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Lawmakers Seek Inquiry of Natural Gas Industry

A version of this article appeared in print on June 29, 2011, on page A12 of the New York edition

Photo Credit: J. Scott Applewhite/Associated Press

Representative Maurice D. Hinchey (right) wants S.E.C. action.

WASHINGTON — Federal lawmakers called Tuesday on several agencies, including the federal Securities and Exchange Commission, the Energy Information Administration and the Government Accountability Office, to investigate whether the natural gas industry has provided an accurate picture to investors of the long-term profitability of their wells and the amount of gas these wells can produce.

“Given the rapid growth of the shale gas industry and its growing importance for our country’s energy portfolio, I urge the S.E.C. to quickly investigate whether investors have been intentionally misled,” wrote Representative Maurice D. Hinchey, Democrat of New York, in one of three letters sent to the commission by four federal lawmakers, all Democrats.

The calls for investigations came amid growing questions about the environmental and financial risks surrounding natural gas drilling and especially a technique known as hydraulic fracturing, or hydrofracking, used to release gas trapped underground in shale formations.

Members of the House Committee on Natural Resources said they hoped to hold a hearing in the next several weeks to discuss natural gas drilling.

Senator Benjamin L. Cardin, Democrat of Maryland, sent a letter to the Government Accountability Office, the investigative arm of Congress, asking it to look into questions about the environmental impacts of hydrofracking, the accuracy of reserves estimates, and industry regulation.

State lawmakers also sought more information.

In Maryland, Delegate Heather R. Mizeur, Democrat of Montgomery County, sent a letter to the state comptroller and the attorney general calling for an investigation into disclosures related to the financial and environmental risks of drilling.

In New York, Assemblywoman Barbara S. Lifton, a Democrat and longtime critic of drilling, sent a letter to the New York State comptroller, Thomas P. DiNapoli, calling for a similar investigation and citing roughly $1 billion in state pension funds invested in shale gas companies.

The New York attorney general, Eric T. Schneiderman, sent subpoenas to five oil and gas companies ordering them to provide documents relating to the disclosure the companies made to investors about the risks of hydrofracking, according to sources briefed on the investigation.

A spokesman from Mr. Schneiderman’s office declined to provide copies of the subpoenas.

The five companies subpoenaed — Talisman, Chesapeake Energy, E. O. G. Resources, Baker Hughes and Anadarko — all declined to comment.

The calls for investigations follow articles in The New York Times describing doubts reflected in internal e-mails from federal regulators and natural gas industry officials about the costs associated with shale gas and the reliability of company reserves estimates.

Oil and gas companies and energy market analysts strongly rejected the views expressed in the industry and federal e-mails published by The Times.

In an open letter to his employees, the chief executive of Chesapeake Energy, Aubrey McClendon, said the company’s prospects were bright.

“There is no reason to believe that shale gas wells will have shorter lives than our conventional wells — some 8,000 of which are 30 years old or older,” Mr. McClendon wrote.

Some financial services companies also released research notes saying they believed shale gas was now profitable for many companies.

But four federal lawmakers — Mr. Hinchey; Representative Edward J. Markey, Democrat of Massachusetts; and Representatives Carolyn B. Maloney and Jerrold Nadler, both Democrats of New York — sent letters calling for the S.E.C. to reconsider recent rule changes that allow companies to avoid disclosing details about the proprietary technology used to predict future gas production and to avoid some third-party audits of those predictions. They asked the commission whether third-party reserves audits should be made mandatory.

The lawmakers also called for an investigation into industry representatives’ accusations of possible illegality or reserves overbooking. A spokesman for the S.E.C. declined to comment.

In a letter to Steven Chu, the secretary of energy, Ms. Maloney and Mr. Nadler asked his department to assess how inaccuracies in production projections could affect energy policy.

The federal Energy Information Administration also faced questions from Mr. Markey and Mr. Hinchey about its reports related to natural gas and its use of industry-tied contractors in writing those reports.

Voicing strong support for the natural gas industry, a bipartisan group of eight federal lawmakers from gas-producing states sent a letter to President Obama on Monday asking him to promote continued natural gas development “by any means necessary, but most specifically, by unconventional shale gas recovery.”

“The need for the United States to move toward energy independence becomes more crucial as the crisis in the Middle East and North Africa worsens,” the letter said.

New York Times Article with multimedia

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