Wed Aug 26, 2015 | 4:53 PM EDT
The exterior of a Schlumberger Corporation building is pictured in West Houston January 16, 2015. REUTERS/Richard Carson
Schlumberger to buy oilfield gear maker Cameron in...X
By Sneha Banerjee and Shubhankar Chakravorty
(Reuters) - Schlumberger Ltd (SLB.N) will buy equipment maker Cameron International Corp (CAM.N) for $14.8 billion, as the world's top oilfield services firm scrambles to offer a broader range of products at lower prices to oil companies slashing budgets.
The deal, which values Cameron around the market cap it had when oil prices were still $100 a barrel, marks the second big merger among energy services companies since crude prices LCOc1 entered a 60 percent slide last year.
Halliburton and Baker Hughes, Schlumberger's rivals, agreed to a $35 billion tie-up in November.
Schlumberger said the acquisition will allow it to bundle its offerings, which range from surveying a site to drilling wells, with ones from Cameron that include pressure valves and blowout preventers, one of which was at BP's Macondo well that exploded in 2010.
The two companies know each other well. They set up a joint venture, OneSubsea, to target the deepwater industry in 2012.
They have been eyeing each other since then, a person familiar with the deal told Reuters who spoke on the condition of anonymity, noting that Schlumberger has a history of acquiring its partners.
"The deal should allow a more complete solution to customers and should allow SLB to grow market share," said BMO Capital Markets analyst Daniel Boyd. "Smaller companies offering discrete products and services will likely be at a disadvantage going forward."
Schlumberger said the combined company would have pro-forma revenue of $59 billion in 2014. That is 20 percent more than Schlumberger's revenue for 2014 and compares with $57.42 billion generated together by Halliburton Co (HAL.N) and Baker Hughes Inc (BHI.N).
The Halliburton and Baker Hughes deal is yet to close as U.S. antitrust enforcers believe the $35 billion merger will lead to higher prices and less innovation, according to a Reuters source. Billions in divestitures are planned in the hope of winning clearance.
Schlumberger, in comparison, said it expects no antitrust hurdles and has no plans to divest any part of Cameron's portfolio to get regulatory approval. An anti-trust lawyer described the product lines as complementary.
"With SLB-CAM, there is not much in the way of overlapping businesses ... we do not envision an overly difficult antitrust review," Oppenheimer analyst James Schumm said.
Cameron's shares were up about 41 percent at $60, below Schlumberger's $66.36 per share cash-and-stock offer, in afternoon trading on Wednesday. Schlumberger's shares fell as much as 7.5 percent to $68.01, their lowest in two-and-a-half years.
MACONDO CONNECTION
The Macondo well explosion in April 2010 killed 11 workers and spilled millions of barrels of oil into the U.S. Gulf of Mexico.
Investigators found Cameron's blowout preventer had battery and wiring troubles that hindered the proper functioning of the devices' blind shear rams, which are designed to slice through drilling pipes and cap a well in an emergency.
Cameron agreed to a $250 million settlement with BP PLC (BP.L) to help pay for costs associated with the spill.
Schlumberger's offer on Wednesday values Cameron at $12.74 billion, based on the company's diluted shares as of June 30.
Cameron shareholders will get $14.44 in cash and 0.716 of a Schlumberger share for each share held.
Schlumberger said it expects the deal to add to earnings by the end of the first year after the deal closes. The deal is expected to close in the first quarter of 2016.
Goldman Sachs & Co is Schlumberger's financial adviser and Baker Botts LLP and Gibson Dunn & Crutcher LLP are its legal counsel. Cameron's financial adviser is Credit Suisse and Cravath, Swaine & Moore LLP is its legal counsel.
Showing posts with label Halliburton. Show all posts
Showing posts with label Halliburton. Show all posts
Wednesday, August 26, 2015
Wednesday, April 15, 2015
Shell’s offer for BG shows how the energy business is changing
Shell and BG
A vote for gas
Apr 11th 2015 | From the print edition
JAM tomorrow, but never jam today. That was long the lament about Britain’s third-largest energy company, BG Group. In recent years it has been notable for its great prospects, troubled operations, wobbly management—and lately its weak share price, down by 20% in the past 12 months. Now Shell, an Anglo-Dutch giant, has pounced, with a £47 billion ($70 billion) cash-and-shares offer which pays BG shareholders a 50% premium on what their holdings were worth just before the bid. The combined companies’ stockmarket value will be around $250 billion. Barring regulatory objections, the merger will be completed early next year.
