Officials Push for Clarity on Oil and Gas Leases – NYTimes.com
November 25, 2011
Officials Push for Clarity on Oil and Gas Leases – NYTimes.com.
The Radio Ecoshock Show: Fracking Gas = Climate Crash
November 24, 2011
The Radio Ecoshock Show: Fracking Gas = Climate Crash.
FM London. Published Wednesdays.
Tuesday, November 22, 2011
Fracking Gas = Climate Crash
For years, governments, industry, and TV ads told us natural gas is the safe bridge fuel while we move away from dirty coal and oil.
Cornell University scientist Robert Howarth wondered “Is that true?”. When Howarth found no science to back up big claims for the gas industry, he and a team from Cornell went to work.
The results are startling. In the short-term, escaped methane from gas fracking threaten to tip us into catastrophic climate change. The total impact of the shale gas industry may be worse than coal. In the United States, where thousands and thousands of new gas wells are drilled, almost half of all greenhouse gas emissions may come from methane. The “natural” gas industry is the largest single source of methane emissions.
The frackers vent loads of gases for the first two weeks after drilling, before connecting pipes. They could collect (and sell) this “waste” methane (read “climate killer”) but don’t bother. Natural gas storage facilities also vent methane as part of their designed operation. Old leaking gas delivery systems complete the job.
Methane is rising in the atmosphere. New science from Dr. Drew Shindell shows in the first 20 years, methane is 105 times more powerful a greenhouse gas than CO2.
Even at 100 years, Shindell finds methane is combining with other air pollution to generate an impact 33 times more powerful than CO2. Not 21, as determined in the 1990’s by the IPCC. That old figure is still being used by industry and governments. Expect a change as Shindell becomes the new lead author of this section in the upcoming IPCC.
You must hear Dr. Robert Howarth explain the importance of new science on methane. he is the expert, I am not.
The industry insists we only calculate methane over a 100 year period. But the latest report from the International Energy Agency (generally a conservative source) says our climate future will be determined in the next 5 years. More new science suspects the burst of methane helped tip us into a mass extinction 250 million years ago.
The 20 year time frame for methane could be the jolt that tips other systems into positive feedback loops. Like igniting the peat in the Arctic. Or warming shallow seas enough to release frozen methane clathrates from the bottom (which started to happen last year). If either of those go, we are toast.
Robert Howarth has taken a lot of abuse for even daring to assemble a comprehensive look at the total greenhouse gas impact of the gas fracking industry, whether it is coal bed gas or shale gas. And we haven’t even discussed the fact fracking is now known to cause earthquakes, uses incredible amounts of fresh water, and risks polluting whole watersheds with a single leak of the mass toxic chemicals pumped underground.
The United Kingdom may be next. With gas production from the North Sea fields down by 25 percent, there is a public relations push to get lots of gas fracking in the UK. This may be the next big environmental battle there.
Fracking mania has hit Canada and Australia as well. Everyone needs to know what the latest science says.
Program includes 27 minute speech by Professor Robert Howarth of Cornell at ASPO USA 2011, November 2nd in Washington D.C. Recorded by Carl Etnier of Equal Time Radio, Vermont. My thanks to ASOP USA for this fine presentation.
Then a follow-up interview this week with Robert Howarth, to fill in his hurried climax of the speech – that methane emissions, when calculated over 20 years, using the new higher rate discovered by Drew Shindell – could add up to at least 44% of all greenhouse gas emissions in the United States! We discuss this, and the importance of a 2006 paper by Dr. James Hansen of NASA, on the importance of controlling methane emissions.
I covered that in 2006 here for blog entry, or download the audio here.
In 2006, I also put out a “Methane Primer” which is still helpful. Blog for that primer is here, and the audio for download here.
But now I’ll have to revisit that piece, since like the IPCC, I was told methane was only 21 times more powerful than CO2. The science moves so fast, it is already outdated just 5 years later.
Essentially, if we cannot control methane, we still lose the climate known over millenia, even if we could limit carbon dioxide emissions. Methane alone can tip us.
The natural gas industry, Howarth says, is the single largest source of methane in the U.S. Shale gas fracking makes that much, much worse.
