Experts warn of bursting shale gas bubble: New York legislators briefed on the economics of fracking
Earthworks, et al
May 23, 2013
Albany, New York—With several bills pending in the New York legislature related to natural gas development in the state, elected officials were briefed today on new research revealing its economic limitations.
Hosted by Citizens Campaign for the Environment, Earthworks, Energy Policy Forum, Environmental Advocates of New York, Frack Action, and the Post Carbon Institute, the briefing focused on two groundbreaking reports released this spring. In sum, scientific and financial analyses show that the medium- to long-term benefits of shale fracking may be illusory and more similar to the housing bubble than the economic silver bullet promised by the gas industry.
The reports, “Drill Baby Drill” by veteran coal and gas geologist David Hughes and “Shale and Wall Street” by financial analyst Deborah Rogers, assess the economic sustainability of the tight oil and shale gas booms that are sweeping America—and could come to New York through fracking in the Marcellus and Utica Shale formations. They comprise a thorough and up-to-date analysis of data on more than 60,000 oil and gas wells and a comprehensive review of the financial status of the companies leading the charge to expand domestic fossil fuel development.
Together, the authors conclude that rather than offering the nation a century of cheap energy and economic prosperity, fracking will provide only a decade of gas and oil abundance, at most, and is creating a fragile new financial bubble that is already starting to deflate. Additional research conclusions discussed at the briefing included:
- The shale gas and tight oil booms have been oversold. According to actual well production data filed in many states, shale gas and shale oil reserves have been overestimated by operators by as much as 400-500%.
- Wall Street has played a key behind-the-scenes role in hyping the fracking boom through mergers and acquisitions and transactional fees, similar to the pattern seen in the housing boom that led to the financial crisis.
- High productivity shale plays are not common. Just five gas plays and two oil plays account for 80% of production of those energy sources, while the most productive areas constitute relatively small “sweet spots” within those plays.
- Production rates are already in decline in many shale plays. The high rates of per-well investment required to maintain production mean U.S. shale gas production may have already peaked and maintaining production will require high rates of potentially unsustainable, high-cost drilling.
“The fracking debate in New York and nationwide has been consistently framed as way to generate economic benefits and job creation, with limited risk of environmental and public health impacts,” says Deborah Rogers. “But data don’t lie. In every region where shale gas development occurs, economic stability has proven elusive—yet environmental degradation and peripheral costs have proved very real.”
“Based on our research and what is increasingly evident in gas and oil fields, a new energy dialogue is clearly needed nationally and in states like New York,” says David Hughes. “Given the true potential, limitations, and both financial and environmental costs of the energy panaceas being touted by industry and government proponents, it will simply not be possible to drill and frack our way to ‘energy independence.’”
Interviews with the issue experts and report authors arranged upon request
David Hughes is an internationally known geoscientist who has studied energy resources for nearly four decades, including 32 years with the Geological Survey of Canada. While there, he served as team leader for unconventional gas on the Canadian Gas Potential Committee that published a comprehensive assessment of Canada’s natural gas reserves. Over the past decade he has researched, published, and lectured widely on issues related global energy supply. He also serves on the board of the Association for the Study of Peak Oil and Gas - Canada and is a Fellow at the Post Carbon Institute.
Deborah Rogers began her financial career in London working in investment banking. Upon her return to the U.S., she worked as a financial consultant for several major Wall Street firms, including Merrill Lynch and Smith Barney. She served on the Advisory Council for the Federal Reserve Bank of Dallas from 2008-2011. In June of 2012, she was invited to speak in Rio de Janeiro at the International Society for Ecological Economics in conjunction with the United Nations Rio+20 world summit. In addition, she lectures on shale gas economics throughout the U.S. and abroad at Universities, business venues, and public forums and has appeared on MSNBC and NPR. In 2012, she was appointed to the President’s Advisory Commission on the US Extractive Industries Transparency Initiative.
For more information and the reports, visit www.shalebubble.org.
For 25 years, Earthworks (www.earthworksaction.org) has been dedicated to protecting communities and the environment from the impacts of irresponsible mineral and energy development while seeking sustainable solutions.
The Energy Policy Forum (www.energypolicyforum.org) addresses the serious long-term implications for U.S. energy consumers as America chooses course at the crossroads of potential energy futures.
The Post Carbon Institute (www.postcarbon.org) provides individuals, communities, businesses, and governments with the resources needed to understand and respond to the interrelated economic, energy, environmental, and equity crises that define the 21st century. We envision a world of resilient communities and re-localized economies that thrive within ecological bounds.
For more information:
To read the reports: www.shalebubble.org
Alan Septoff, Earthworks, 202-271-2355, email@example.com
Sarah Eckel, Citizens Campaign for the Environment, 518-339-2853, firstname.lastname@example.org
Travis Proulx, Environmental Advocates of New York, 518-462-5526 ext. 238, email@example.com
John Armstrong, Frack Action, 607-220-4632, firstname.lastname@example.org