The deal—one of several involving BG that has been rumoured, on and off, for years—shows that for the beleaguered international oil giants, buying reserves, even juicily priced, is cheaper and easier than finding and developing them. It also highlights the scope for consolidation since the fall in the oil price last year, which has sent companies scrambling to cut costs and pacify investors. In November Halliburton, an oil-services company with headquarters in Houston, bought Baker Hughes, a smaller rival, for $35 billion.
This deal, far bigger, boosts Shell’s declining oil and gas reserves by a quarter, and makes the new firm the world’s third-largest gas producer (see chart). Among Western-owned oil and gas firms, it will be second only to ExxonMobil by market capitalisation, and by 2018 its output will overtake that of its American rival.
That assuages one worry for Shell’s investors—that it is not replacing its reserves speedily enough to secure its long-term future. But it may not quell another (contradictory) one: that a notoriously spendthrift management is splurging (To indulge in an extravagant expense or luxury: splurged on room service.) cash on acquisitions which it could be returning to shareholders. Shell counters this as follows: it has already said it is cutting capital spending by $15 billion; it now says it will raise asset sales to $30 billion in 2016-18. It also insists it will maintain its dividend and raise its share buy-backs, all to its newly enlarged investor base. It expects the takeover to generate $2.5 billion of cost savings, in everything from purchasing to trading.
The deal underlines the way the money is moving in the energy industry. Shell managers highlight the increasing attractiveness of midstream (transport) and downstream (refining and distribution) activities, which offer less risk and fatter margins than finding and developing new oil and gas. One of BG’s strengths, for example, is in the liquefaction, transport and storage of gas. Its fleet of giant tankers will boost Shell’s clout in the world gas market.
The purchase also demonstrates that gas is a more promising business than oil. Indeed, Shell is now more Gas Giant than Big Oil. This is not easy money: the global gas industry has been plagued by high costs (much gas is in hard-to-reach places such as the Arctic and deep oceans) and low prices (thanks to competition from other fuels and America’s shale-gas glut). But the market is growing, supplies are abundant and the environmental outlook friendlier than for oil. BG has promising offshore assets, including in east Africa, Kazakhstan and Trinidad. Some are troubled: a big investment in Egypt is beset by political difficulties. Others are doing better. A $20 billion Australian project is now producing gas from coal. Having tripped up in shale ventures in China and America, Shell is now betting heavily on offshore gas. Simon Henry, its finance chief, says he doubts the gas glut will persist. In any case, a bigger and stronger company is better placed to ride it out.
Other deals may follow, just as the last oil-price crash in the 1990s brought a wave of mergers. Among possible takeover targets are Tullow, a British oil and gas explorer (whose share price rose by 4.5% on news of the BG deal, having fallen by half since last summer). Such small companies with exciting but risky projects are particularly exposed in current conditions.
But bigger acquisitions could be on the horizon too, perhaps even involving BP, Britain’s largest energy company, which no longer looks too big to buy. Absorbing BG will keep Shell busy for a while (particularly given its mixed record in managing previous purchases). But the deal could prompt one of its two main American rivals, Chevron or ExxonMobil, to try to regain dominance by making a move on BP.
For all their enthusiasm for the deal, Shell and BG are merging mainly from necessity. Though BG had stopped disappointing shareholders, and had brought in a capable new boss, Helge Lund, from Norway, its fortunes were too closely tied to volatile gas prices; and its main oil partner in Brazil, Petrobras, is mired in a corruption scandal. For its part Shell was struggling to replenish reserves and cut costs. Assuming BG delivers, the deal solves both these problems, and strengthens Shell’s cashflow.