RIPPING OFF THE CARBON MARKETS AND CONSUMERS
We add an interview promised last week, with Samuel Labudde, about the billion dollar scam ripping off carbon credits.
Companies in China are threatening to release powerful greenhouse gases, unless these fake credits are continued. Ratepayers in Europe are being blackmailed.
LaBudde, a noted wildlife biologist, is also covering the climate beat for the Environmental Investigation Agency for the American branch of the organization.
To honor the craziness of gas fracking in Australia, the theme music this week is “My Water’s on Fire Tonight” written and performed by David Holmes, Andrew Bean, Niel Bekker. Australian compilation album: “Whole Lotta Frackin’ Going On”
The lyrics in “My Water’s On Fire Tonight” is a product of Studio 20 NYU (bit.ly/hzGRYP) in collaboration with ProPublica.org (bit.ly/5tJN). The song is based on ProPublica’s investigation on hydraulic fractured gas drilling (read the full investigation here: bit.ly/15sib6).
Recording credit: Robert Howarth speech at ASPO recorded by Carl Etnier of Equal Time Radio, Vermont. Speech courtesy of ASPO USA.
Labels: ASPO, climate, climate change, emissions, energy, environment, gas, global warming, impact, methane, science, shale, speech
posted by Alex Smith at 10:35 PM 
Town of Ithaca Comments on SGEIS
November 24, 2011
Town of Ithaca Comments.pdf (application/pdf Object).
http://www.tompkins-co.org/tccog/Gas_Drilling/Public Hearing Comments/Town of Ithaca Comments.pdf
TOWN OF ITHACA
COMMENTS ON THE REVISED DRAFT SUPPLEMENTAL
GENERIC ENVIRONMENTAL IMPACT STATEMENT (sGEIS)
ON OIL, GAS AND SOLUTION MINING
ADOPTED NOVEMBER 21, 2011
Note: The comments submitted are only those feasible within the time period allowed for comments. Limited staff and elected officials’ time was inadequate to fully digest the 1000 plus pages of material. Thus, the comments submitted are not comprehensive and reflect those elements of the sGEIS that, for the most part, most directly affect the Town of Ithaca. Numerical notes in parentheses refer to specific sections of the sGEIS.
MUNICIPAL WATER
Of overwhelming concern to the Town of Ithaca is the threat to municipal surface water supplies. Well water in this area is often difficult to obtain in sufficient quantity and is of spotty quality. The Town is home to the three biggest municipal water supplies in Tompkins County: the City of Ithaca (Six Mile Creek), Cornell University (Fall Creek) and the Southern Cayuga Lake Intermunicipal Water Commission (aka Bolton Point), which serves the Town of Ithaca, the Town of Dryden, the Town of Lansing, the Village of Cayuga Heights and the Village of Lansing. Additional water is provided to the southern end of the Town of Ulysses. Any pollution of these water supplies would be a calamity of unparalleled proportions and no amount of remediation or compensation could replace the loss of these drinking water sources. Surface water – and the contaminants carried by it – flows downhill and therefore the entire watershed must be considered. Furthermore the rationale that the New York City and Syracuse water supplies are unfiltered and thus different is odd on its face: none of the municipal water plants are capable of filtering or otherwise removing potential contaminants resulting from gas drilling activity. Besides, the setbacks proposed for these two water supplies are not sufficiently protective. Therefore the setback provisions for drilling (7.1.12.1, Page 7-75 and 7.1.12.2 page 7-76 and Page 7-78) are wholly inadequate. Any gas industry activity within the watersheds of any municipal water supply must be prohibited.
HOME RULE
The DEC should expressly support the right of local municipalities under Home Rule to determine land use within municipal borders, including where or whether natural gas development occurs, consistent with zoning and comprehensive planning. (8.1.1) The DEC should explicitly state that if the applicant for a gas drilling permit encounters local laws, regulations and policies that are inconsistent with their proposal, the DEC will respect the municipality’s position and deny the permit. (8.1.1.5)
REGULATIONS AND THE sGEIS
New York State’s SEQRA law provides for the gathering of environmental information to inform the creation of regulations and prior to the implementation of projects. DEC’s proposal to write and perhaps promulgate regulations concurrently with the SEQRA review certainly violates the intent of the law and may invite legal challenge.
