New York Times vs. the Wall Street Journal on Shale Gas
On Sunday, the New York Times and the Wall Street Journal published pieces that provided starkly different portraits of the natural gas industry. The NYT's article, the first of a two-part series, suggested that projected shale reserves might be inflated, which could in turn lead to an Enron-esqe bust. Journalist Ian Urbina cites emails from industry analysts, Energy Information Administration (EIA) staff and geologists to support his contention that extracting shale gas may be more costly and difficult than claimed by the industry. The WSJ editorial, on the other hand, contended that the shale gas boom is creating jobs and enhancing energy security. The article suggests that sustainability concerns related to new development are unfounded and are being pushed by environmentalists and EPA Administrator Lisa Jackson's "anti-fossil fuel" agenda.
The NYT's article finds that natural gas producers are overstating the amount of recoverable reserves in order to spur investment in new projects. Evidence from a variety of credible sources, including not only EIA but also IHS CERA and MIT, among others, conflict with the NYT's allegations. Certainly a degree of uncertainty pervades any projection of future production, but data on current production demonstrates the meteoric rise in development over the past several years. For instance, shale gas currently constitutes 25% of total domestic natural gas supplies compared to 1% in 2000. Moreover, production in the Barnett Shale has doubled over the last four years, even as the number of wells has decreased by 60%. Additionally, the author relies on data from the Barnett, Haynesville and Fayetteville shales in arguing that “many wells are not performing as the industry expected.” Highlighting production in these three shales to fit the author’s conclusion while not mentioning significant production in the Marcellus Shale raises concern. This oversight is particularly disconcerting in the context of recent reports that some wells in Susquehanna County are producing at record levels for the Marcellus Shale. The NYT’s article is correct in identifying low natural gas prices as a risk for producers and investors. Prices are, however, at historic lows spurred in part by both a glut from new development and decreased demand from the economic downturn.
The WSJ editorial is correct in touting the economic, energy security and environmental promise of shale gas. Given the scale of new production, particularly in areas unaccustomed to oil and gas development, the natural gas industry faces questions regarding the environmental and health concerns associated with hydraulic fracturing and other aspects of drilling. The WSJ editorial, however, downplays the need for the industry to actively engage with the public, regulators and environmental groups regarding concerns with new development.
The good news is that many in the industry are working to address these concerns. A first step is gaining the public's trust, which can be achieved in part by disclosing more information related to the process. Some in the industry worked with Texas legislators and environmental organizations in passing a bill that will require the disclosure of chemicals used in hydraulic fracturing. Similar measures in other states can help to mitigate some of the public’s concern related to new development.
Credibly addressing environmental and health concerns is essential to guard against states adopting knee-jerk reactions to the prospect of new development, such as costly moratoriums. Shale gas is an important strategic asset that can create jobs, enhance energy security and reduce emissions of both CO2 and other air pollutants if done correctly.
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