Watching the Gas Bubble?

In recent months, it appears that top national media outlets have started to cast a more skeptical eye at how “abundant” shale gas really is.

The New York Times led the charge last year by analyzing “hundreds of industry e-mails and internal documents.” The Times concluded that shale gas has inherent risks, the geology varies, and that data is sparse. According to their report:

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.

Despite attacks from the gas front group, Energy In Depth (EID), other outlets are beginning to confirm The New York Times original reporting. It’s far from clear that shale gas is magically “abundant.” Yesterday, Bloomberg reported similar conclusions in an article entitled, “Shale Bubble Inflates on Near-Record Prices”:

  • “Surging prices for oil and natural- gas shales…are raising concern of a bubble as valuations of drilling acreage approach the peak set before the collapse of Lehman Brothers.”
  • The “quirky nature of shale geology means the risks are high that an investment made in a sparsely drilled prospect will go bust.”
  • “[O]verseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production.”
  • Hunt “has only drilled ‘a handful’ of wells in its Eagle Ford shale acreage, which means it doesn’t yet know how extensive or rich those holdings are.” The same problem exists in other shale formations around the country.

DeSmogBlog conducted a deeper comparison of the two reports showcasing the similarities between The New York Times and Bloomberg reports. It is clear now that EID lead mislead the public with unnecessary attacks on the Times’ Drilling Down series.

And, a new Reuters story quotes “public health professionals and advocates” arguing that the “public health effects of shale gas development need to be rigorously studied as production rapidly spreads in the United States.”

Here’s why this is important:  Without looking at the costs of contamination of public water supplies – as one industry study skipped altogether – it’s impossible to meaningfully evaluate the costs and benefits of shale gas. In other words, why talk about “abundance” without talking about cost?

Hydraulic Fracturing undermining mortgages

Agreements to frack on private property could cause defaults and plummeting home prices.

By Andrew Schenkel

 

For the more than one million Americans who have been offered cash for the right to hydraulically fracture their property, an investigation by The New York Times outlines their biggest fears: devalued property and potential defaults.

Image: arimore/flickr

Ian Urbina’s investigation, which went to print on October 20th, points out that deals offered to landowners for drilling rights may be in direct conflict with the mortgage agreements between banks and citizens. According to Urbina’s report, “bankers are concerned because many leases allow drillers to operate in ways that violate rules in landowners’ mortgages.” Banks have traditionally stayed out of the deals made between the gas industry and landowners, which has caused countless families to be living in violation of the terms of their home mortgages without even knowing it. This, needless to say, could cause citizens to contractually default on their loans and for the bank to demand full payment

The recent investigation notes that the technical default situation has not yet occurred on a widespread level, but the fears that the gas industry could be on the cusp of causing another mortgage crisis has created an atmosphere where more red tape would be added to mortgage procedures. From the investigation: “In terms of litigation, there is a real potential for a domino effect here if lenders at each step of the way made guarantees that are invalid,” said Greg May, vice president of residential mortgage lending at Tompkins Trust Company, headquartered in Ithaca.

Another part of the investigation included a presentation given by the Pennsylvania Credit Union Association, which compared getting drilling procedures in line with mortgage regulations to “solving a Rubik’s Cube.” The presentation outlines the basic questions of how this can be done, while minimizing risk for local lenders.

In recent years, landowners in heavily ‘fracked’ parts of the county, like Garfield County Colorado, have seen property values plummet. Retirees, like Dee Hoffmeister and Lisa Bracken, have experienced this first hand. Both of their families have found themselves powerless to pursue any recourse at recovering the damage done to their personal assets.

 

 

 

Related Articles:

The Silent Treatment: Why those out west are watching the fracking reports from the east.

The Hanger Rule: How many times can one plug pro-industry talking points?

Isaac Newton taught us that for every action there is an equal or opposite reaction, and in John Hanger’s case that means answering in pro-industry talking points anytime something bad is said about the gas industry. We call it  ‘The Hanger Rule.’

Hanger is the former head of Pennsylvania’s Department of Environmental Protection and now works in Harrisburg as a lawyer with Eckert Seamans law firm as an advisor on energy and environmental issues. While he is mostly out of public life, Hanger emerges with blog posts within hours of almost any negative report about hydraulic fracturing that hits the mainstream media.