EXTRACTION AND AD VALOREM TAXES
All other states other than New York and Pennsylvania have an extraction tax of between 7% and 25%. Local municipalities (not to mention NYS) have already expended hundreds of thousands – if not millions – of dollars preparing for the expansion of the gas industry. An extraction tax of at least 12% must be imposed in order to pay for NYS’s regulation, inspection and enforcement of the gas industry and local municipalities’ costs as a result of the impact of gas drilling. The 12% tax should be evenly divided between the state and the local municipalities. The ad valorem tax should be increased to at least 8% and at least 4% go to towns, which are the level of government which must absorb most of the costs of gas drilling.
HEALTH
- ●The sGEIS does not require or refer to an analysis of public health impacts despite the fact that fracking-related air pollution and the potential for water contamination may have serious effects on people-especially the elderly and children – and communities downwind and downstream of proposed fracking operations. There is growing evidence of negative health impacts related to gas extraction in other states. The DEC in its sGEIS must undertake further review of fracking and the impacts of horizontal drilling to ensure that all environmental and public health impacts are mitigated or avoided.
- ●As suggested by the United States Environmental Protection Agency (USEPA) in its 12/30/2009 commentary on the dSGEIS, the DEC should actively involve the NYS Department of Health in the review process. Local departments of health should also be involved. Indeed, the problems associated with shale gas development near housing have only recently been catalogued as drilling has moved into suburban locations and farming communities.
DEC STAFFING AND MANAGEMENT
- ●The DEC has an inherent conflict of interest since it is charged to “conserve, improve and protect New York’s natural resources and environment and to prevent, abate and control water, land and air pollution, in order to enhance the health, safety and welfare of the people of the state and their overall economic and social well-being,” but it also issues gas drilling permits which has been shown in other areas to likely harm the environment. These functions must be separated.
- ●New York State DEC has been subject to steep budget and staff cuts and does not have adequate staff or resources to properly oversee fracking, even if every possible protection were in place This reality raises the possibility that the DEC will be forced to cut corners with its reviews or fast-track permits despite the risks. Therefore permitting must not take place until the DEC is fully staffed with a clear funding stream to support that staff.
- ●The thousands of miles of pipelines (and compressor stations required for drilling) to get the resulting gas to market will be reviewed by a different agency under a different process. Without an accounting of such impacts, New York’s environmental assessment is incomplete and the full impact of fracking is unknown. The Public Service Commission (PSC) has jurisdiction over gas infrastructure. As such, Governor Cuomo should direct state agencies to coordinate their efforts in order to protect our air, water and communities. It should be stated explicitly in the regulations that any gathering lines not regulated by the PSC are under the jurisdiction of local municipalities (8.1.2.1, page 8-4).
CUMULATIVE IMPACTS FOR WATER WITHDRAWALS
The sGEIS addresses cumulative impacts for water withdrawals by using the pass-by flow determinations; however, the sGEIS needs to address cumulative impacts on water resources in all areas. Although the Water Resources Bill passed in 2011 would address cumulative impacts of groundwater and surface water withdrawals when and if regulations are developed, rules governing water withdrawal permits must be developed before permits are issued for drilling. Without the permitting framework for water withdrawals, it is not possible to determine if there are adequate safeguards for surface water and groundwater.
CUMULATIVE IMPACTS FOR ALL INTERCONNECTED DRILLING ACTIVITIES
In its 12/30/2009 comments USEPA suggested that analysis of cumulative impacts be “greatly expanded.” A process needs to be established to address impacts from all interconnected activities, including drilling operations, that are regulated by DEC and pipelines and compressor stations that are regulated by the Public Service Commission (PSC). An Environmental Impact Statement for the gas lines and compressor stations must be performed by the PSC to assess the cumulative impacts on water resources, community infrastructure and quality of life issues such as noise, road damage and air quality from the additional pipelines and compressor stations that will be needed to transport the gas from the thousands of individual well pads to the regional pipelines. Compressor stations will be needed, with pipelines from each well to the compressor station, and additional pipelines from the compressor station to the main transmission line. However, the sGEIS does not address the impacts of the pipelines or compressor stations necessitated by well drilling operations. The impact of the vast network of access roads, pipelines and compressor stations must be addressed by the sGEIS. The sGEIS identifies the PSC as the responsible agency to oversee construction and protection of the environment for pipeline construction. This segmentation of the environmental impact assessment makes it difficult for decision makers and the public to adequately assess the total environmental impacts anticipated from gas drilling activities.
