Mon June 27, 2011
Report: Federal Officials Fear Fracking Industry Bubble
President Obama has praised the potential of American natural gas as “enormous," saying exploration for the energy source was something both Democrats and Republicans could support.
But internal documents from the Energy Information Agency (EIA), obtained by the New York Times, indicate some administration officials fear the natural gas industry is experiencing an investment bubble that “may be set up for failure.”
The natural gas industry is tremendously important in Texas, where large shale hydraulic fracturing (or “fracking”, for short) operations have been extracting gas and creating jobs in places like the Barnett Shale in North Texas and the Eagle Ford Shale in South Texas. If you look check out this map from the EIA, you can see just how much of Texas sits on a gas basin. The boom of development has stirred concern among environmentalists.
The front page story on the Times print edition says internal EIA documents and emails question how productive natural gas wells will be.
One senior Energy Information Administration official describes an “irrational exuberance” around shale gas. An internal Energy Information Administration document says companies have exaggerated “the appearance of shale gas well profitability,” are highlighting the performance of only their best wells and may be using overly optimistic models for projecting the wells’ productivity over the next several decades.
The New York Times has made these documents available online.
The news is being greeted with skepticism by people in the natural gas industry.
“For shale drilling as a whole, I think it's a complete falsehood,” Bill Stevens with the Texas Alliance of Energy told KUT News. “We’ve heard it over numerous plays over the 30 years I’ve been in a business, that the industry just drills to drill. And it’s just not the case.”
Stevens says many factors will affect the profitability of the shale industry, the price of natural gas among them. He says many energy companies have gone bankrupt over the years betting on something that wasn’t there, while others have made fortunes and provided energy for consumers by assuming risk.