More on the New York Times Shale Saga

by Michael Levi

I’ve been wary of wading back into the brouhaha over Ian Urbina’s New York Times shale gas series – after all, I’m a policy analyst, not a media critic. But a couple pieces about natural gas published in the Times over the weekend make it impossible to resist.

This past Sunday saw a second hard-hitting piece from the newspaper’s public editor, this time about a June 27 story that claimed to document disturbing dissension (and potential conflict of interest) within the U.S. government regarding its bullish take on the prospects of shale gas. Short version of the problem revealed by the public editor: the Times story relied heavily on redacted emails, but the redactions turn out to be severely misleading. The most prominent source in the article was variously an intern and a junior staffer when he wrote the emails that the story quoted; he was identified in three different ways in the article, making it appear that comments were coming from three different sources, when if fact they were all from the same guy; and parts of some emails that were relatively favorable to shale gas were redacted too, without explanation. The story editors, as they did two weeks ago, don’t see anything wrong with what they did. This, more than anything else, is what disturbs me.

Why? Because the series continues – as do its problems. This past Saturday, the Times published the first new installment since the problematic June articles. The latest story is mostly about how the SEC is asking several shale gas companies to document their resource estimates. That’s a perfectly responsible thing for a regulator to do, and for a newspaper to report, though as former Pennsylvania DEP Secretary John Hanger notes, the article could have done with less self-congratulation. My problem is with the last part of the story, which ominously reports that “federal agencies have also begun discussing concerns about the long-term productivity of shale gas wells”, and cites a recent National Energy Technology Laboratory (NETL) newsletter to back that up. The story doesn’t link to the newsletter, but here it is. A careful look makes clear that the story has distorted what that newsletter says. It’s been a long time since I properly fisked an article, but here goes (all quotes from the Times; I haven’t skipped anything):

“Some federal agencies have also begun discussing concerns about the long-term productivity of shale gas wells.”

This is not news. The NETL newsletter is mostly a summary of technical research being sponsored by the lab. But federal research agencies have (rightly) been discussing concerns about the long-term productivity of shale gas wells for as long as they’ve been involved in funding fracking research, i.e. for a very long time. Contrary to the insinuation in the Times article, they haven’t just “begun” discussing these things, and they aren’t doing this because they’re afraid that shale gas is a mirage – they’re doing it, as the newsletter makes clear, because they believe that public R&D funding can help make gas extraction cheaper and more environmentally acceptable. As a corollary, one shouldn’t expect the USG to revise its shale gas projections downward as a result.

“For example, the 2011 summer newsletter of the National Energy Technology Laboratory, a research arm of the Department of Energy, says that technology needs to improve in the Barnett shale in Texas, and in other shale gas areas, for these shale gas wells to be more economically viable.”

Fine. This is almost tautological. It shouldn’t surprise anyone that lots of wells that are drilled will turn out to be losers. Nor is it news that better technology will move some wells from the loser column to the winner one. There is no indication in the newsletter that NETL means anything more than that.

“Shale gas wells often decline sharply after their first year, but many in the industry had remained optimistic about the wells’ ability to produce at a slow but steady rate for decades. Others have doubted these assumptions, which may not be holding up.

‘A crucial challenge for the industry today,’ the newsletter said, is that only a ‘fraction’ — a third or less — of wells show “sustained long-term production,” which makes it difficult for companies to make money on this drilling.”

Gadzooks – it’s the smoking gun! NETL is worried that high decline rates “make it difficult for companies to make money on this drilling”! Except… the newsletter never says that. Take a look at the relevant research abstract, which runs from page 15 to 17 of the newsletter. Yes, it points out that single well productivity is a crucial challenge facing the industry, and it claims that only a minority of wells to date appear to show sustained long term production. (There isn’t enough detail in the research abstract – in particular, the sample is not specified – to interpret exactly what that means.) But there is absolutely no claim offered as to whether it’s easy or hard for companies to make money as a result. The economic judgment is purely Urbina’s — though that’s pretty much impossible for Times readers to tell.

(UPDATE: So that I’m being fair to readers, I’ll take a cue from one of the commenters, and quote this passage from the NETL newsletter: “A crucial challenge for the industry today is that play economic viability depends on total field production and only a fraction (~30%) of shale gas wells show sustained long term production.” I read this as a frame for the research that doesn’t make a net assessment one way or the other. I suppose some can read it as saying that companies can’t make money.]

“The newsletter added that many of the wells produce poorly and others drop in production sharply after an early periodof heavy production.”

I don’t doubt it. Why anyone thinks this is news is another question. If Urbina means to imply that these factors haven’t been recognized in the serious estimates of shale gas potential that are out there, he’s mistaken. Take a look, for example, at page 12 of the recent MIT “Future of Natural Gas” study: there’s a big chart showing that well productivity varies wildly, and that many wells in fact produce poorly. MIT – and others – come to their upbeat assessments of shale gas in spite of the challenges that resource faces, not ignorant of them.

Michael A. Levi  is the David M. Rubenstein Senior Fellow for Energy and the Environment.     Additional thoughts from Michael Levi, can be found HERE

Source: Council on Foreign Relations