PROGRAM TO MONITOR AND PROTECT DRINKING WATER RESOURCES
Proper monitoring and assessment strategies must be in place to protect the State’s water resources, and sufficient laboratory capabilities for analysis must be in place prior to drilling.The state currently does not have a strategy in place for data collection and analysis. Such a strategy is key to developing a comprehensive regulatory process that must be in place prior to drilling. All stakeholders (regulatory personnel, drilling companies, and the public) need to be ensured that valid data are being collected and disseminated in a cost effective manner. Considering the volume of environmental and public health data that will be generated by gas drilling, it is essential that NYS Department of Health develop and manage comprehensive databases in order to facilitate effective, comprehensive oversight and public protection during gas drilling. A program must be developed for electronic sharing of monitoring data and must be shared with local health departments as they will be the agency first contacted if any contamination is detected.
PERMIT RE-EVALUATION
The NYSDEC re-evaluation of specified permit conditions in two or three years should involve public review and comment.
OTHER LOW PERMEABILITY SHALE FORMATIONS
The scope of the sGEIS includes all low permeability shale formations where high volume hydro-fracturing gas drilling will be employed. However, many sections of the document only reference the Marcellus Shale. Environmental impacts associated with other low permeability gas reservoirs where the hydrogeochemistry is different from the Marcellus shale are not addressed in the sGEIS. The sGEIS must be expanded to include potential impacts from other formations.
LOCAL GOVERNMENT NOTIFICATION
Local Governments need to be involved and informed in all aspects of the drilling process and a procedure for this needs to be in place before drilling begins. Each municipality must receive copies of gas drilling permit applications, including parcel tax map numbers, before any permits are issued by NYSDEC. The NYSDEC should also be required to provide each local municipality and county government with 1) accurate Environmental Inspector contact information for permit coordination between agencies as well as emergency and spill response coordination, and 2) written notification to each municipality of the location of each well-plugging permit application, including tax map parcel number and mapping coordinates.
ACCIDENTS AND VIOLATION REPORTING
Currently the DEC does not have an adequate electronic record-keeping system of violations, accidents, and spills which makes aggregating problems and notifying local governments and residents so difficult as to be nearly impossible. The DEC must bring their violations reporting system into the 21st century by making them easily available to the public electronically.
PROPRIETARY CHEMICALS
- ●The sGEIS allows any “proprietary” chemical constituents not to be subject to public disclosure. It appears that the companies can avoid disclosure if they simply claim the additive is a “trade secret.”The DEC must require full disclosure of all chemicals and additives, including chemical composition of each, used in the hydro-fracturing process.(8.1.3.2,)
- ●The sGEIS only weakly suggests operators “evaluate the use of alternative fracturing additive products that pose less risk.” The DEC must require that the least toxic alternatives be used and then only if proven to not be a danger to the public and the environment.
FLOWBACK WATER DISPOSAL
- ○The state must not allow municipal sewage treatment plants to treat drilling wastesbecause such plants are not capable of handling the toxic elements in such wastes. (7.1.8.1)
- ○Some components of drilling waste would normally qualify as hazardous wasteunder state and federal law, but have been exempted from these laws. The DEC must not allow any waste that would qualify as hazardous waste in any other settings to be sent to municipal sewage treatment facilities unable to properly treat it or to disposal wells (here or in other states), putting the health and safety of our waters and communities at grave risk. (1.7.9)
MANAGEMENT OF DRILL CUTTINGS
The plan by the DEC to track the solid and liquid wastes generated in connection with fracking is positive; however tracking of these wastes is said to be the responsibility of the gas industry operators. The DEC must take a more active role in tracking waste that in other settings qualifies as hazardous. The gas industry must not be allowed to oversee itself in this area.(1.7.10)
COMMUNITY AND SOCIOECONOMIC IMPACTS
- ●The DEC needs to do a comprehensive, focused plan to review and analyze the consequences of a full build out of many wells on a community. (1.7.15)
- ●A monetary value must be assigned to potential degradation of the environment in a comprehensive review of community and environmental impacts from drilling.
