Bloomberg News

Democrat Seeks Energy Agency Data on Gas Reserve Estimates

June 27, 2011

(Updates with comment from Hinchey in 11th paragraph.)

June 27 (Bloomberg) -- A Democratic lawmaker asked the U.S. Energy Information Administration to re-evaluate natural-gas resources after a published report questioned whether drillers can extract the fuel economically.

Representative Edward Markey, a Massachusetts Democrat, said in a statement today that he wants EIA, which tracks and analyzes energy data, to justify “optimistic estimates” of the potential for gas production from advances in drilling in shale- rock formations known as hydraulic fracturing.

The U.S. has 2,552 trillion cubic feet of potential natural gas resources, according to a letter from Markey to EIA Administrator Richard Newell that cited the agency’s annual energy outlook released in April. About 827 trillion cubic feet comes from shale formations, the report found. The shale-gas figure was double the EIA’s estimate for such deposits a year earlier, according to the agency’s report.

“We need to know whether the natural gas located underneath the surface is a real source of fuel for the next generation, or a speculative bubble hyped by the oil and gas industry, and echoed by the federal government’s energy experts,” Markey said in the statement.

Markey said in the letter that the New York Times story today on shale-gas development showed some EIA employees “apparently have deep reservations” about projections of recoverable natural gas resources.

Reserves ‘Skyrocketed’

In the April report, the EIA said that while forecasts for shale-gas reserves have “skyrocketed,” the increases “embody many assumptions that might prove to be incorrect over the long term.”

Production rates for wells in shale “sweet spots” might lead to overestimation of potential in the rest of an underground formation, the agency said today in a statement.

Technical advances may lead to lower well-drilling costs that would make shale-gas production more economical. Untested formations, such as thin seams of gas-containing rock, “could prove to be highly profitable,” according to the EIA report.

Markey asked the EIA to provide information on its data and how it calculates the gas resources.

Environmental groups have opposed using hydraulic fracturing, or fracking, which injects chemicals and water under high pressure thousands of feet below the surface to break up the rock. The groups say the process may pollute drinking water. Producers say fracking expands the amount of natural gas available and has lowered prices for the fuel.

Outside Contractors

Representative Maurice Hinchey, a New York Democrat, in a separate request to Newell asked for information on the agency’s use of outside contractors to complete studies by the energy agency, as reported by the Times.

“This raises questions about the independence of their work products, as well as question about the process EIA uses to select private contractors,” Hinchey said today in the letter.

An official from the American Petroleum Institute, the largest oil and gas trade group in Washington, said it was “fact-checking” the Times story.

Companies “don’t invest billions of dollars in non- profitable ventures,” Kyle Isakower, vice president of regulatory and economic policy at the trade group, said today on a conference call with reporters. “The resource estimates that have been used come from the government, and I can’t see any reason why EIA would have any incentive to not give their very best estimate based on the technical information that’s available to them.”

--With assistance from Katarzyna Klimasinska in Washington. Editors: Steve Geimann, Judy Pasternak

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net


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