On June 26, 2011, the New York Times published an article titled Insiders Sound an Alarm Amid a Natural Gas Rush. That article described how emails from natural gas industry insiders, financial analysts covering the gas industry, and several independent geologists describe the challenges associated with producing gas by hydraulic fracturing. The mosaic that emerges from those quoted emails is substantially different from the impression that utility executives and natural gas consumers have gained from the marketing messages produced by the gas industry.
Here is a quote from that 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.”
As part of the damage control effort from the natural gas industry in response to that article, Aubrey McClendon, the Chief Executive Officer of Chesapeake Energy, wrote a lengthy letter to his company employees and posted it on the company’s public Facebook page. In that letter, McClendon identified who he thought was responsible for the NY Times article and he issued a call to action to Chesapeake employees. Here is what he said about the motive for the article:
The story is misleading, at best, and is the latest in a series of articles produced by this publication that obviously have an anti-industry bias. We know for a fact that today’s NYT story is the handiwork of the same group of environmental activists who have been the driving force behind the NYT’s ongoing series of negative articles about the use of fracking and its importance to the US natural gas supply growth revolution – which is changing the future of our nation for the better in multiple areas. It is not clear to me exactly what these environmental activists are seeking to offer as their alternative energy plan, but most that I have talked to continue to naively presume that our great country need only rely on wind and solar energy to meet our current and future energy needs. They always seem to forget that wind and solar produce less than 2% of America electricity today and are completely non-economic without ongoing government and ratepayer subsidies.
After reading both the NY Times article and Chesapeake Energy’s response, I thought it was time to share an audio message from Thomas Price. At the time that he gave the talk I am sharing with you, Price was identified as Chesapeake Energy’s Senior Vice President for Corporate Development and Government Relations. The occasion of the talk was a panel discussion held during Energy Epicenter 2010, an annual gathering of the Colorado Oil and Gas Association. The panel discussion was titled Colorado Clean Air-Clean Jobs Act Panel and it featured a series of invited speakers talking about the team that had been formed to push through an act that favored use of natural gas over coal.
After describing how Chesapeake has 125 active drilling rigs and how it has developed a “swat team” with more than 100 employees that works with environmental groups to produce legislation designed to slow the development of new coal fired power plants and to hasten the closure of existing coal plants, Tom Price said the following:
“It’s been said before, but the demand side of the equation is extremely important right now. I mean this really is a zero sum game. I think that there are a number of very progressive utilities out there that recognize the challenges that they are facing with regard to climate change, but the Transport Rule, Clean Air Act and various others.”
Please listen carefully to the way that Price described Chesapeake’s activities to a group of oil and gas producers and compare that to the way that McClendon describes the people who are fighting against the development of shale gas and who are pointing out faults with the idea that shale gas is a sustainable, low-cost bridge to a cleaner energy future.
Disclosure: I freely and frequently announce that I have a pro-nuclear agenda. I have convinced myself using a number of pieces of evidence that the natural gas industry – which has a large overlap with the multinational oil industry – is engaging in a price war against new nuclear power plants. The leaders in the oil and gas industry understand how even a small number of new nuclear power plants would affect the long term “demand side of the equation”. (Quoting Tom Price again.)
My theory is that by holding down prices temporarily, the industry guesses that it can insert several years of delay into the inevitable arrival of new nuclear power plants that will run reliably for 60+ years, rarely, if ever, needing back up from natural gas.