Mar 30 2011

Voices from the Shale 4

Oil & Nat Gas Industry = Failed Production Model;

Disservice to Energy Industry by Exempting It

From So Many Environmental Laws

What is ‘Balanced Approach’ to Oil & Gas Extraction?

Balance Toxins & Population?

Balance Toxins & Economic Growth?

by Mike Benard

Deborah Rogers raises a provocative challenge to the energy industry:  It is a “failed production model and ought to be exploited appropriately.”

“I believe we have done this industry a disservice by exempting it from so many environmental laws that it has not kept up with modern technological standards in contrast to other manufacturing industries – which either got better at their production methods or faced attrition.”

Rogers lives in the Fort Worth, Texas area, and brings a tough-minded analysis to the shale gas industry, based on her combined financial and business experience.

Her financial career began in London where she worked in venture capital financing.  Returning to the United States, she worked as a broker with Merrill Lynch and Smith Barney.  In addition, she has served on the six-member Advisory Committee for the Federal Reserve Bank of Dallas.

In 2003, she started her own company, Deborah’s Farmstead, producing award-winning artisanal cheeses.

Meanwhile, the oil and gas industry juxtaposes two arguments.  First, the shale gas industry alleges its operations result in no significant adverse environmental or health effects.  Second, but if the industry should face regulation aimed at protecting the health and safety of communities where it operates, it will be forced to lay off employees.

Put “Balance” on the Table

Too often, Rogers points out, elected officials support industry’s wishes while calling for a “balance.”

To which she asks:  “A balance of what?  Toxins and population?  Toxins and economic growth?”

“There are people as we speak living next to a gas facility in North Texas that spewed benzene at 15,000 parts per billion (ppb),” she says.  “That’s the equivalent to placing your nose in a gas can.  And no one could verify for how long this had been occurring.”

“There is an entire neighborhood in East Fort Worth that surrounds a compressor station where formaldehyde was detected at twice the highest levels ever recorded in the Houston Ship Channel,” she continues.

I live at one of those sites where the carbon disulfide has been detected at over 400 times the norm for ambient urban air in addition to very high levels of benzene,” Rogers says.

“Why should communities shoulder the potential for catastrophic illness in order to make the oil and gas industry’s product more financially attractive? This is not a question of enduring a bit of noise or dust.  This is about serious potential health impacts.”

Industry’s Point-of-View

What about the point-of-view of the nat gas industry?  One executive who was willing to engage in the debate is Ben Wallace, Chief Operating Officer (COO) of PENNECO, an oil and gas exploration company headquartered outside of Pittsburgh, Pennsylvania.

PENNECO owns interests in more than 1,200 wells in 5 states, according to a corporate brochures on its website, and most of its wells are hydraulically fractured.

In an e-mail Wallace told me (emphasis added):

  • “It does not bother me that a Marcellus fracture treatment uses 20 tons of chemicals diluted in 1,000,000 gallons of water and that the slurry is injected into a natural gas bearing formation multiple thousands of feet below any fresh water aquifers isolated by steel casing and cement.”
  • “I would not support requiring closed loop systems to eliminate plastic lined ponds nor would I support installing vapor recovery units on tanks. Again, the relative risk is minimal and it only serves to increase the cost of energy to the consumer.”
  • “In general, I do not support restrictions on drilling beyond those that currently exist. Sufficient zoning regulations are already in place within individual communities to govern this activity.”

Ben Wallace, like many of his industry colleagues, speaks in absolutes with complete confidence that only the ‘perfect world’ model exists in gas industry operations.  Despite that confidence, PENNECO COO Wallace admitted:  “I do not have a shale gas drilling rig on my property.”

Potential Superfund Sites

Deborah Rogers declares, “It is a fact that each of these [drilling] pad sites has the potential to become a Superfund site due to the chemicals being used and released.  Who will shoulder the burden of clean up?”

“Our energy policy must take into account the potential for catastrophic incidents such as that in San Bruno, California, especially given the new emphasis on urban drilling.”

As Rogers continues, she echoes Samuel Johnson’s famous line about false patriotism – “Patriotism is the last refuge of a scoundrel.”

Or as Rogers put it:  “To wrap ourselves in a red, white and blue flag proclaiming energy independence because of shale gas extraction is nothing more than smoke and mirrors.  These companies have serious financial problems.  These [shale] plays have serious commercial flaws.”

Drilling for Dollars

“I believe shale gas is more about exploiting capital markets than exploiting natural resources,” she says.

“It is about drilling for dollars in the financial markets.  Natural gas is simply a façade which enables this to occur more efficiently,” she concludes. “Hence the unmitigated disregard for disciplined drilling which would keep prices at viable levels.  Hence the disregard for disciplined lease/bonus payments which abounded when capital inflows were at giddy heights.”

Links & Resources

Deborah Rogers on the subject of “Shale Gas or Shell Game” – “I have never seen an investment more hyped than shale gas.  After years in the financial markets in Europe and the US, the one thing I learned is that if something is hyped to this extent, beware.”

Rogers shared her analysis of the economics of shale gas extraction in a presentation given at a summit in Pittsburgh, PA, in November, 2010, sponsored by the EARTHWORKS Oil and Gas Accountability Project.  For more information and a copy of her Powerpoint presentation, refer to these two posts from Spectra Energy Watch:

Shale Gas or Shell Game, Part 1, see footnote #1 under “Links & Resources” at the bottom of the post – http://www.spectraenergywatch.com/blog/?p=1057

Shale Gas or Shell Game, Part 2http://www.spectraenergywatch.com/blog/?p=1078

Penneco COO Ben Wallace’s remarks – refer to this post from Spectra Energy Watch:

Coca-Cola Frack 2http://www.spectraenergywatch.com/blog/?p=882

NOTE: This article – Voices from the Shale, Part 4 – is cross-posted on the Accountability Central website at this link: http://www.accountability-central.com/nc/single-view-default/article/voices-from-the-shale-part-4-oil-natural-gas-industry-failed-production-model/

Accountability Central is part of the Governance & Accountability Institute, Inc.

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