Politicians hate to be called dreamers or seen as complacent. Consequently, they love confident forecasts about the future.
When industry experts and economists get enthused about what’s sure to happen politicians act just like most investors: they go overboard.
Rosy forecasts about abundant and economic supplies of natural gas embedded in the vast shale formations in almost every region of North America have contributed significantly to the present relatively complacent state of energy policy development in the US and in Canada.
Unlike crude oil from sand in Alberta, it is alleged that natural gas from shale deposits will provide a relatively cheap alternative to dirty coal, expensive renewable power technologies, rising oil imports and, possibly, even the need for more nuclear power. Shale gas is creating jobs now and soon will generate profits across continental America, not just for Texans and Albertans! Being cheap and plentiful it will find a way to overcome environmental concerns.
This happy vision of a market-driven return to energy abundance has dampened interest in costly new sources of energy and fear of economic dislocation in those regions of the US that prospered in the coal and oil age. The shale industry is still growing, but its policy bubble may soon be pricked.
On June 26th, The New York Times ran with this headline: “Insiders Sound an Alarm amid a Natural Gas Rush: Productivity of Shale Wells Is a Concern—Investor Flood Spurs Talk of Bubble.” The most optimistic statement in the article was by T. Boone Pickens.
“I wouldn’t worry about these shale companies,” said T. Boone Pickens, the oil and gas industry executive, adding that he believes that if prices rise, shale gas companies will make good money.”
Times reporter Ian Urbina said:
“Most gas companies claim that production will drop sharply after the first few years but then level off, allowing most wells to produce gas for decades.
“Gas production data reviewed by The Times suggest that many wells in shale gas fields do not level off the way many companies predict but instead decline steadily.
“This kind of data is making it harder and harder to deny that the shale gas revolution is being oversold,” said Art Berman, a Houston-based geologist who worked for two decades at Amoco and has been one of the most vocal skeptics of shale gas economics.”
One major piece in the New York Times doesn’t settle anything but it may serve to re-awaken debate on energy policy in North America.
If fears catch on that shale gas is not a panacea other choices—and tough issues—will get greater attention: the expansion of continental energy transportation systems and the development of northern natural gas reserves; more aggressive measures to reduce the consumption of fossil fuels, including carbon taxes; and more popular support for research and the development of alternative sources of renewable power.