The New York Times’ natural gas fiasco

posted at 6:42 pm on June 28, 2011 by Tina Korbe

Talk about hot air. The Gray Lady blew a spectacular bit of smoke with a recent article that suggested shale natural gas production is a shaky investment at best and, at worst, a Ponzi scheme of sorts, destined to devastate those who buy the “lie” that shale plays will not only produce high profits for companies, but will also provide affordable energy for the country.

The piece — “Insiders Sound an Alarm Amid a Natural Gas Rush” — appeared in the Sunday New York Times and implied natural gas companies intentionally or even illegally overstate the productivity of their wells and the size of their reserves. The article mentioned by name (among others) Aubrey K. McClendon, CEO of Chesapeake Energy Corporation, the second-largest producer of natural gas in the country. The piece juxtaposed a McClendon quote — “It’s time to get bullish on natural gas” — with supposed “facts” that suggest no reason to be bullish exists.

By Sunday night, McClendon had already responded to the inaccurate and misleading article. In an internal all-staff e-mail, McClendon reminded Chesapeake employees of the facts NYT reporter Ian Urbina conveniently chose to ignore. Yesterday, McClendon published much of the same information to the Chesapeake website:

Chesapeake stands behind all of its statements to shareholders, partners and the public regarding our natural gas discoveries and production. Our industry’s operations and investment decisions are informed and guided by the best geoscientific, petrophysical and 3-D seismic data available and analyzed by some of the best drilling, completion, production and reservoir engineers in the business. The results of the industry’s efforts to revolutionize natural gas development and production have been extraordinary and continue to improve. …

By analyzing our own and industry peer well performance, we know that the initial productivity of a majority of the industry’s shale gas wells have been steadily improving, both in initial production rates and the expected ultimate recoveries of natural gas. We fully expect that the majority of these wells will be productive for 30-50 years, or even longer. …

It is also absurd to conclude that shale gas wells are underperforming while America is awash in natural gas and benefiting from natural gas prices less than half of what they averaged in 2008. I also note that Chesapeake and other shale gas producers are routinely beating natural gas production forecasts. In fact, in 2009, thanks to shale gas, the U.S. passed Russia as the largest natural gas producer in the world. Today shale gas production represents approximately 25 percent of total U.S. natural gas production. How can shale gas wells be underperforming if shale gas companies are beating their production forecasts, natural gas prices remain low and U.S. natural gas demand is at a record high? …

I am proud to be associated with the American natural gas industry – an industry that is providing a direct economic stimulus to the U.S. economy of more than $250 million a day through lower natural gas prices than in 2008. The indirect economic effects are likely many times this amount. In addition, the U.S. natural gas industry has created more than 500,000 jobs in the past seven years of the gas shale revolution and created tens of billions of dollars in economic value, while at the same time reducing the need to perpetuate massive trade deficits from reliance on foreign energy sources. Natural gas is the only available, scalable and affordable fuel that can reduce oil imports, reduce air pollution, create jobs, enhance national security and save Americans money on energy costs. Chesapeake will continue to deliver natural gas in increasing quantities in the years ahead to meet the increasing market demand from consumers for this American treasure.

McClendon was hardly alone in his reaction to the article. Energy in Depth compiled a list of some 25 responses to it, from experts in government, academia, industry and peer media, all to the same effect: The NYT article misstated the truth about natural gas. The U.S. Energy Information Administration, the Council on Foreign Relations, the American Petroleum Institute and the American Natural Gas Alliance are just some of the organizations that responded with disappointment and outrage to the Times’ poor reporting.

Two quotes from the EID compilation stand out, in particular. The Energy Information Administration had this to say:

EIA was contacted by a Times reporter in advance of the story, and provided a response that described the agency’s approach to developing its shale gas projections. Those interested in EIA’s views on shale gas, which differ in significant respects from those outlined in the June 27 article, may want to review the EIA response to the inquiry from the Times, the Issues in Focus discussion of shale gas included in the Annual Energy Outlook 2011, and a recent presentation on domestic and international shale gas.

Terry Engelder, a professor of geosciences at Pennsylvania State University, who was quoted in the original NYT article, said the newspaper took his quotes from an e-mail he wrote on shale economics — an e-mail that didn’t express the full range of his views on the subject. “The reporters didn’t talk to me in person,” Engelder said. “[The e-mail had] a lot of nuance in it. The reporters could have learned something from the nuance.”