The fall in the oil price has highlighted the weaknesses of energy companies that place big, long-term bets on difficult production and exploration projects. When times were good they excited their engineers with the technical challenges, and boosted their executives’ egos with ever-bigger balance-sheets. Firms are now dealing with rising debts—those of the largest American and European energy companies have risen by $31 billion so far this year—and falling share prices, down by a fifth since the summer. They are selling assets in a buyers’ market.
Behind the Shell-BG deal, and the speculation of more mergers to come, is an even more fundamental shift in the energy industry. Contrary to some expectations, the oil-price fall has not derailed the American shale boom. The small, flexible and innovative firms that specialise in horizontal drilling and hydraulic fracturing are proving better at cutting costs, raising productivity and adapting to market fluctuations than the lumbering giants who have long dominated the industry. Dinosaurs may mate to ensure the survival of their species. But this is an age of mammals.
From the print edition: Business
Monday, March 26, 2012
UPDATE 4-Schlumberger sees hit from fracking price pressures
Mon, Mar 26 15:23 PM EDT
* N.America liquids basins start seeing price pressure in Q1
* Schlumberger shares down 1.2 pct, Baker Hughes off 1.6 pct
* Market leader Halliburton rises, seen as better placed
By Braden Reddall
NEW ORLEANS, March 26 (Reuters) - Schlumberger Ltd, the world's largest oilfield services company, said profits would be hurt by downward pricing pressure for hydraulic fracturing services, which had now reached North American liquids-producing basins as well.
The use of hydraulic fracturing, or fracking, around the many U.S. shale basins has boosted natural gas production while stemming (To make headway against: )a decades-long trend of falling U.S. oil production.
"There is some slackening of demand in the gas plays and there has been migration to liquids plays. So there's more supply coming online and it is normal that pricing would come down," said David Vaucher, an analyst with IHS-Cambridge Energy Research Associates in Houston.
Vaucher highlighted the challenge of getting all those materials to so many wells. "Looking at just pressure pumping is a little myopic," he said. "There is upward pressure for all other things that are still required for fracking jobs."
But other supplies remain scarce in general, from rigs to frack crews, water, sand and synthetic proppants used to keep cracks in shale rock open to get the hydrocarbons out.
HALLIBURTON UP
Shares of Schlumberger, which makes most of its money outside North America, fell 1.2 percent to $72.28, while rival Baker Hughes Inc dropped 1.6 percent to $43.03.
Baker Hughes gave a profit warning last week, in addition to a warning in January, about the impact of disruptions from its fracking crew relocations and supply shortages.
But shares of Halliburton, the market leader in North American pressure pumping, rose 0.8 percent on Monday.
"We believe (Halliburton) has a much better developed supply-chain network, and while not immune to near-term frictions, will likely post much better margins than its peers in North America," Sterne Agee Analyst Stephen Gengaro wrote on Monday as he cut profit estimates for Baker Hughes.
Nabors Industries Ltd, the No. 6 in North American pressure pumping, sees an increasingly competitive market in 2012 and a U.S. land rig count "flat to slightly down" in the second half of 2012. But the company said that with 72 percent of its 2012 operating income under contract, the downside was limited.
Nabors also spelled out plans to sell its helicopter business and well service rigs in Canada, some of its offshore rigs, as well as its oil and gas properties. Dahlman Rose's James Crandell expects those sales to raise about $1 billion.
Outside North America, Schlumberger saw steady growth from deepwater activity and exploration, as well as key land markets.
"The medium-term outlook for the oil and gas industry remains positive, driven by the narrow cushion of spare oil capacity and the growing demand for natural gas," Kibsgaard said in his first presentation to the conference after taking over as CEO from Andrew Gould last August.
Barclays believes international growth could offset the near-term weakness in North America. "We think this softness is largely due to transitory issues and some pricing pressure in pressure pumping," analysts at the bank wrote on Monday.
Bernard Duroc-Danner, an economics Ph.D. who runs oilfield services company Weatherford International Ltd , said the pressure pumping market may get even tougher as a result of building decisions made three months ago in response to what were then healthy margins.
"Beyond the 'gas very bad, oil very very good' phenomenon, pressure pumping has dynamics of its own insofar as there is a quite sizeable amount of capacity just waiting to come on the market," Duroc-Danner told the conference.
