Fracking Fail: A glut of gas and a mountain of bad debt
To hear officials in the Trump administration tell it, fracking is a fantastic gift to the American people because it allows the US to be the largest oil and gas producer in the known universe. The US is pumping so much of the stuff, it now has what is being called “energy security.” Apparently no one in government has tumbled to the fact that renewable energy also provides that elusive “energy security” as well.
By Steve Hanley
Steve Schlotterbeck, former chief executive of EQT, one of the largest shale gas fracking companies in the US, has a different perspective. At a petrochemicals conference in Pittsburgh recently, he shocked his audience by telling them that fracking has been an “unmitigated disaster” for shale companies.
“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions. In fact, I’m not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change. While hundreds of billions of dollars of benefits have accrued to hundreds of millions of people, the amount of shareholder value destruction registers in the hundreds of billions of dollars. The industry is self-destructive.”
Writing for Oil Price.com, Nick Cunninham says, “The message is not a new one. The shale industry has been burning through capital for years, posting mountains of red ink. One estimate from the Wall Street Journal found that over the past decade, the top 40 independent U.S. shale companies burned through $200 billion more than they earned. A 2017 estimate from the WSJ found $280 billion in negative cash flow between 2010 and 2017. It’s incredible when you think about it — despite the record levels of oil and gas production, the industry is in the hole by roughly a quarter of a trillion dollars.
“In a little more than a decade, most of these companies just destroyed a very large percentage of their companies’ value that they had at the beginning of the shale revolution,” Schlotterbeck said. “It’s frankly hard to imagine the scope of the value destruction that has occurred. And it continues. Nearly every American has benefited from shale gas, with one big exception — the shale gas investors.”’
Cunningham adds that in addition to the shocking losses being piled up by fracking companies, new research is emerging that links fracking to a number of public health issues. A report published in June by the Concerned Health Professionals of New York and Physicians for Social Responsibility studied more than 1,700 articles from peer-reviewed journals and found harmful impacts from fracking on human health and the environment. Specifically, 69% of the studies found potential or actual evidence of water contamination associated with fracking; 87% found air quality problems; and 84% found harm or potential harm on human health.
Why is this information just becoming available now? Because detailed studies and peer reviewed research takes time. The majority of the 1700 studies reviewed for this report were not published until 2016 or later.
Such health and environmental impacts may represent yet another negative economic factor for the fracking industry. An increase in a rare form of cancer has occurred in southwestern Pennsylvania recently, right in the middle of the Marcellus shale area. The causes are unclear but some public health advocates and environmental groups are suggesting shale gas drilling is to blame and have called on the governor to stop issuing new drilling permits.
With debts mounting, Wall Street’s ardor for fracking operations has cooled considerably, leading Pioneer Natural Resources, one of the best shale known shale drillers in Texas, to significantly change its business model.
It now intends to be a modest sized driller that can make money for its shareholders. “We lost the growth investors,” Pioneer’s CEO Scott Sheffield said in a recent Wall Street Journal interview. “Now we’ve got to attract a whole other set of investors.” To accomplish that goal Pioneer is slashing its workforce and slowing down its pace of drilling.
Fracking is another component of the fossil fuel business model that rapes and pillages the land in the search for quick profits and makes no effort to correct its health or environmental abuses. When the business goes bust, as it inevitably will, the companies who did most of the damage will simply go out of business or declare bankruptcy, leaving states and local communities to clean up the mess they leave behind.
In the capitalist model that pervades America today, being in business means never having to say you’re sorry. And thanks to the lessons learned from Big Tobacco, the industry will vigorously oppose any attempt to hold the frackers responsible for the damage they have done to people and the environment.
“Oh, you can’t identify the individual molecules that led to your cancer and tie them directly to our fracking operations? No damages to for you!” Notice that the companies refuse to publicly identify the carcinogens and chemicals they are pumping under tremendous pressure into the ground so that the actual connection can be established.
The biggest problem for fracking, however, is that the wells drilled typically have a shorter working life than traditional wells. That dynamic means fracking is a treadmill that never ends. Drill today. Drill more tomorrow. Drill, baby, drill and never ever stop. What happens when the oil and gas run out? Where will be America be then? Up the creek without a paddle.
Unless, of course, it embraces free electricity from renewables like wind and solar. Then and only then will America have energy security in perpetuity. That sounds pretty appealing, doesn’t it?
(Originally appeared at our sister-site, Cleantechnica)