The natural gas industry is waging an aggressive public relations campaign to bolster investor confidence, despite evidence showing that shale gas is an unreliable resource and that the production process releases large amounts of methane into the atmosphere. Although hydraulic fracturing (or fracking) is in the media’s hot seat, the prospect of a drilling bubble coupled with the under reported problem of methane leakage may be the most destructive qualities of natural gas in the United States.
From commissioning false field reports to flooding television with commercials, natural gas companies are convincing Americans that gas will save the U.S. market; it will not.
The public relations push is an effort to revive a campaign that started in 2006 and was subsequently killed when the economic crisis hit two years later. Natural gas companies tripled the number of existing wells in those two years, hoping that a glut would attract a large consumer base before raising the prices back up again. Financial companies pumped billions of dollars into the industry, only to see it crumble.
As time passes, data on natural gas production, which goes back only a few years, indicate that shale gas is an unreliable energy source. Reserves are declining up to 70 percent per year. Where corporate reports show that decline leveling off through the use of theoretical models, figures point to an unrelenting decline that predicts the reserves will dry up in a few years.
Financial backers such as Goldman Sachs and AIG are hurriedly funding the development of the natural gas sector to attract other investors before reality sets in. If they fail, the billions of dollars spent from 2006 to 2008 will have been wasted.
These firms are financing energy companies to buy up cheap land, quickly drill wells, label the fields as profitable, and then bundle up those leases and sell them for up to $30,000 per acre to clueless investors. The average acre, according to the founder of Energy Policy Forum and former investment banker Deborah Rogers, is sold to developers for no more than $1,200, and sometimes as low as $100.
These industries are doing the same thing they did leading up to the 2008 crash, only swapping out subprime mortgages for unproved shale gas reserves.
Just as in 2008, companies control the ratings agencies. They “guide” them, arguing that these deals are too complex for the agency to rate by itself.
They’ve created confusing financial products as well, luring investors in with Volumetric Production Payments (VPP), which are indecipherable structures of payments much like derivatives.
The hype surrounding natural gas is a last push to take toxic assets—literally, in this case—dress them up as fancy investments, and then sell them off to unsuspecting Americans.
“Public policymakers need to be very aware of the promotional aspect of shale gas,” petroleum geologist Art Berman says. “This is a very efficient public relations and business machine. They have done a really good job of convincing public policymakers that shale is revolutionary.”
The industry’s reach, many say, infects the Department of Energy and its Energy Information Agency. Geologists such as Berman and Post Carbon Institute fellow Dave Hughes have looked at figures in the reports and say the conclusions do not match the findings.
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