The industry has attempted to rein in this expansion. Superior Energy Services Inc, for one, cut its pressure pumping capacity growth plan this year by about one-quarter.
This follows the huge ramp-up in the past few years. Dan Pickering, of Tudor, Pickering, Holt, sees available hydraulic horsepower by year-end at 19 million horsepower, or 2-1/2 times more than in 2009. A typical frack job uses up about 50,000 hp. === Jul. 22, 2012 6:44 PM ET Experts: Some fracking critics use bad science By KEVIN BEGOS, Associated Press AIM Share FILE - In this file photo from Nov. 3, 2010, documentary filmmaker Josh Fox speaks at a rally of protestors against Marcellus Shale drilling and hydraulic fracturing in Pittsburgh. Researchers say the claim that fracking has been linked to increased cancer rates in Texas is simply wrong. Fox, an Oscar-nominated filmmaker who uses the claim in a new film, declined to acknowledge the error when told of researchers who say he's doing a disservice to people with cancer by misrepresenting health data. (AP Photo/Keith Srakocic, File) More News Video APNewsBreak: EPA reviews part of power plant rule Jul. 20, 20125:32 PM ET Judge slaps mining company with $2 million penalty Jul. 20, 20123:44 PM ET NM fuel spill threatens Albuquerque water supply Jul. 20, 20126:31 AM ET US insurer won't cover gas drill fracking exposure Jul. 12, 201210:12 PM ET Electric rates not falling along with fuel costs Jul. 11, 20122:54 PM ET
PITTSBURGH (AP) — In the debate over natural gas drilling, the companies are often the ones accused of twisting the facts. But scientists say opponents sometimes mislead the public, too.
Critics of fracking often raise alarms about groundwater pollution, air pollution, and cancer risks, and there are still many uncertainties. But some of the claims have little — or nothing— to back them.
For example, reports that breast cancer rates rose in a region with heavy gas drilling are false, researchers told The Associated Press.
Fears that natural radioactivity in drilling waste could contaminate drinking water aren't being confirmed by monitoring, either.
And concerns about air pollution from the industry often don't acknowledge that natural gas is a far cleaner burning fuel than coal.
"The debate is becoming very emotional. And basically not using science" on either side, said Avner Vengosh, a Duke University professor studying groundwater contamination who has been praised and criticized by both sides.
Shale gas drilling has attracted national attention because advances in technology have unlocked billions of dollars of gas reserves, leading to a boom in production, jobs, and profits, as well as concerns about pollution and public health. Shale is a gas-rich rock formation thousands of feet underground, and the gas is freed through a process called hydraulic fracturing, or fracking, in which large volumes of water, plus sand and chemicals, are injected to break the rock apart.
The Marcellus Shale covers large parts of Pennsylvania, New York, Ohio and West Virginia, while the Barnett Shale is in north Texas. Many other shale deposits have been discovered.
One of the clearest examples of a misleading claim comes from north Texas, where gas drilling began in the Barnett Shale about 10 years ago.
Opponents of fracking say breast cancer rates have spiked exactly where intensive drilling is taking place — and nowhere else in the state. The claim is used in a letter that was sent to New York's Gov. Andrew Cuomo by environmental groups and by Josh Fox, the Oscar-nominated director of "Gasland," a film that criticizes the industry. Fox, who lives in Brooklyn, has a new short film called "The Sky is Pink."
But researchers haven't seen a spike in breast cancer rates in the area, said Simon Craddock Lee, a professor of medical anthropology at the University of Texas Southwestern Medical Center in Dallas.
David Risser, an epidemiologist with the Texas Cancer Registry, said in an email that researchers checked state health data and found no evidence of an increase in the counties where the spike supposedly occurred.
And Susan G. Komen for the Cure, a major cancer advocacy group based in Dallas, said it sees no evidence of a spike, either.
"We don't," said Chandini Portteus, Komen's vice president of research, adding that they sympathize with people's fears and concerns, but "what we do know is a little bit, and what we don't know is a lot" about breast cancer and the environment.
Yet Fox tells viewers in an ominous voice that "In Texas, as throughout the United States, cancer rates fell — except in one place— in the Barnett Shale."
