Monday, May 21, 2012

Deutch, Investors tell Gas Industry to Improve Drilling Practices

Shale gas is big, it’s booming and it’s global. But if it's going to be permanent, it needs to improve. That's the message from investors and from John Deutch.

Over the past forty years shale gas (and oil) is the biggest change our country has seen in energy, says John Deutch. The MIT professor, who served a number of years in the Department of Energy, recently chaired President Obama’s Shale Gas Production Subcommittee of the Secretary of Energy Advisory Board, so he knows a little bit about energy. He also sits on the board of directors of Cheniere Energy, Inc. and Raytheon and used to serve on the board at Schlumberger.

A couple weeks ago Deutch spoke at Cornell University about unconventional drilling. Shale gas – and oil – is a game-changer, he said. Not only are the reserves “huge and unexpected” but they are found around the world. And that has political implications for countries that are currently importing oil.

However, he said, for these benefits to come to fruition the gas industry must take quick and decisive action to protect the environment. Developing shale gas is a heavily industrial activity that Deutch characterized as “extremely intrusive”. And, he reminded people, “…no matter how much gas we eventually use, reliance on natural gas does not avoid the threat of global warming.” Burning gas may decrease the amount of carbon dioxide we pump into the atmosphere, he said, but the continued leakage of methane from production and transport of gas adds an even more potent greenhouse gas into the atmosphere.

But the biggest danger, by far, is the industry’s failure to deal with the environmental impacts, Deutch said. He pointed to four concerns that the President’s shale gas advisory board highlighted in their report:  protecting air quality; protecting water quality; reducing impacts on communities; and long-term land use.

Regardless of what government does, industry needs to step up and take specific steps to reduce environmental impacts. Above all, said Deutch, they need to measure, disclose, and improve. Four months after issuing their initial report they checked in with the industry to see how well they were following the twenty recommendations. The second report, he said, was “pessimistic and skeptical that any progress had occurred.”

Now, six months later, institutional investors are hammering the industry to get moving – to incorporate “best practices”. Why? Because uncertainty about the impacts of unconventional drilling on the environment and human health makes it harder to sell gas development to potential clients.

They, too, have a list, but much shorter. But it also relies on measurement, disclosure and improving drilling practices.

The President's shale gas subcommittee has spoken. The regulators have spoken. The people have spoken. Now the market-place has spoken. The question is: is anybody listening?


  1. All this call for BMPs should have happened 5 years ago when the devastation started. The cries were loud, but government leadership was not listening either. State regulatory agencies are still not listening, or refusing to listen, because of pressure from politicians with dollar signs in their eyes.

    Not only is the shale drilling industry not listening, but their credibility is so shot that people who live in the drilling areas don't trust anything they say. The industry is characterized by corrupt greedy leadership exemplified by Chesapeake's Aubry McClendon.

    We can't drink money, and we can't breathe it either. The long term security of America depends more on having a source of clean food, air and water than on supporting the current glutinous and wasteful use of energy.

    1. You've said what I wanted to say, thanks.

  2. You said everything I wanted to say, thanks. jaime