Both quotes suggest Urbina had the facts at his fingertips — but deliberately disregarded them. The seeming anti-natural gas agenda this reveals perplexes me, until I consider what Ed wrote just this morning in his defense of hydraulic fracturing, a technique used in the natural gas drilling process.

The problem with fracking isn’t that it’s particularly new or dangerous. The methodology has been in use for decades, and it is as safe as other drilling processes. The real problem is that it could produce relatively cheap hydrocarbon energy for a very long time, and that’s what has environmentalists worried.

So it is: Natural gas just might be the energy solution environmentalists say they want, but actually can’t stand because nothing would put them out of business faster. Forbes blogger Chris Helman words it perfectly:

We would have thought that the Times would be in favor of plentiful, low-cost natural gas. It burns a lot cleaner than coal, and with nuclear off the table for now, gas is poised to fuel U.S. economic growth for more than a generation to come. I can only guess that the problem, as the Times sees it, is that as long as we have all that cheap gas, there’s precious little need for solar panels, windmills and other cornerstones of their much-heralded but slow evolving green jobs revolution.

Forbes, on the other hand, thinks it’s pretty awesome that thanks to drilling ingenuity the U.S. has proven to have one of the world’s biggest and cheapest hoards of clean-burning gas. Now that’s a story.

 


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Busted.

PBoilermaker on June 28, 2011 at 6:46 PM

I swear to God these fools really believe that all the energy we’ll ever need comes outta that little socket in the wall…

BigWyo on June 28, 2011 at 6:47 PM

If it is good for the Economy or leads to prosperity the left is against it.

Grunt on June 28, 2011 at 6:49 PM

Par for the course……………Ooops, sorry BarryO, pun intended.

Robert17 on June 28, 2011 at 6:51 PM

The NYT is the most bias organization on the planet, every article printed there is tainted. Luckily for us, newspapers will join the VCR, rotary phone and soon be a thing of the past.

MJZZZ on June 28, 2011 at 6:54 PM

Our industry’s operations and investment decisions are informed and guided by the best geoscientific, petrophysical and 3-D seismic data available and analyzed by some of the best drilling, completion, production and reservoir engineers in the business.

Yeah, but did you get Algore or James Hansen or Greenpeace or PETA or the American Society of Unwashed Hippies to sign off on your, so-called, ‘facts’?

Yeah.

That’s what I thought!

catmman on June 28, 2011 at 6:58 PM

suggested shale natural gas production is a shaky investment at best and, at worst, a Ponzi scheme of sorts, destined to devastate those who buy the “lie” that shale plays will not only produce high profits for companies, but will also provide affordable energy for the country

As an investor, I had a different take on the article. I didn’t see it as an attack on the natural gas industry, but a warning from insiders that an investment bubble is forming around the industry. It’s not hard to believe given the propensity for bubbles in this country, and it’s certainly not unusual for a specific industry to see over-investment. Remember that an investment bubble doesn’t indicate any problem in the underlying asset or business model, just as the existence of the housing bubble didn’t suggest that homes were destined to collapse. Bubbles can form when, in the rush to invest in a given sector, ‘dumb money’ is willing to jump into even the smallest opportunity without doing adequate due diligence or without fully grasping the potential return on investment.

It may be the case that we’re seeing a natural gas investment bubble that’s ultimately caused by over-supply. Unless more utilities replace coal-fire plants with gas and more freight companies transition to CNG engines, investors may be left with collapsing asset values as over-supply depresses prices for the next several decades.

foreverright on June 28, 2011 at 6:59 PM

If it’s a bad investment it would only be because little Bammie and his rapacious EPA is desperately looking for a way to shut it down.

slickwillie2001 on June 28, 2011 at 7:00 PM

My new T-Shirt:

Fracking gives you gas.

The New York Times gives you crap.

Yoop on June 28, 2011 at 7:00 PM

Because they are evil, lying, fabricating of quotes, and twisting of facts is acceptable (and encouraged) when writing an article dealing with the oil and gas industries.

NYT Editorial Guidelines, pg 42 par 12

Rod on June 28, 2011 at 7:03 PM

I have all my money invested in gas. Not natural gas but 87 octane and it’s all in my car.

lowandslow on June 28, 2011 at 7:03 PM

The NYT is the most bias organization on the planet, every article printed there is tainted. Luckily for us, newspapers will join the VCR, rotary phone and soon be a thing of the past.

MJZZZ on June 28, 2011 at 6:54 PM

True enough, but the next tier is no better: AP, Reuters, and Google. It is places like HotAir that are critical to filling the gap.

pedestrian on June 28, 2011 at 7:05 PM

My new T-Shirt:

Fracking gives you gas.