Lee called the claims of an increase "a classic case of the ecological fallacy" because they falsely suggest that breast cancer is linked to just one factor. In fact, diet, lifestyle and access to health care also play key roles.
Fox responded to questions by citing a press release from the Centers for Disease Control and Prevention that doesn't support his claim, and a newspaper story that Risser said is "not based on a careful statistical analysis of the data."
When Fox was told that Texas cancer researchers said rates didn't increase, he replied in an email that the claim of unusually high breast cancer rates was "widely reported" and said there is "more than enough evidence to warrant much deeper study."
Another instance where fears haven't been confirmed by science is the concern that radioactivity in drilling fluids could threaten drinking water supplies.
Critics of fracking note the deep underground water that comes up along with gas has high levels of natural radioactivity. Since much of that water, called flowback, was once being discharged into municipal sewage treatment plants and then rivers in Pennsylvania, there was concern about public water supplies.
But in western Pennsylvania, the Pittsburgh Water and Sewer Authority did extensive tests and didn't find a problem in area rivers. State environmental officials said monitoring at public water supply intakes across the state showed non-detectable levels of radiation, and the two cases that showed anything were at background levels.
Concerns about the potential problem also led to regulatory changes. An analysis by The Associated Press of data from Pennsylvania found that of the 10.1 million barrels of shale wastewater generated in the last half of 2011, about 97 percent was either recycled, sent to deep-injection wells, or sent to a treatment plant that doesn't discharge into waterways.
Critics of fracking also repeat claims of extreme air pollution threats, even as evidence mounts that the natural gas boom is in some ways contributing to cleaner air.
Marcellus air pollution "will cause a massive public health crisis," claims a section of the Marcellus Shale Protest website.
Yet data from the U.S. Energy Information Administration show that the shale gas boom is helping to turn many large power plants away from coal, which emits far more pollution. And the U.S. Environmental Protection Agency passed new rules to force drillers to limit releases of methane from wells and pumping stations.
Some environmental groups now say that natural gas is having a positive effect on air quality.
Earlier this year, the group PennFuture said gas is a much cleaner burning fuel, and it called gas-fired power plants "orders of magnitude cleaner" than coal plants.
Marcellus Shale Protest said in response to a question about its claims that "any possible benefit in electric generation must be weighed against the direct harm from the industrial processes of gas extraction."
One expert said there's an actual psychological process at work that sometimes blinds people to science, on the fracking debate and many others.
"You can literally put facts in front of people, and they will just ignore them," said Mark Lubell, the director of the Center for Environmental Policy and Behavior at the University of California, Davis.
Lubell said the situation, which happens on both sides of a debate, is called "motivated reasoning." Rational people insist on believing things that aren't true, in part because of feedback from other people who share their views, he said.
Vengosh noted the problem of spinning science isn't new, or limited to one side in the gas drilling controversy. For example, industry supporters have claimed that drilling never pollutes water wells, when state regulators have confirmed cases where it has. He says the key point is that science is slow, and research into gas drilling's many possible effects are in the early stages, and much more work remains to be done.
"Everyone takes what they want to see," Vengosh said, adding that he hopes that the fracking debate will become more civilized as scientists obtain more hard data.
Associated Press
============
* N.America liquids basins start seeing price pressure in Q1
* Schlumberger shares down 1.2 pct, Baker Hughes off 1.6 pct
* Market leader Halliburton rises, seen as better placed
By Braden Reddall
NEW ORLEANS, March 26 (Reuters) - Schlumberger Ltd, the world's largest oilfield services company, said profits would be hurt by downward pricing pressure for hydraulic fracturing services, which had now reached North American liquids-producing basins as well.
Kibsgaard said in a speech to kick off the Howard Weil Energy Conference in New Orleans on Monday.
Chief Executive Paal Kibsgaard said that on top of the price squeeze, already widely seen in natural gas areas due to weak gas prices, the shift of pressure pumping equipment to liquids-rich basins was reducing utilization while also adding to costs.
"Together these factors will have an impact on our results both in North America, and overall, in this and in the coming quarters,"
The use of hydraulic fracturing, or fracking, around the many U.S. shale basins has boosted natural gas production while stemming (To make headway against: )a decades-long trend of falling U.S. oil production.
