Why the Shale Gas Rush Will Be an Economic Bust for New Yorkers
If nothing else, the recent chemical spill in West Virginia reveals the extent to which elected officials go along with powerful industries at serious cost to public health and the environment. As can be seen in the abject 40-year failure to regulate toxic chemicals like the one contaminating the West Virginia water, U.S. policy (from the national level all the way down to the state and local level) is to accept at face value industry safety assurances and economic projections, without further investigation to protect the public health or pocketbook.
That is exactly what happened in New York State through the Department of Environmental Conservation’s misguided push to industrialize key regions of upstate New York based on the pleas of gas companies.
Healthcare professionals’ concerns about the health impacts of gas fracking persuaded the New York State Commissioner of Health to delay the DEC’s drive to issue drilling licenses for shale gas. Eleven months ago, the state undertook a health review, which is still pending. Now a new team of professionals has analyzed whether or not fracking would be good for New York’s economic health. And the answer is a resounding no!
To assess the gas industry promises of massive job creation, fat royalty checks and a century of ample energy from shale gas, five senior New York State professionals with impressive credentials combined their special areas of expertise to create a comprehensive analysis of New York State’s likely shale gas output. The five specialists are Lou Allstadt, a retired gas and oil industry executive with oversight for all of Mobil Oil’s on- and offshore drilling in the Northern Hemisphere; James Northrup, a retired oil and gas investor, former planning manager at Atlantic Richfield, and onetime member of the Governor of Texas Energy Advisory Board; Brian Brock, a geologist and onetime mapper with both the New York and the U.S. Geological Surveys; Jerry Acton, retired lead systems engineer and systems architect for IBM and Lockheed; and Anthony Ingraffea, the Dwight C. Baum professor of engineering and Weiss presidential teaching fellow at Cornell University.
Unlike the current gas rush in neighboring Pennsylvania, they demonstrate why the specific attributes of New York’s geology are likely to produce something closer to the drip, drip, drip of a leaky faucet rather than a gusher. If their analysis is correct, for all the contamination risks and destruction of upstate lands and economy, fracking New York would not be economically viable. So long as the current gas glut and low prices endure, low gas output levels will make it unprofitable for gas companies to spend millions drilling the sparse shale of New York State, Lou Allstadt says. According to this industry insider, the oil and gas industry has known this for some time. That’s why they have been quietly pulling out of New York.
Allstadt and the other experts are touring the state sharing their analysis so that the general public can understand what the industry already knows: New York’s shale gas potential will be nowhere near a glut.
In their Jan. 17, 2014 presentation in NYC at the New York Ethical Cultural Society, (sponsored by the Sane Energy Project) and in a presentation in Albany on February 4, the analysts draw an in-depth portrait of New York’s downgraded shale gas potential.
The Gas Boom That Isn’t There
When in 2004 the new horizontal fracking technology was first deployed to unearth shale gas, the industry got public buy-in through the promise of a century of energy independence. Visually underwriting that claim were maps depicting the large land mass of the Marcellus Shale, a gas-containing rock formation that extends from Virginia, West Virginia and Maryland, up through Ohio, New Jersey, Pennsylvania and Western New York State. Its very size encouraged the uninformed public to assume that an endless supply of gas gushed under every inch of the more than 100,000-mile region. Through its industry-promoting Division of Mineral Resources (DVMR), NY’s Department of Environmental Conservation (DEC) urged citizens to get onboard.
“The prevailing belief was that it worked in Texas, so it should work here,” Anthony Ingraffea says. “But geology rules. You can’t get what Mother Nature has not provided.”
What goes on underground may be a mystery to the average person, but gas geologists and engineers are familiar with that territory. That's why Cornell University’s Ingraffea, now the president of Physicians, Scientists, and Engineers for Healthy Energy, Inc., came to be one of New York’s earliest fracking critics.
Yet initial industry projections, as well as promises by government agencies like NY’s DEC, purveyed a misperception to Wall Street and the public. In fact, according to James Northrup, the DEC calculated drilling’s projected jobs and revenue based on the faulty assumption that uniform gas stores pervaded the entire Marcellus region. The state environmental regulators used those inflated numbers to justify gas exploitation despite the dangers of regional contamination of water, earth, air, and food, as well as the loss of wildlife, forests, homes and communities due to industrialization.
