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By Don Briggs
President
Louisiana Oil & Gas Association

In a recent New York Times article entitled, “Insiders Sound an Alarm Amid a Natural Gas Rush”, the publication asserts that shale gas developments across the nation are to be compared to an Enron-like ponzi scheme.  Among other claims, the story suggests that energy companies have overestimated shale gas reserve quantities and that the costs of drilling shale gas wells are uneconomical.

For starters, it is a simple fact that shale gas resources in the U.S. are real and abundant.  Recent estimates show that the U.S. holds nearly 1,000 trillion cubic feet of recoverable natural gas in its shale gas deposits.  In fact, the federal government’s own Energy Information Agency attests to these reserve numbers and agrees that they will play a significant role in our nation’s energy portfolio. Currently, the U.S. produces nearly 30 trillion cubic feet of natural gas per year.  That is the most annual natural gas production in U.S. history.

It is also a fact that shale gas wells are becoming less profitable and taking longer periods of time to payout due to sluggish natural gas prices.  But, the declining price and economics are a result of substantial supply increases of natural gas that these shale developments have produced.

The New York Times reporter points to a decrease in production in the Barnett Shale region.  However, production and rig activity reports do not seem to support this claim.  Today, the Barnett Shale produces 5.6 billion cubic feet of gas per day.  Two years ago, the Barnett was producing 5.3 billion cubic feet per day.  With over half of the rigs that were in operation a year ago now gone, the statement that production is declining is simply not true.

The assertion that the Haynesville Shale has not lived up to its expectations is a bold and outlandish statement.  Since its development began in 2008, the Haynesville Shale has resulted in the injection of over $22 billion into the local and state economy in Louisiana, just in fiscal years 2008 & 2009 alone.  In fact, while other states have lost jobs and revenue, the Haynesville Shale development has shielded our state from the economic recession.

As has been the case since the first shale gas well was drilled, advancements in natural gas drilling technology will continue to drive down the costs associated with developing these reservoirs.  Companies are finding new and innovative ways to positively impact their bottom line, while also drilling more safely and efficiently.  Some of these measures include utilizing drilling rigs that run on natural gas and advancements in the hydraulic fracturing and drilling process.

The article also makes claim that the hydraulic fracturing process is a threat to the environment.  Contrary to the reporter’s claims, hydraulic fracturing is essential to the development and production of shale gas resources.  The process is well-regulated by the states and conducted safely, with a proven track record. The oil and natural gas produced thanks to this technology helps fuel our nation’s economy by providing jobs, and the energy needed to heat our homes, fill-up our cars, generate electricity and create the basic materials for such things as fertilizer and plastics of every variety.

Hydraulic fracturing is an environmentally responsible way to make the most of our American energy resources. Without it, wells that would have run dry years ago, or would never have been drilled at all, are made viable. Experts believe 60 to 80 percent of all wells drilled in the United States in the next ten years will require fracturing to remain profitable and operating.

It is fair to say that the New York Times missed the mark with this story. With a country as energy dependent as the United States, it is imperative that we are producing our own energy sources to ensure the continuation of our American way of life. Our abundant natural gas resources, produced in areas such as the Haynesville Shale, help us to do just that for generations to come.

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By Don Briggs
President
Louisiana Oil & Gas Association

On Thursday, the White House and International Energy Agency (IEA) announced that a joint effort is currently underway to release 60 million barrels of oil into the global market to offset rising energy costs.  Over the next 30 days, the U.S. and other partners within IEA will release these reserves to offset disruptions in global oil supply caused by the recent social and economic turmoil occurring throughout the Middle East.

In support of this effort, the Obama Administration plans to contribute 30 million barrels of oil to be withdrawn from the U.S. Strategic Petroleum Reserve. Energy Secretary Steven Chu said in a statement, “We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery.”

The release of these vital reserves comes at an interesting time as oil prices have begun to wane as a result of recent gains in the U.S. dollar and declining projections of global economic growth.

The Strategic Petroleum Reserve was established to provide relief in case of any temporary disruption in oil supply, like natural disasters, hurricanes, or a blockade of oil imports from other nations.  Essentially, our strategic stockpile serves as a safety net for our nation in times of emergency.  It is important to be responsible and particular about any decision to utilize these reserves.  Maybe our nation will face a significant war or experience another hurricane Katrina in the near or distant future.  Having access to vital fuel in those certain emergency situations is extremely important to the safety and security of our country.

The Administration’s decision to release a portion of our oil reserves is purely political in nature.  The decision to tap our strategic stockpile will only serve as a short-term response and simply ignores the implications of our country’s failed energy policies.

To put it into perspective, the 30 million barrels of oil that the US plans to contribute is the equivalent of 75 days of oil production that we are projected to lose in the Gulf of Mexico as a result of the federal drilling moratorium and the government’s inability to permit ongoing and future projects in the Gulf region.

So, why release our oil now?  It’s fairly simple.  It’s campaign season.

The underlying fact is that the U.S. economy is recovering at a slower pace than expected, and the Obama Administration and Feds are running out of solutions to fix the dwindling economic situation. With the 2012 Presidential election already underway, the hottest issue for candidates will be the economy and efforts to alleviate pain at the gas pumps.  Dumping a significant amount of oil into the open market will give short term relief on projected oil prices and might just buy some time leading up to the November election.

Unfortunately, a policy decision of this nature will not fix the economy nor will it have an impact on the future global energy crisis we face.  The reality is that the global oil markets are driven simply by supply and demand.  The only way we can climb out of the economic issues we face and drive energy prices down long-term is to incentivize American companies to explore and produce our own natural resources here at home.