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A Fracking Ponzi Scheme on Steroids

In case you got diverted by environmentalists criticizing Governor Christie’s conditional veto of a meaningless fracking ban bill (a political stunt by Democrats), you might want to know that there have been extremely important revelations regarding the fundamental economic viability of natural gas fracking.

The NY Times has written devastating investigative stories on the gas fracking industry (see “Drilling Down” series).

In the wake of stories that suggest that the fracking industry exhibits the economics of a “Ponzi scheme, yesterday, the Times reported that previous estimates of gas reserves were off by 80%:

WASHINGTON — Federal geologists published new estimates this week for the amount of natural gas that exists in a giant rock formation known as the Marcellus Shale, which stretches from New York to Virginia.

The shale formation has about 84 trillion cubic feet of undiscovered, technically recoverable natural gas, according to the report from the United States Geological Survey. This is drastically lower than the 410 trillion cubic feet that was published earlier this year by the federal Energy Information Administration.

As a result, the Energy Information Administration, which is responsible for quantifying oil and gas supplies, has said it will slash its official estimate for the Marcellus Shale by nearly 80 percent, a move that is likely to generate new questions about how the agency calculates its estimates and why it was so far off in its projections.

The decision by the agency to lower the estimates comes amid growing scrutiny from Congress about how the administration calculates its numbers and why it depends on outside and industry-tied consultants to produce some of its reports.

Wow! Wonder if Chesapeake Energy stock price dropped by 80%, given that they hold almost 16 million acres of shale gas, and especially in light of Forbes’ report on the NY Attorney General subpoena of natural gas drillers).

With all that, it’s no wonder Chesapeake stock in on price alert.

In light of these new facts, will Governor Christie re-assess the promotion and huge reliance on natural gas in his Energy Master Plan?

Do we still need all those massive gas pipelines?

Looks like gas may not be the “transition” fuel. Some “game changer” ey, oilman Jim Benton?

The revised estimate confirms major problems the Times previously disclosed, that suggest that the economics of fracking are a Ponzi schme:

Insiders Sound an Alarm Amid a Natural Gas Rush

Natural gas companies have been placing enormous bets on the wells they are drilling, saying they will deliver big profits and provide a vast new source of energy for the United States.

But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells. …

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.”

“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.

Now that is NEWS!