Like early immigrants who imagined New York City streets were paved with gold, the state government’s fracking enthusiasts gulled the public with inflated expectations. But the numbers were wrong. Instead of the 43,000 gas wells the DEC projected, there are less than 1,500 possible well sites in NY. Instead of the 53,000 jobs the DEC promised, fracking in NY is likely to yield no more than 3,100 jobs, says Northrup, who crunched the numbers. He found that industry estimates took output data from a handful of select highly productive wells and projected that best-case scenario everywhere. As a result, “You had speculative leasing,” says Northrup. “You lease large areas and hype the results.” Sixty-four million dollars worth of industry lobbyists sold those inflated projections to New York’s elected officials, says Northrup.
Initially, the Security and Exchange Commission had relied on gas industry projections. These were based on vertical drilling output data, since horizontal fracking was a new technology. But as it proceeded, economic analysts like Deborah Rogers pointed out the significant disparity between the initial projections and the actual output levels. Reviewing the data, the SEC later revised its projections in 2011, substantially downgrading them.
Ongoing fracking in neighboring Pennsylvania produces ever more accurate output data, allowing both geologists and economists to further revise projections. Since the Pennsylvania region is the closest (geologically) to the Marcellus formations in New York, geologist Brian Brock defined the key subterranean characteristics of shale throughout both regions in order to single out the conditions that most typically yield high, moderate and minimal volumes of shale gas. Brock’s geological mapping also distinguishes between areas that yield higher and lower gas quality. (Low quality gas requires more energy to unearth and refine than it ultimately delivers for use.)
Next, systems engineer Jerry Acton tracked the 2009-2013 output productivity of nearly 1,800 high-, moderate- and low-performing wells in Pennsylvania. He confirmed Brock’s geological analysis: the areas with high vs. low gas yield in Pennsylvania tracked to the geological indicators Brock defined. In areas with shallow shale, drilling does not bring up much gas. In areas with thin shale, there is an insufficient reservoir of gas underground. In areas with more ancient levels of rock formation, the gas reservoir gets “cooked” to produce lower quality gas. Based on the Pennsylvania analysis, Acton is able to map the specific underlying geology throughout all of New York’s Marcellus regions in order to identify areas with the most promising productivity levels.
His analysis reveals that there aren’t any.
According to Acton’s systemic analysis, no areas in New York State are likely to produce high gas output. Hardly any areas are likely to produce moderate gas output. A few sparse areas close to the Pennsylvania borders in New York’s southern tier are likely to produce minimal gas output. In nearby Pennsylvania, gas companies have abandoned leases and pulled out of areas with the same geological and output profile, simply because it is not worth the high expense to drill there.
Do Governor Cuomo and the DEC need to be aware of these findings? When asked that question, the two I spoke to both smiled at the irony. They believe New York’s top elected official and the state agency he oversees must already know— and perhaps have known all along.
According to Allstadt, who is also the former director of the U.S. Oil and Gas Association, the industry would only enter a region after undertaking this type of analysis. Industry meetings he had attended confirm that they had done so. Nevertheless, they promoted different projections to Wall Street and the general public. Moreover, say Northrup and Brock, Division of Mineral Resources documents indicate that state regulators were also aware of the actual shale gas potential despite the inflated projections they presented to the general public. Although embedded in the DEC, the DVMR has close ties to industry since its mandate is to promote gas and oil permitting and development.
So the question remains: If as the geology reveals, fracking in New York has always been a marginal undertaking at best, why the land grab and the millions spent on lobbying to frack New York State? Who is this shale play for? According to the five experts, the answer just might be Wall Street.
That’s why, despite New York’s limited shale gas potential, activists opposing fracking can’t go home and put their feet up just yet. The industry is unlikely to stop pushing for fracking licenses, primarily because a permanent halt or ban would tarnish fracking’s carefully honed image with investors. What’s more, as new fracking pipelines carry shale gas across New York (and into New England and beyond), a wider segment of the population will be exposed to shale gas chemicals, contaminants and radioactivity. Meanwhile, pipeline and compressor station releases of methane will continue to drive global climate change. As fracking’s perceived economic benefits decline, and its downside risks reach wider segments of the population, it’s likely that more people will join the opposition to save their health, their homes, their communities, their water and food, their wildlife and their land.