- ●As proposed, the DEC staff will review the well applications one at a time, without considering the impact of many wells being permitted in close proximity. Impacts on communities must be considered from the standpoint of multiple wells being introduced to an area not one at a time since the industry profits from a high drilling density within an area.
- ●In its considerations of the economics of drilling, the DEC and the State must acknowledge that:
- ○Relatively few local jobs will be produced by the gas companies. Many of the higher paying jobs associated with HVHF go to employees who are residents of other states and will not be paying state income taxes. Likewise, most of the technical field jobs go to transient workers with no social or other connection to the local community. The experience in other communities has demonstrated an increase in crime, local housing costs, and a strain on health care resources (see Sayre Health report).
- ○Small businesses will face higher labor costs as a result of competing with wages paid by the gas companies in order to keep their employees on the job
- ●The sGEIS is incomplete because it does not yet contain the socio-economic analysis of whether there is a balance between risk/reward.
PUBLIC WATER SYSTEMS
Primary and Principal Aquifers
Prohibit HVHF near all primary aquifers. The DEC is proposing to prohibit fracking in primary aquifers that serve as public drinking water supplies, but this “prohibition” is only limited to a couple of years after which the state could “reconsider” the bans. In addition, the DEC does not lay out the conditions under which “reconsideration” would be reviewed. The DEC needs to prohibit HVHF near all primary aquifers. 2.4.4.1
Sunset date for buffers
The preliminary draft proposes to place some areas of the state off limits to gas drilling, but upon closer examination, many of the restrictions have sunset dates and some of the protective buffers only call for site-specific individual environmental review, rather than clear restrictions. The DEC needs to strengthen and clarify restrictions and the requirements for buffers and site-specific environmental review.
Mapping of aquifers is Inadequate.
In order to determine a 500 foot buffer to a principal aquifer, the aquifer must be mapped at least to the scale of 1:24,000 feet but many aquifers are only mapped at the 1:250,000 foot scale. The DEC must increase buffer requirements overall but particularly when mapping of the aquifers is inadequate. Part of the fee structure for permitting should go to funding better maps of aquifers throughout the state.
NATURALLY OCCURRING RADIOACTIVE MATERIALS (NORM)
According to James W. Ring, Professor Emeritus of nuclear physics from Hamilton College, the draft sGEIS does not include adequate study of radon in its review of issues. This is a subject which deserves further study before supplies of Marcellus gas are delivered to households where it may endanger the health of citizens. (4.6)
ROAD SPREADING
The DEC has already failed to protect NY drinking water by allowing produced water from PA to be spread on roads in New York State, within Tompkins County, without SEQR review. Road spreading of produced water and brine must be expressly prohibited. (5.13.3.4)
IMPOUNDMENTS
Given the recent history of “100 year rains” occurring every few years and the inherent long-term instability of impoundments, only closed-loop systems for all hydrofracking operations must be permitted. (8.2.2.2)
ROAD PERMITS
The DEC must require, not merely encourage, gas companies to make road use agreements with local municipalities. (8.1.1.4)
COMPULSORY INTEGRATION
New York State is one of the few states to allow compulsory integration and possibly the only one to allow it against individual homeowners. NYS must rescind compulsory integration to respect the rights of its homeowners.
