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Insider Emails: Natural Gas a "giant Ponzi scheme"

27 Jun 2011  |   Emma Brown

Emails between key natural gas insiders reveal serious doubts about the vitality and durability of the industry, a New York Times investigation reports. 

In industry emails and leaked internal documents, natural gas insiders expressed concerns that the fracking business is “inherently unprofitable,” and called it little more than a “giant Ponzi scheme,” in which investors are lead to believe that the industry is more lucrative than reality suggests. 

One insider email confirmed fears that the amount of natural gas available and the costs of extracting it may have been grossly miscalculated. On March 17, an industry geologist wrote to a federal analyst:

“You are completely correct about questioning the life of these wells. Our engineers here project these wells out to 20-30 years of production and in my mind that has yet to be proven as viable. In fact I’m quite skeptical of it myself when you see the % decline in the first year of production.”

The NY Times reports that data of existing operations supports these concerns, as the fracking process is more expensive, with smaller payoffs than previously thought. Between 2003 -2009, less than 10% of the 9,000-plus wells in existence had recouped their estimated costs after seven years, a review found. 

Read the leaked documents online here.

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