In February, Hanger responded to Ian Urbina’s piece in The New York Times that identified concerns about lax regulation of hydraulic fracturing in Pennsylvania with a series of posts to his blog, These concerns included such facts as: The Pennsylvania waste treatment facilities were ill- equipped to remove radioactive material from fracking wastewater before it was discharged into rivers and waterways throughout the Keystone State. This rapid reaction led Checks and Balances Project Director, Andrew Schenkel, to pay a visit to Hanger’s Harrisburg office to gain a better understanding of his perspective.

Hanger is a proud man who touts the numerous regulations he helped to impose on the gas industry while in office. It was perhaps natural that a man who dedicated so much of his life to improving regulations in Pennsylvania may be a bit defensive about allegations that his work was ineffective or simply did not go far enough. However, what was perhaps most striking was Hanger’s tone throughout the interview. He wasn’t combative. He wasn’t defensive. Instead, he maintained a friendly nature while talking in sound bites. Almost all of his answers mimicked the familiar rhetoric of the gas industry. In fact, Hanger touched upon almost 30 industry talking points.

As you can see in the video, Hanger uses key gas industry messaging, that gas is a cleaner alternative to oil and coal, 15 times.

Hanger’s comments are in line with the words of energy tycoons T. Boone Pickens and Aubrey McClendon of Chesapeake Energy.

-“Natural gas is about 30 percent cleaner than petroleum and produces no particulate emissions.” -Pickens

-“Natural gas has already achieved significant market share gains in the electrical generation market at the expense of coal largely on the basis of price, but also because of environmental issues.” –McClendon

Weeks after the first Urbina story, Hanger reemerged during the release of a new study that suggested that gas may not be a cleaner alternative to coal. The study, which was conducted by scientists at Cornell University, simply suggested that more research should be devoted to finding out if gas is as clean as many in the industry suggests. Following the release of that study, the gas industry embarked on a campaign to discredit the study’s authors including lead scientist Robert Howarth. A Google search of Howarth’s name generates a top search result as a link (paid for by the America’s Natural Gas Alliance [ANGA]), which casts doubt on his study. The link takes readers to quotes from John Hanger who says, “Professor Howarth does want the result to which he gets. He is a committed opponent of gas drilling and fracking, a position to which he is entitled in this free country.”

Following ANGA’s ad campaign, the Checks and Balances Project caught up with the Howarth. The scientist had no problem explaining that his conclusion, that more data is needed to find out if gas is on par with coal in terms of emissions, was not out of line. What was out of line, according to Howarth, was the lengths to which pro-gas advocates had gone to ruin his reputation. “It used to be that if you Googled my name… my boring lab site at Cornell University was the top pick up. Now there’s an ad from the gas industry, which has a critique of why my science is wrong. They are trying hard to push back,” said Howarth.

The latest news about gas broke in late June when Urbina filed another report for the Times that quotes an industry insider saying that rhetoric about the supply of gas is comparable to a “Ponzi scheme.” Since this story focused more on economic concerns rather than environmental ones it seemed unlikely Hanger would weigh in. But he did. “Would anyone imagine more sensationalistic narratives than radiation, Ponzi, and Enron?” asked Hanger. He continued, “Consistent with this reporter’s method, today’s article uses often anonymous statements to paint a sensational narrative and leaves out or underplays critical information that is inconvenient to establishing the credibility of the dominant anti-gas narrative.”

These comments led the Checks and Balances Project to go back and review its interview with Hanger from earlier this year. The point was to see if Hanger had weighed in on the economics of drilling for gas in Pennsylvania. It turns out Hanger did – using pro-industry talking points 13 times throughout the conversation.

Once again Hanger sounds a lot like McClendon, except with no soft background music as you can observe in this video.

-“CNG costs about 40& less than gasoline. Natural gas is abundant, American shale basins contain an ocean of natural gas”

During the initial interview, Hanger was asked if he was currently working for the gas industry or if Eckert Seamans was planning to assign Hanger any gas industry clients. At the time Hanger said he had no gas clients but added he wouldn’t rule out working for them. While the industry is not currently paying Hanger, what you hear in his interviews  certainly sounds like he is.