The New York Times gives you crap.

Yoop on June 28, 2011 at 7:00 PM

My new T-Shirt:

Frack You, NYTimes

Rod on June 28, 2011 at 7:06 PM

I have all my money invested in gas. Not natural gas but 87 octane and it’s all in my car.

lowandslow on June 28, 2011 at 7:03 PM

The price of gas where I live (right next to oil refineries) has dropped about $0.75 to around $3.50 a gallon since Memorial Day. People are so relieved that it’s not up to the $5.00 that all the experts were predicting by Independence Day. They forget when Obama took office it was right around $2.00. This is all due to his administration and his coconspirators in the MSM.

Tommy_G on June 28, 2011 at 7:14 PM

GasBaggers

faraway on June 28, 2011 at 7:16 PM

Smells like Soros. Tastes like Soros. Good thing we didn’t step in it.

Kenosha Kid on June 28, 2011 at 7:19 PM

Just remember, whe the final pushing-shoving match is finished, it is these NYT reporters, and the rest of the trash in New York, that will be freezing in the dark.

Old Country Boy on June 28, 2011 at 7:19 PM

Heh. I saw lefties on HuffPo citing this the other day. They have worked themselves into full-on conniptions over natural gas. It’s kind of funny.

juliesa on June 28, 2011 at 7:22 PM

Is Urbina going to fall back on the tried and true NYTimes “journ-o-list” excuse ‘well I am a crackhead’

DANEgerus on June 28, 2011 at 7:24 PM

It’s not surprising that elitists commie wallow in, and peddal lies, but that there are actually people out there, idiotic enough to believe them.

Remember the movie, Escape From New York? It imprisoned criminals inside a walled Manhattan. I’m starting to think this isn’t such a bad idea…and to throw the stupid in with them as well. *sigh*

capejasmine on June 28, 2011 at 7:24 PM

Isn’t the expression ‘crack team’? At NYTimes it’s ‘CrackHead Team’

DANEgerus on June 28, 2011 at 7:26 PM

Natural Gas From Shales Will Permanently Change
U.S. Energy Supply For The Better
11th Annual Tulane Engineering Forum
New Orleans, LA
April 15 2011
**************
**************

U.S. Energy Outlook At This Moment
==================================

canopfor on June 28, 2011 at 7:26 PM

Crap,Linky snafau,ugh!

http://tef.tulane.edu/pdfs/2011/william-marko.pdf

canopfor on June 28, 2011 at 7:27 PM

Talk about hot air.
——————–

New York Times Is All Hot Air On Shale Gas
Jun. 27 2011 – 1:37 pm
**********************

http://blogs.forbes.com/christopherhelman/2011/06/27/new-york-times-is-all-hot-air-on-shale-gas/

canopfor on June 28, 2011 at 7:30 PM

Texas recently passed a law enabling CNG use in large vehicles. Normally I don’t want the government picking winners and losers, but it’s ridiculous not to use all this cheap gas we have, especially if it can cut our need for foreign oil to make gasoline.

juliesa on June 28, 2011 at 7:31 PM

They will stop at nothing to prevent fossil fuels.

They have a clear agenda towards “renewable” energy. (except wood….gotta’ shut down those loggers!).

Any news that shows a cheap way to expand and add to our fossil fuels resources is met with protest and scorn by this rag.

They rather throw billions down a shI$#@hole like this:

http://dailycaller.com/2011/02/22/panel-green-jobs-company-endorsed-by-obama-and-biden-squandered-535-million-in-stimulus-money/

Opposite Day on June 28, 2011 at 7:36 PM

They call the Times the “Gray Lady”? To me, it’s the Gray Haired old lady spinster. She sits there, has her opinions, which no one is going to change. She doesn’t want to change because, she’s right and the whole rest of the world is wrong. Yeppers, she’s definitely the gray haired old spinster lady.

I don’t know why anyone would waste their money buying this rag. The paper has become nothing more than the media mouthpiece of the Democratic Party, nothing more, nothing less. If you really want to know what’s going on in the world, the NY Times is not the place to find out.

Vote Republican and only be called a racist one more time.

bflat879 on June 28, 2011 at 7:43 PM

NYT, ponzi, energy, enviromentalist, For a second I thought the article was about carbon credits, not fracking.

multiuseless on June 28, 2011 at 7:52 PM

What cheeses me off is that environmentalists (and even some commenters here) refer to natural gas as non-renewable, the rare product of decaying lily pads and squids. Nothing is more renewable. Simply subduct mega-masses of carbon-rich calcareous rock under huge volumes of iron-rich (catalyst) igneous rock in the presence of oceans of hydrogen-rich water and you get massive amounts of methane. It may take eons to travel up cracks to where it can be economically accessed, but it has been being made 24/7/365 for billions of years now, yes, with help from dead squids too.