NO ACTION ALTERNATIVE
Based on the sGEIS analysis the No Action Alternative is the preferred outcome. Given the clear dangers to the environment and public health of high volume hydraulic fracturing using the current technologies, the lack of significant financial gain for the overwhelming majority of the citizens of New York State and the assured decades-long damage to the way of life of those residing in the gas-drilling regions, the No Action Alternative is the logical and proper finding resulting from this SEQRA study. (9.1)
END
Health Effects of Shale Gas Extraction: 2nd Annual Conference Videos
November 23, 2011
2011 Presentation Videos | 2nd Annual Conference: Health Effects of Shale Gas Extraction.
Below are links to the videos of the presentations from the 2011 conference where permission was given to record them. These are shown in the order in which they were given:
- Donald S. Burke, MD – “Welcome Message and Introduction to the Marcellus Shale”
- Bernard D. Goldstein, MD – “Public Health, Sustainability and the Marcellus Shale”
- Allen Robinson, PhD – “Regional air pollution emissions from the development and production of Marcellus Shale”
- Adam Law, MD – “Endocrine and Metabolic Disruption”
- Charles Werntz, DO, MPH – “Worker Health Concerns in Marcellus Shale Work”
- William Burket, CFPS – “Industry Safety Initiatives and Community Emergency Preparedness”
- Simona Perry, PhD – ” ‘It’s like we’re losing our love’: Documenting and Evaluating Social Change in Bradford County, PA during the Marcellus Shale Gas Boom (2009-2011)”
- Kathy Brasier, PhD – “Community Impacts of Natural Gas Development in the Marcellus Shale: A Research Summary”
- Tom Biksey, MPH – “A Risk Assessment of Fracing Fluid Flowback Water from an Operation in an Asian Pacific Setting”
- Myron Arnowitt, MPH – “Review of the Citizens Marcellus Shale Commission board report”
- Robert Boulware; Joe Osborne, JD; and Raina Rippel – “Research Needs Panel”
Lease termination workshop -Delphi Falls, NY Nov. 22, 2011
November 22, 2011
Insiders Sound an Alarm Amid a Natural Gas Rush – NYTimes.com
November 22, 2011
Insiders Sound an Alarm Amid a Natural Gas Rush – NYTimes.com.
Insiders Sound an Alarm Amid a Natural Gas Rush
By IAN URBINA
Natural gas companies have been placing enormous bets on the wells they are drilling, saying they will deliver big profits and provide a vast new source of energy for the United States.
But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.
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. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.
“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 on Aug. 28, 2009.
Company data for more than 10,000 wells in three major shale gas formations raise further questions about the industry’s prospects. There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted.
The data show that while there are some very active wells, they are often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth. Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted by energy companies, making it more difficult for them to turn a profit over the long run.
If the industry does not live up to expectations, the impact will be felt widely. Federal and state lawmakers are considering drastically increasing subsidies for the natural gas business in the hope that it will provide low-cost energy for decades to come.
But if natural gas ultimately proves more expensive to extract from the ground than has been predicted, landowners, investors and lenders could see their investments falter, while consumers will pay a price in higher electricity and home heating bills.
There are implications for the environment, too. 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.
The e-mails were obtained through open-records requests or provided to The New York Times by industry consultants and analysts who say they believe that the public perception of shale gas does not match reality; names and identifying information were redacted to protect these people, who were not authorized to communicate publicly. In the e-mails, some people within the industry voice grave concerns.
“And now these corporate giants are having an Enron moment,” a retired geologist from a major oil and gas company wrote in a February e-mail about other companies invested in shale gas. “They want to bend light to hide the truth.”
Others within the industry remain optimistic. They argue that shale gas economics will improve as the price of gas rises, technology evolves and demand for gas grows with help from increased federal subsidies being considered by Congress. “Shale gas supply is only going to increase,” Steven C. Dixon, executive vice president of Chesapeake Energy, said at an energy industry conference in April in response to skepticism about well performance.
Studying the Data
“I think we have a big problem.”
Deborah Rogers, a member of the advisory committee of the Federal Reserve Bank of Dallas, recalled saying that in a May 2010 conversation with a senior economist at the Reserve, Mine K. Yucel. “We need to take a close look at this right away,” she added.
A former stockbroker with Merrill Lynch, Ms. Rogers said she started studying well data from shale companies in October 2009 after attending a speech by the chief executive of Chesapeake, Aubrey K. McClendon. The math was not adding up, Ms. Rogers said. Her research showed that wells were petering out faster than expected.
