Fredericton NB - The communications committee for the alliance of community groups opposed to shale gas asked Jim Emberger for a first response to the NB Business Council Report on Shale Gas.
Jim Emberger, a resident of Taymouth NB and a retired software developer says: “The most striking point is that this report proves that if you pay a consulting firm they will produce a positive report for you regardless of how weak and conditional the conclusions are. “
"Below are my first comments to the questionnaire that was used, the supporting data they used, the conclusions that were drawn, and their review of current regulations and their lack of assessment of costs incurred by road damage” Mr. Emberger continues.
On the questionnaire and subsequent conclusions:
Right off the bat, there was a response rate on their questionnaire of 16% and they calculate the report has an 11% margin of error on those few points where the report can even make a comment, because of the small response rate. I’m not a pollster or statistician, but I wouldn’t want to bet the farm on that foundation.
On the supporting data:
The report uses some outdated data to support some of its statements. On the outlook of unproven technically recoverable gas, it cites a 2010 EIA report showing 1,931 trillion cubic feet in North America – the source of the famous 100 years of natural gas comment. However, the EIA recently revised that figure downward by 42% in the US, meaning at best a 24-year supply.
I don’t have figures on Canada itself, but it is undoubtedly similar. The revisions mirror the actual production figures recently calculated for 65,000 shale wells by Canadian energy analyst David Hughes (Drill, Baby, Drill Can Unconventional Fuels Usher in a New Era of Energy Abundance – David Hughes, 2/13)
The real life accounting of wells by David Hughes, (also Deborah Rogers and Art Berman and others) show that existing shale plays peak in about 4 years on average, with individual wells depleting by 79% to 95% in three years. Entire plays deplete at an annual average of 30% to 50%. So despite drilling thousands of new wells, terminal decline starts rather quickly and it is inconceivable that shale plays will last anywhere near the 6-25 years mentioned in the report. Remember that shale gas is barely a decade old, and that the figures used for longevity are based on conventional gas wells. Virtually all plays older than 5 years are in decline.
The report also cites consulting firm IHS CERA for predictions about how much royalty money will flow by the year 2030. Unfortunately, IHS CERA has one of the worst records of long term predictions anywhere. It’s long term predictions for oil from their reports of the early 2000’s stated that oil production would soar to millions of more barrels a day, and that we would now be paying between $30 and $40 a barrel. Instead, the price has been $100 a barrel or more for many years, and supply has not increased since 2005.
The use of GDP as a measure of benefits is flawed as things like road repair, environmental clean-up and legal action would all increase GDP, while actually illustrating negative consequences for NB citizens.
The figures for Full time equivalent jobs (FTE) per well based on a One Well model can be misinterpreted. One cannot simply take the figure of 21.5 FTE jobs per well and multiply it by the number of wells to get how many people will be employed. Most jobs are portable, meaning that a few drilling crews go from well to well, thus not increasing the number of employees, only the FTE statistics.
Since they did not explain the one-well model in the paper, I may have misinterpreted it, but it is something that the press should question.
The report also supports our contention that except for a few geologist type jobs, most jobs for NB’ers would be truck driving and security type jobs.
The conclusions note that gas companies have many existing relationships with existing suppliers and trained employees. This confirms what we have been saying about the benefits to NB.
They compared NB to BC, Alberta, Colorado and Arkansas. First, BC and Alberta’s gas plays are in the boondocks generally – many miles from anywhere. Alberta, as noted by the report, is new to shale and is only now addressing new regulations for it. For example, they do not currently require testing of water wells for a frack.
Arkansas, one of the first shale plays, has been playing catch-up, as production started with few regs. Correspondents from there have told us to stop shale before it starts, because regulations always lag damages.
Colorado – the only long-term health study from the Univ. of Colorado showed the states regs to be inadequate to protecting public health. As extraction moves into populated areas, friction between local governments and state government is increasing.
Geologically, none of these areas resemble NB. Pennsylvania is probably the closest analogue, but was not considered. The main point continues to be that all those areas continue to have widespread problems despite a variety of regs.
Road repair paid for by companies?
It is interesting to note that the report claims the cost estimate for road damage cannot be determined yet, but that the government regulations “contemplate” that companies will be responsible for these costs. We haven’t found any direct reference to this in the new government rules. Furthermore, shale oil and gas income from royalties have been shown in other jurisdictions to be way less than the costs incurred by accompanying road damage.
For example, since 2009, Arkansas has taken in approximately $182M in royalties but estimates its road damage from drilling to be $450M. This is not surprising, as it takes over 1,000 loaded trucks to bring one gas well into production, plus 350 loaded trucks per year formaintenance, and another 1,000 loaded trucks for each additional frack.