Is Pa. gas boom not all it's fracked up to be?
Few issues have dominated the Pennsylvania landscape over the last year or so than the newfangled form of natural gas drilling deep into the shale formations under the Keystone State known as hydrofracking, or just plain "fracking."
Is Pa. gas boom not all it's fracked up to be?
Few issues have dominated the Pennsylvania landscape (literally, if you live in the wrong part of the state like Dimock, pictured above) over the last year or so than the newfangled form of natural gas drilling deep into the shale formations under the Keystone State known as hydrofracking, or -- more lyrically -- just plain "fracking."
It started in the waning days of the Rendell administration with the much ballyhooed release of the Academy Award-nominated documentary "Gasland," then accelerated with a series of reports -- especially from the New York Times and ProPublica -- about environmental hazards, puctuated by the arrival of Gov. Corbett and his promise to make Pennsylvania "the Texas of the natural gas boom." Corbett's promise not to tax drilling, which happens in every other key gas-producing state (including, ahem, Texas) loomed large over the fight to deal with a $4 billion budget hole in Harrisburg. Fracking proponents said, dubiously, that the pollution risk is overblown and -- less dubiously -- that fracking was creating jobs here in Pennsylvania when few other industries were doing that.
After all that comes a stunning report in the New York Times: Natural gas drilling may not be all that it's fracked...I mean, cracked up to be. Geologists say that many wells creating during the ongoing boom in fracking in shale formations from Texas through central New York are petering out long before predicted, meaning that far less natural gas is being collected than forecasts. Some critics wondering if all the hype about fracking -- and whatever your view, you can't argue there's been a ton of hype, including from politicians like Tom Corbett -- is just a Ponzi scheme to boost the stock price of energy firms.
From today's Times article:
In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.
“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”
“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.
It's a little too early to tell if these under-producing wells -- which certainly seem to be a problem in areas such as the Barrett Shale formation in Texas, where drilling picked up sooner than in Pennsylvania -- are going to be as big a problem in the Marcellus Shale. It's interesting to note, however, that one company singled out in the Times article for potential overhyping -- Chesapeake Energy -- is now the most active Pa. driller.
According to the article:
“Our engineers here project these wells out to 20-30 years of production and in my mind that has yet to be proven as viable,” wrote a geologist at Chesapeake in a March 17 e-mail to a federal energy analyst. “In fact I’m quite skeptical of it myself when you see the % decline in the first year of production.”
“In these shale gas plays no well is really economic right now,” the geologist said in a previous e-mail to the same official on March 16. “They are all losing a little money or only making a little bit of money.”
I think I state the obvious when I say the significance of this story for Pennsylvania cannot be underestimated. Corbett came to office -- in fairness, like many other politicians in 2011 -- promising "jobs, jobs, jobs," but with nothing really geared toward job creation even really proposed in Harrisburg, the hiring in the Marcellus Shale was one positive he could point to.
Now you have to wonder if this is all another mirage. just a new variation on the "housing boom" that wasn't or the growth of for-profit colleges built upon loans that can never be paid back. It really feels like the only job category showing growth in America right now is the "scams" category. And if the Marcellus Shale is just the geological version of sub-prime mortgages, than God save the commonwealth of Pennsylvania. Because if that's the case, not only will these jobs vanish as fast as they came, but we also fracked up a lot of citizens' drinking water for little or no reason.