“These wells are depleting so quickly that the operators are in an expensive game of ‘catch-up,’ ” Ms. Rogers wrote in an e-mail on Nov. 17, 2009, to a petroleum geologist in Houston, who wrote back that he agreed.
“This could have profound consequences for our local economy,” she explained in the e-mail.
Fort Worth residents were already reeling from the sudden reversal of fortune for the natural gas industry.
In early 2008, energy companies were scrambling in Fort Worth to get residents to lease their land for drilling as they searched for so-called monster wells. Billboards along the highways stoked the boom-time excitement: “If you don’t have a gas lease, get one!” Oil and gas companies were in a fierce bidding war for drilling rights, offering people bonuses as high as $27,500 per acre for signing leases.
The actor Tommy Lee Jones signed on as a pitchman for Chesapeake, one of the largest shale gas companies. “The extremely long-term benefits include new jobs and capital investment and royalties and revenues that pay for public roads, schools and parks,” he said in one television advertisement about drilling in the Barnett shale in and around Fort Worth.
To investors, shale companies had a more sophisticated pitch. With better technology, they had refined a “manufacturing model,” they said, that would allow them to drop a well virtually anywhere in certain parts of a shale formation and expect long-lasting returns.
For Wall Street, this was the holy grail: a low-risk and high-profit proposition. But by late 2008, the recession took hold and the price of natural gas plunged by nearly two-thirds, throwing the drilling companies’ business model into a tailspin.
In Texas, the advertisements featuring Mr. Jones disappeared. Energy companies rescinded high-priced lease offers to thousands of residents, which prompted class-action lawsuits. Royalty checks dwindled. Tax receipts fell.
The impact of the downturn was immediate for many.
“Ruinous, that’s how I’d describe it,” said the Rev. Kyev 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.
That boom-and-bust volatility had raised eyebrows among people like Ms. Rogers, as well as energy analysts and geologists, who started looking closely at the data on wells’ performance.
In May 2010, the Federal Reserve Bank of Dallas called a meeting to discuss the matter after prodding from Ms. Rogers. One speaker was Kenneth B. Medlock III, an energy expert at Rice University, who described a promising future for the shale gas industry in the United States. When he was done, Ms. Rogers peppered him with questions.
Might growing environmental concerns raise the cost of doing business? If wells were dying off faster than predicted, how many new wells would need to be drilled to meet projections?
Mr. Medlock conceded that production in the Barnett shale formation — or “play,” in industry jargon — was indeed flat and would probably soon decline.
“Activity will shift toward other plays because the returns there are higher,” he predicted. Ms. Rogers turned to the other commissioners to see if they shared her skepticism, but she said she saw only blank stares.
Bubbling Doubts
Some doubts about the industry are being raised by people who work inside energy companies, too.
“Our engineers here project these wells out to 20-30 years of production and in my mind that has yet to be proven as viable,” wrote a geologist at Chesapeake in a March 17 e-mail to a federal energy analyst. “In fact I’m quite skeptical of it myself when you see the % decline in the first year of production.”
“In these shale gas plays no well is really economic right now,” the geologist said in a previous e-mail to the same official on March 16. “They are all losing a little money or only making a little bit of money.”
Around the same time the geologist sent the e-mail, Mr. McClendon, Chesapeake’s chief executive, told investors, “It’s time to get bullish on natural gas.”
In September 2009, a geologist from ConocoPhillips, one of the largest producers of natural gas in the Barnett shale, warned in an e-mail to a colleague that shale gas might end up as “the world’s largest uneconomic field.” About six months later, the company’s chief executive, James J. Mulva, described natural gas as “nature’s gift,” adding that “rather than being expensive, shale gas is often the low-cost source.” Asked about the e-mail, John C. Roper, a spokesman for ConocoPhillips, said he absolutely believed that shale gas is economically viable.
A big attraction for investors is the increasing size of the gas reserves that some companies are reporting. Reserves — in effect, the amount of gas that a company says it can feasibly access from its wells — are important because they are a central measure of an oil and gas company’s value.
