According to industry sources, natural gas companies have recently invested substantial amounts of money into drilling their wells in hopes the wells will deliver enormous profits and provide the United States with a new energy source. However, the New York Times has recently published an article explaining how the gas might not be as profitable to extract from the underground shale formations as the gas companies would have the public believe.
The New York Times reports that emails which were recently made public shed light on the opinions of energy executives, industry lawyers, state geologists and market analysts who have voiced skepticism about the gas industries lofty financial forecasts regarding the wells. The emails are even said to question whether companies are intentionally and illegally overstating the productivity of their wells and the size of their reserves. The Times reports that many of the emails depict a view of the wells that is drastically different than the comments made by representatives of the gas industry.
According to the Times’ report, one email speaks of how investors are pouring in even though the shale gas is “inherently unprofitable.” Another email compares investments in shale gas to the dot com boom. Yet another email sent by an energy research company compares shale investments to giant a Ponzi scheme.
The Times reports that although there is undoubtedly vast amounts of gas in the formations, questions still remain as to how affordably the gas can be extracted. After examining data from over 10,000 wells, the Times reports that in many cases it costs more to drill and operate the wells than the finished gas is worth. Reportedly, the amount of gas produced by successful wells is also falling much faster than initially predicted by the energy companies, which will make it more difficult to turn a profit in the long run.
According to the Times’ report, the gas industry not living up to expectations will have profound implications. Federal and state law makers have already been considering drastically increasing subsidies for the natural gas business in hopes to provide low cost energy in the future. However, if natural gas 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.
The Times also points out that the gas drilling has an effect on the environment. The procedure used to extract the gas from the shale is known as hydraulic fracking and can require over a million gallons of water per well. The Times reports that some the water eventually must be disposed of as it becomes contaminated during the process. Further, if the wells dry up sooner than expected energy companies will have to “frack” them more often, which ultimately results in more toxic waste.
According to the Times, 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.
Click on the link to read the full New York Times article: Insiders Sound An Alarm Amid Natural Gas Rush