More evidence that the recent stories by Ian Urbina in The New York Times were fiction and not fact came from two shale gas experts yesterday:
Speaking July 6 during a news briefing on domestic shale gas production, American Petroleum Institute Chief Economist John Felmy and Penn State University Professor Terry Engelder discredited much of the work from the Times. Felmy said he was "mystified" by the articles, which questioned current reserve estimations and the financial returns of shale drilling, and he said the reality of development tells a much different story.
"These shale gas reserves could well make clean-burning natural gas tomorrow’s energy, and it is no exaggeration to say the United States is poised to be the Saudi Arabia of tomorrow’s energy," Felmy said. "Shale gas production … is poised to make up more than 40% of U.S. production in 2020."
Felmy said the stories appeared to be based on dated sources and information that "disagrees sharply" with the formal modeling done by the Department of Energy and others. "It’s hard for me to believe that [shale gas development] isn’t based on fundamental economics," he said. "If you look what the forecasts from virtually everybody around the country … it affirms that it’s very much a real opportunity that’s economically justified."
In addition to using unidentified sources and unverified statements, the reporting overlooked how thoroughly the oil and gas industry is audited, according to Felmy. "They all have to demonstrate what their reserves are, what their production is, both because of royalties and because of taxes they have to pay for resource extraction and so on," he said. "It’s very hard for me to believe that anything like that could be going on given all the oversight these companies are under."
Engelder, who is serving on Pennsylvania Gov. Tom Corbett’s Marcellus Shale advisory commission, also had trouble accepting the reporting. "The Sunday story was based largely on an interview given by Art Berman. Art is known for casting rain clouds all over the North American gas shale play," Engelder said. "Art’s claim is that these wells have to pay for themselves … in two to three years, at most. The economic models that are being run by the major players in these gas shales, particularly the Marcellus for example, recognize an eight to 10 year payout."*
*SNL Financial (Jul 6, 2011) – Expert: Southern Tier may hold the best Marcellus wells in New York