Chaz on June 28, 2011 at 7:53 PM

How about a cap and trade tax on newsprint.

esblowfeld on June 28, 2011 at 8:07 PM

The NYT article misstated the truth about natural gas.

Punch has a political agenda. He’s not interested in the “truth”.

GarandFan on June 28, 2011 at 8:36 PM

Natural gas and methane are both very potent long term sources for energy as alternatives and substitutes for petroleum and coal. Science backs that up and many environmentalists like it too even if this guy from the Times does not. Storage and extraction have downsides but with oil prices set to remain high or rise they are easily mitigated with technology and investment.

For any change there will be resistance but there are very good reasons for optimism about natural gas and the industry is moving ahead.

lexhamfox on June 28, 2011 at 8:38 PM

I live in a region that’s been producing coalbed methane for 30 years. It uses the same technology of drilling into deep deposits, fracturing them and then drawing up the gas that gets released when the pressure begins to ease. Unless there is a lot of faulting in the intervening rocks, it’s safe, but each project has to reviewed before it gets approved.

This whole flap smells like the work of environmental lobbyists who can’t stand the idea of making profits or creating jobs, especially if they tap our natural resources. But America’s economic strength has come from developing our resources, and environmentalist-imposed limits on that have cost us trillions of dollars and enriched regimes that support international terrorism. America could be an oil exporting nation, but not until it shakes off the grip of radical environmentalists, or “ecolytes” as I like to call them.

flataffect on June 28, 2011 at 8:41 PM

I work for the LARGEST natural gas producer in the country and have been in the natural gas industry for 33 years. Overestimating your reserves has disasterous effects on borrowing and employing service companies not to mention state regulators don’t like it either. I read the piece, laughing all the way through it. The environitwits are having a field day with the story but have no clue. Every DAY we look at production vs estimates and make sure we understand why the numbers are the way they are. Urbina has an agenda and our best interests aren’t part of it.

gitarfan on June 28, 2011 at 8:57 PM

I think this is what really got the NY Times PO’ed at natural gas:
His breath kindleth coals, and a flame goeth out of his mouth.

Knott Buyinit on June 28, 2011 at 9:05 PM

blink on June 28, 2011 at 8:58 PM

Obviously you haven’t looked at the depletion curve of traditional fields vs shale development. Shale is the future and it is now. Traditional fields are being replaced by shale gas.

gitarfan on June 28, 2011 at 9:11 PM

I think this is what really got the NY Times PO’ed at natural gas:
His breath kindleth coals, and a flame goeth out of his mouth.

Knott Buyinit on June 28, 2011 at 9:05 PM

Good article, looks like the left in Israel may muck up new gas finds there as well.

slickwillie2001 on June 28, 2011 at 9:12 PM

Ahhh yes, the New York Times waddles in with another story short on facts and long on agenda. Course this too will not be printed in the NYT because for most of us, it ain’t news!

gordo on June 28, 2011 at 9:18 PM

Crap,Linky snafau,ugh!

http://tef.tulane.edu/pdfs/2011/william-marko.pdf

canopfor on June 28, 2011 at 7:27 PM

GREAT slide show!!!

Quick – everyone make a copy before NYT and Obama deep six it.

Seriously, everyone should pass this around — now!!!

fred5678 on June 28, 2011 at 9:23 PM

I swear to God these fools really believe that all the energy we’ll ever need comes outta that little socket in the wall…

BigWyo on June 28, 2011 at 6:47 PM

That too, but they really think this is akin to a race to landing a man on the moon. The pure myopic truth is that the original race to the moon left us with digital prevailing over printed media. Now we can get digital media on our low energy demanding cell phones. Can you guess how non-green firing up a printing press is for an item that has less than a 24 hour useful life and then turns into (another form of) trash?

ericdijon on June 28, 2011 at 9:25 PM

It’s not surprising that elitists commie wallow in, and pedal lies, but that there are actually people out there, idiotic enough to believe them.

I especially enjoyed reading the comments from the Manhattan Cocktail Party crowd orgasming over how this is quite possibly the greatest piece of journalism in the history of mankind. Sad to see how intellectual dishonesty and outright ignorance has usurped common sense and fact.

