Michael Giberson
After following the reactions to the New York Times stories on shale gas skepticism for a day or two, I began to get tired of all of the complaints (“pretty poor quality,” “sensationalistic … false,” “poorly done piece of work,” “mislead its readers,” “approaching yellow journalism“) and so started searching for supportive reactions, for someone to say “right on,” “good work,” or “that Ian Urbina should win a Pulitzer for his mind-blowing investigative work on display in these articles.”
Here is what I found: a claim that “the New York Times’ ongoing ‘Drilling Down’ series … has been providing groundbreaking coverage” followed by the observation that three more articles had appeared. From that statement, then, we might infer that the author meant to suggest these new articles in the series also constituted “groundbreaking coverage.” That’s about as close as I came to finding a supportive remark. (Source: the NRDC Switchboard blog.)
On the other hand, even at the Huffington Post we find less than complimentary views of the Times‘ work. Raymond Learsy writes:
Quite incredibly, for two days running including a two column headline on this Sunday’s front page, “Insiders Sound Alarm Amid a Natural Gas Rush“, and again on Monday, “Behind Veneer, Doubt on Future of Natural Gas” The New York Times descended into a realm approaching yellow journalism: reportage of freighted opinion presented as news often with only the flimsiest attribution, often undated or old enough no longer to be germane given the explosive developments in the field, repeatedly out of context and clearly selected to substantiate a predetermined point of view. In doing so, offering a selection of documents “including hundreds of industry emails, internal agency documents and reports by analysts” imparting the New York Times’ imprimatur to documents whose “names and identifying information have been redacted to protect the confidentiality of source, many of whom are not authorized by their employers to communicate with the Times.” Documents presented without context nor permitting the reader in too many cases to be able to ascertain the who, why, and motivating factors. Is this the new world of newspaper reporting?
The articles are shameless in deprecating the standing of institutions that hold differing views than that of the Times. The United States Energy Information Administration is excoriated for its optimistic assessments of shale gas reserves and its potential by inferring their research relies on “outside consultants with ties to the industry”. This from the masters of redacted references.
Energy in Depth, a project of the Independent Petroleum Association of America, also took a dim view of the two articles, essentially accusing reporter Ian Urbina of outsourcing his reporting and writing to long-time shale gas skeptic Art Berman (who is quoted briefly in the article).
In any case, I’d still like to find some support for Urbina’s articles. I thought that at least the Oil Drum would take note of the skeptic viewpoints, but as of this morning the only reference was provided in the comments to a post. Ideally, I’d like support with data (the Oil Drum commenter suggests a test based on drilling at DFW airport). Alternately, maybe one of the anonymous analysts whose email was quoted will step forward and say “that is my quote and I still believe it.” Maybe I’ve missed the outpouring of informed support, or maybe it will just take a little time for supportive analysts to get their data together and then go public. In any case, if you see complimentary remarks for Urbina’s work, please leave a comment here. Thanks.
A couple quick comments. I share your skepticism of the report, and the comment in your prior post that Michael Levi’s response is probably the most thoughtful of the bunch. That said, there are good reasons to be skeptical about the more bullish claims on shale gas. My expertise is more in the electric than gas industry, but have been consistently struck over the last few years that everyone looking at gas futures has the same criticism of forecasts from EIA and elsewhere asserting that shale changes everything. (See here for some of the issues: http://www.grist.org/article/2010-10-28-shale-doesnt-change-everything)
Briefly, several consistent themes I hear that the NYT ignored or framed in a more conspiratorial light than I would have, but still serve to temper the bullish forecasts:
1. For all of CHKs growth, they are delivering negative retained earnings over a fairly extended period. All public info from their public filings. Can certainly argue that they are investing in growth, entering harvest mode soon, but very hard to square that financial reality with LT low gas price forecasts; surely their investors aren’t betting on gas prices staying low?
2. Just about every independent analysis out there suggests that shale plays are losing money on the margin. The requirements to produce within the first 3 years in order to maintain your lease have led to a glut of supply on the market – again, justified in the hope that the price will rise on the back end of the loss leader. I’m not going to make predictions, but this again suggests that those who know most about gas are betting on rising prices. My understanding is that the only exception is for wells that have high C2+ contents and can produce natural gas liquids that compete against petroleum products. But even in these, note that the natural gas is losing money; it’s simply offset by the other produced commodities, and not sustainable in the long term from an economic perspective.
3. Finally, all the stories around shale gas’ inherent cheapness are supply stories. You can’t forecast price without also considering demand, and for much of the electric grid, gas and coal fired generators are approaching parity. This is only going to increase as coal plant retirements accelerate, and a host of scenarios suggest that this could lead to increases in total US gas demand by 10 – 30%. No way that doesn’t put upward pressure on price, but the demand side of that equation is rarely if ever factored into the shale story. (Note that gas forecasts suffered from this same ‘one hand clapping’ story 5 yrs ago, when all the story was around the rising cost of LNG, and people were buying strips @ $12/MMBtu, never asking what sustained prices at that level would do to NG demand.)
None of this is to suggest conspiracies of the sort intimated by the NYT article, but does strongly suggest that those making investments on the thesis that natural gas prices are now going to stay low and non-volatile, contrary to past history are likely to get burned.
Here is a supporter: http://www.ravennacapitalmanagement.com/mrr/wp-content/uploads/2011/07/The-Master-Resource-Report-2011-07-01.pdf
Quote: “Just in case you missed the New York Times article on shale gas it is worth reading and is much better written than anything I would have produced. The article is titled ‘Insiders Sound an Alarm Amid a Natural Gas Rush.'”