North Carolina and the upcoming natural gas bubble burst.

[mmonk]

Is North Carolina’s Government and the Energy Companies It Represents Betting Our Future on a Bubble? Who will be left with the damage?

Recent reports are indicating an upcoming bust on the natural gas landscape. This would make North Carolina’s current activities and “economic” plans look short sighted and quite possibly, folly. A deregulated and unregulated Wall Street appears on its repetitous track of being as Matt Taibbi of Rolling Stone puts it, “The Great American Bubble Machine” once again. The recent few decades since Wall Street took over the federal government, the subsequent deregulated and under-regulated financial sector has wreaked havoc on both the domestic economy as well as internationally. The reality is getting harder and harder to deny but the political parties in Washington, broadcast “news”, think tanks and the corporations that fund them keep pushing the denial on the public. We’ve had the dot com bubble, the housing bubble, and the oil and gasoline price bubbles, but yet half of Americans can’t seem to put it all together. An unregulated market is a manipulated market, not a “free market”. Some of the news stories warning us of the natural gas bubble and subsequent bust are “Reports: Shale Gas Bubble Looms, Aided by Wall Street” by Desmogblog.com, “Shale Gas Bubble Looms” from Counterpunch, and “US Shale Gas Bubble is Set to Burst” from Oilprice.com which defines itself as “The No. 1 Source For Oil & Energy News”. So who is behind these reports and what are they saying?

The people providing us with reports on a natural gas bubble are as follows:


Art Berman-A petroleum geologist and consultant to the energy sector; editorial board member of The Oil Drum; Associate Editor of the AAPG Bulletin; and Director of The Association for the Study of Peak Oil.

David Hughes-A geoscientist who has studied the energy resources of Canada including the Geological Survey of Canada; developed the National Coal Inventory (Canada); Team Leader for Unconventional Gas on the Canadian Gas Potential Committee; has published, researched, and lectured widely on global energy and sustainability issues in North America and internationally.

Deborah Rogers-Started her financial career in London in investment banking; returned to US as a financial consultant for several Wall Street firms; appointed primary member to the US Extractive Industries Transparency Initiative, an advisory committee within the Department of Interior; appointed to a task force reviewing placement of air monitors in the Barnett Shale region by the Texas Commission on Environmental Quality.

What do these reports tell us? They present the following points:


In 2011, shale mergers accounted for $46.5 Billion in deals for Wall Street investment banks.

This occurred while shale wells underperformed in dollar terms.

Investment banks’ push and promotion created glut and new lows for natural gas prices.

Supply exceeded demand by a factor of four.

Price declines opened door for transactional deals worth billions securing large fees for investment bankers.

Created largest profit centers in investment banks’ energy portfolios since 2010.

Overproduction pushed in order to meet financial analysts’ production targets and support cash flow to operators’ imprudent leverage positions.

So what we have are large portfolios held by investment banks which have an overvalued increasingly toxic investment instrument overinflated. Deja vu’ anyone? And who will be left holding the bag when this house of cards collapses? Certainly the people and taxpayers of North Carolina. Beyond the health costs, pollution cleanup costs, the loss of water resources, they will also have to deal with declines in property values in the frack zones and the new proposed toxic injection zones along the coastal counties. Fossil fuels are the past, not the future, and this state is staring at a new train wreck.


Original with links and short video from Cornell Professor Tony Ingraffea (I'm the author)