JFS61 on June 28, 2011 at 9:35 PM

I asked this when it was a headline item, but no one replied, so I figured I’d ask again: does anyone have any links to articles or whatnot where the link between “fracking” and contamination was debunked? It’s not that I doubt the claim of it being debunked, but I’d like to read it for myself and have the link for future reference/proof.

JediArashi on June 28, 2011 at 9:57 PM

Excellent slide show, canapfor.

Did you notice that the last slide says that EPA’s Lisa Jackson is a Tulane graduate, who, thus, should be promoting the development of this natural resource. Yet we know that Lisa Jackson has an agenda quite contrary to making us energy-independent. Ironic, eh?

onlineanalyst on June 28, 2011 at 10:02 PM

Alternate headline:

New York Times Gets Fracking Wrong

DannoJyd on June 28, 2011 at 10:05 PM

Click the link to the article them click on the author’s name. He has a whole series of anti-natural gas articles.

aloysiusmiller on June 28, 2011 at 10:23 PM

Unlike the NY Times editors, Chesapeake Energy can’t make false statements that might have a material effect on its stock prices. SEC regs prohibit it. But the Times, not under the same consraints when addressing the shale gas can just lie their heads off.

Corky Boyd on June 28, 2011 at 10:43 PM

Given the choice between the NYT, and National Enquirer, I’ll take the Enquirer.

Slowburn on June 28, 2011 at 10:48 PM

blink on June 28, 2011 at 9:22 PM

As it stands right now, the states of New York and PA are using regulatory procedures to slow down drilling activity. This will provide a respite to assess development whether drillers want it or not. Everyone knows how horizontals deplete. I see it every day in Texas. Everyone takes that into account, they have to. Technology has improved field development beyond initial expectations more often than not in every play I can remember. So, shale, while new, still has a history and forces are already moving to slow development in the Marcellus.

gitarfan on June 28, 2011 at 11:04 PM

Heh. This guy at HuffPo of all places agrees it’s crappy journalism, and he thinks the NYT is doing the bidding of OPEC and Big Coal.

http://www.huffingtonpost.com/raymond-j-learsy/the-nytimes-flays-natural_b_886234.html?ir=Green#comments

juliesa on June 28, 2011 at 11:09 PM

Several Presidential aspirants have expressed support for an “ALL OF THE ABOVE” domestic energy policy.

But Democrats, especially Obama, are supporting a “NONE OF THE ABOVE” energy policy which will render the nation cold, hungry, broke, and jobless.

landlines on June 28, 2011 at 11:30 PM

I knew this was BS when I read it last night. Good to see the followup confirming what I thought. If you click through to Energy In Depth link given by Tina Korbe, it is pathetic to see everyone trashing the article. Pennsylvania has gone ahead big time with fracking in Marcellus while NY state has prevented it. The Times is just coming to the rescue of liberal TPTB in the state.

chris999 on June 28, 2011 at 11:49 PM

Natural gas just might be the energy solution environmentalists say they want, but actually can’t stand because nothing would put them out of business faster.

Very true. It will be a stake in the heart of Obama’s fictitious “millions of green jobs that can’t be shipped over seas.” It will crush the attempt by the Obamacrats and environmentalist wackos who have wasted billions of taxpayer dollars in an attempt to out smart the free market through “green industry” subsidies. It would be nice to have that money back now that we are in dire financial straits.

stefano1 on June 29, 2011 at 1:12 AM

There comes a time when a million remaining people need to be asked, “why do you waste hours of your day on something (reading the NY Times) that leaves you dumber for the effort?”

MNHawk on June 29, 2011 at 7:09 AM

As it happens, I work for the largest supplier of natural gas in the country, gas that is extracted largely from shale plays. We were recently acquired by a much larger energy company specifically because of our expertise in producing gas from unconventional sources; they obviously see this as the wave of the future.

And that company was willing to bet several billion dollars on shale gas, the biggest endorsement you can give.

grahampowell on June 29, 2011 at 9:12 AM

They call the Times the “Gray Lady”? To me, it’s the Gray Haired old lady spinster. She sits there, has her opinions, which no one is going to change. She doesn’t want to change because, she’s right and the whole rest of the world is wrong. Yeppers, she’s definitely the gray haired old spinster lady.

Helen Thomas as a newspaper.

Steve Z on June 29, 2011 at 11:11 AM

Fux
Anyone
Gaining
Ground
On
Them

That’s what they do best.

nimrod on June 29, 2011 at 1:30 PM

There is no evidence of a bubble.

itsspideyman on June 29, 2011 at 9:06 PM