Forecasting these reserves is a tricky science. Early predictions are sometimes lowered because of drops in gas prices, as happened in 2008. Intentionally overbooking reserves, however, is illegal because it misleads investors. Industry e-mails, mostly from 2009 and later, include language from oil and gas executives questioning whether other energy companies are doing just that.
The e-mails do not explicitly accuse any companies of breaking the law. But the number of e-mails, the seniority of the people writing them, the variety of positions they hold and the language they use — including comparisons to Ponzi schemes and attempts to “con” Wall Street — suggest that questions about the shale gas industry exist in many corners.
“Do you think that there may be something suspicious going with the public companies in regard to booking shale reserves?” a senior official from Ivy Energy, an investment firm specializing in the energy sector, wrote in a 2009 e-mail.
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.
Production data, provided by companies to state regulators and reviewed by The Times, show that many wells are not performing as the industry expected. In three major shale formations — the Barnett in Texas, the Haynesville in East Texas and Louisiana and the Fayetteville, across Arkansas — less than 20 percent of the area heralded by companies as productive is emerging as likely to be profitable under current market conditions, according to the data and industry analysts.
Richard K. Stoneburner, president and chief operating officer of Petrohawk Energy, said that looking at entire shale formations was misleading because some companies drilled only in the best areas or had lower costs. “Outside those areas, you can drill a lot of wells that will never live up to expectations,” he added.
Although energy companies routinely project that shale gas wells will produce gas at a reasonable rate for anywhere from 20 to 65 years, these companies have been making such predictions based on limited data and a certain amount of guesswork, since shale drilling is a relatively new practice.
Most gas companies claim that production will drop sharply after the first few years but then level off, allowing most wells to produce gas for decades.
Gas production data reviewed by The Times suggest that many wells in shale gas fields do not level off the way many companies predict but instead decline steadily.
“This kind of data is making it harder and harder to deny that the shale gas revolution is being oversold,” said Art Berman, a Houston-based geologist who worked for two decades at Amoco and has been one of the most vocal skeptics of shale gas economics.
The Barnett shale, which has the longest production history, provides the most reliable case study for predicting future shale gas potential. The data suggest that if the wells’ production continues to decline in the current manner, many will become financially unviable within 10 to 15 years.
A review of more than 9,000 wells, using data from 2003 to 2009, shows that — based on widely used industry assumptions about the market price of gas and the cost of drilling and operating a well — less than 10 percent of the wells had recouped their estimated costs by the time they were seven years old.
Terry Engelder, a professor of geosciences at Pennsylvania State University, said the debate over long-term well performance was far from resolved. The Haynesville shale has not lived up to early expectations, he said, but industry projections have become more accurate and some wells in the Marcellus shale, which stretches from Virginia to New York, are outperforming expectations.
A Sense of Confidence
Many people within the industry remain confident.
“I wouldn’t worry about these shale companies,” said T. Boone Pickens, the oil and gas industry executive, adding that he believes that if prices rise, shale gas companies will make good money.
Mr. Pickens said that technological improvements — including hydrofracking wells more than once — are already making production more cost-effective, which is why some major companies like ExxonMobil have recently bought into shale gas.
Shale companies are also adjusting their strategies to make money by focusing on shale wells that produce lucrative liquids, like propane and butane, in addition to natural gas.
Asked about the e-mails from the Chesapeake geologist casting doubt on company projections, a Chesapeake spokesman, Jim Gipson, said the company was fully confident that a majority of wells would be productive for 30 years or more.
David Pendery, a spokesman for IHS, added that though shale gas prospects had previously been debated by many analysts, in more recent years costs had fallen and technology had improved.
Still, in private exchanges, many industry insiders are skeptical, even cynical, about the industry’s pronouncements. “All about making money,” an official from Schlumberger, an oil and gas services company, wrote in a July 2010 e-mail to a former federal regulator about drilling a well in Europe, where some United States shale companies are hunting for better market opportunities.
“Looks like crap,” the Schlumberger official wrote about the well’s performance, according to the regulator, “but operator will flip it based on ‘potential’ and make some money on it.”
“Always a greater sucker,” the e-mail concluded.
