By MANDY SMITHBERGER
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"I think there is a certain side of this story that has not been shared with the public, although obviously more research and empirical data is needed. I think once (or if) that data becomes available, the public will be surprised with how hazardous and haphazard some of this development in the past has been." -- December 11, 2009, e-mail from someone at EIA |
Earlier this month, a bipartisan group of 30 experts came together to urge Congress to restore funding for the Energy Information Administration (EIA). The EIA, the Energy Department's independent statistics shop, stands to have its budget cut by 14 percent under the current budget deal.
As gas prices rise at the pump and concerns about speculation in the market mount, the experts wrote in a letter to congressional leaders, the EIA provides a unique, important service to policymakers. Michael Levi, one of the letter's signatories, argued earlier this year that without the EIA, the Energy Department and Congress would have to depend on information provided by industry to make their decisions. And a few weeks later, an EIA press release warned that under the current cuts, the agency would be unable to produce their annual analysis on natural gas reserves.
But an investigation conducted by Ian Urbina at The New York Times suggests that the EIA is not as independent as the experts believe it to be. A trove of emails and interviews allege that the EIA's analysis of natural gas reserves amounts to little more than repackaged industry press releases. As a result, the EIA's reports have helped drive support for what many EIA officials believe to be overly optimistic estimates of both the supply and the costs of shale gas production.
The EIA was first created as a response to environmental disasters and manipulation that occurred in the energy markets in the 1970s. Policymakers realized that they would never be able to see through or evaluate industry claims unless they had their own experts and statisticians. And, as the letter from numerous experts suggests, the EIA has earned a reputation as an important independent resource for energy analysts.
The EIA's natural gas analysis, however, seems to have been different. Instead of relying upon their own experts and analysis, the Times found that the EIA relied upon research provided by consultants with clients and financial ties to the natural gas industry. Unsurprisingly, the reports that were ostensibly produced by these consultants under the EIA's seal have echoed “bullish” industry prognoses of the breadth and depth of these reserves.
The problem, of course, is that EIA senior officials and scientists doubt the accuracy of these reports of “irrational exuberance.” They believe that the size of the reserves have been overstated, and many believe that accessing the natural gas will be significantly more expensive and risky than the EIA and industry would lead policymakers to believe.
EIA staff complained that analysis was being pushed to echo industry PR rather than accurate science. Specifically, the Times highlights how Intek and Advanced Resources International—two contractors that both have major clients in the oil and gas industry—provided data for EIA's major annual forecasting report on domestic and foreign oil and gas resources. A senior EIA petroleum geologist said that upper management relied too heavily upon these outside contractors and relied upon "all too often unreal data" from industry releases.
The experience of other countries indicates that the skeptics, not the consultants, may be right. Australia's experience with oil shale, for example, failed to show Australians a real return on their investment and forced three heavily subsidized operators into bankruptcy. Another story in this investigation raises concerns that Securities and Exchange Commission (SEC) rule changes for estimating natural gas reserves may increase risks to taxpayers and investors. Technology has advanced significantly since the Australia example, but many American experts believe that taxpayers and investors in this country are investing in companies that will become financially unviable within 10 to 15 years.
Until then, communities will have to ride out the environmental risks of perfecting fracking technology and be forced to trust industry's assurance that the technology won't contaminate groundwater (and ignore evidence that the glass of water before bed has become flammable).
Before the Times published their story, Richard Newell, the head of the EIA, announced that he was resigning to return to Duke University. Before he leaves on July 1, Congress should question him under oath to determine what role, if any, he's had in EIA losing its independence on natural gas analysis, and whether any research grants may be waiting for him as he returns to Durham. Outsourcing EIA's independence gives the appearance of compromised integrity. The Times investigation may make the case that it's been destroyed.
Mandy Smithberger is a POGO Investigator.
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