Sounding Off on the Economy of Natural Gas from Shale Development


Last month, two New York Times articles turned heads and bruised egos by questioning the long-term profitability of natural gas extraction from shale deposits. Now, energy companies, the federal government and the Times itself are pushing back against the assertion that the burgeoning shale gas industry is uneconomical.

The articles, part of a series on the effects of hydraulic fracturing (fracking) and drilling for shale gas, cited anonymous internal emails and documents from the Energy Information Administration (EIA), a division of the Department of Energy that estimates increasingly large stockpiles of domestic natural gas. In the communications, employees remarked that these estimates vastly overstated the amount of gas that companies could economically produce from shale. One of the articles by Times Reporter Ian Urbina implied that the EIA, whose reports are supposed to be independent, relied heavily on research from consultants who parroted energy company data. While energy company CEOs were touting the promise of shale gas investment, the articles asserted, geologists and analysts were quietly analogizing to the dot-com and real estate bubbles.

Energy companies were quick to return fire. Chesapeake Energy CEO Aubrey McClendon sent an email to employees panning the articles. "How can shale wells be underperforming if shale gas companies are beating their production forecasts and as U.S. natural gas production has recently surged to record highs?" McClendon asked. ExxonMobil, the largest natural gas producer in the United States, bristled at the Times' failure to contact it for comment and dismissed the assertions as baseless. The company's vice president of public and government affairs noted that ExxonMobil acquired XTO and other shale gas ventures with an eye toward long-term investment, not instant profit from the day-to-day fluctuation of gas prices.

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