"There is some slackening of demand in the gas plays and there has been migration to liquids plays. So there's more supply coming online and it is normal that pricing would come down," said David Vaucher, an analyst with IHS-Cambridge Energy Research Associates in Houston.
Vaucher highlighted the challenge of getting all those materials to so many wells. "Looking at just pressure pumping is a little myopic," he said. "There is upward pressure for all other things that are still required for fracking jobs."
But other supplies remain scarce in general, from rigs to frack crews, water, sand and synthetic proppants used to keep cracks in shale rock open to get the hydrocarbons out.
HALLIBURTON UP
Shares of Schlumberger, which makes most of its money outside North America, fell 1.2 percent to $72.28, while rival Baker Hughes Inc dropped 1.6 percent to $43.03.
Baker Hughes gave a profit warning last week, in addition to a warning in January, about the impact of disruptions from its fracking crew relocations and supply shortages.
But shares of Halliburton, the market leader in North American pressure pumping, rose 0.8 percent on Monday.
"We believe (Halliburton) has a much better developed supply-chain network, and while not immune to near-term frictions, will likely post much better margins than its peers in North America," Sterne Agee Analyst Stephen Gengaro wrote on Monday as he cut profit estimates for Baker Hughes.
Nabors Industries Ltd, the No. 6 in North American pressure pumping, sees an increasingly competitive market in 2012 and a U.S. land rig count "flat to slightly down" in the second half of 2012. But the company said that with 72 percent of its 2012 operating income under contract, the downside was limited.
Nabors also spelled out plans to sell its helicopter business and well service rigs in Canada, some of its offshore rigs, as well as its oil and gas properties. Dahlman Rose's James Crandell expects those sales to raise about $1 billion.
Outside North America, Schlumberger saw steady growth from deepwater activity and exploration, as well as key land markets.
"The medium-term outlook for the oil and gas industry remains positive, driven by the narrow cushion of spare oil capacity and the growing demand for natural gas," Kibsgaard said in his first presentation to the conference after taking over as CEO from Andrew Gould last August.
Barclays believes international growth could offset the near-term weakness in North America. "We think this softness is largely due to transitory issues and some pricing pressure in pressure pumping," analysts at the bank wrote on Monday.
Bernard Duroc-Danner, an economics Ph.D. who runs oilfield services company Weatherford International Ltd , said the pressure pumping market may get even tougher as a result of building decisions made three months ago in response to what were then healthy margins.
"Beyond the 'gas very bad, oil very very good' phenomenon, pressure pumping has dynamics of its own insofar as there is a quite sizeable amount of capacity just waiting to come on the market," Duroc-Danner told the conference.
The industry has attempted to rein in this expansion. Superior Energy Services Inc, for one, cut its pressure pumping capacity growth plan this year by about one-quarter.
This follows the huge ramp-up in the past few years. Dan Pickering, of Tudor, Pickering, Holt, sees available hydraulic horsepower by year-end at 19 million horsepower, or 2-1/2 times more than in 2009. A typical frack job uses up about 50,000 hp. === Jul. 22, 2012 6:44 PM ET Experts: Some fracking critics use bad science By KEVIN BEGOS, Associated Press AIM Share FILE - In this file photo from Nov. 3, 2010, documentary filmmaker Josh Fox speaks at a rally of protestors against Marcellus Shale drilling and hydraulic fracturing in Pittsburgh. Researchers say the claim that fracking has been linked to increased cancer rates in Texas is simply wrong. Fox, an Oscar-nominated filmmaker who uses the claim in a new film, declined to acknowledge the error when told of researchers who say he's doing a disservice to people with cancer by misrepresenting health data. (AP Photo/Keith Srakocic, File) More News Video APNewsBreak: EPA reviews part of power plant rule Jul. 20, 20125:32 PM ET Judge slaps mining company with $2 million penalty Jul. 20, 20123:44 PM ET NM fuel spill threatens Albuquerque water supply Jul. 20, 20126:31 AM ET US insurer won't cover gas drill fracking exposure Jul. 12, 201210:12 PM ET Electric rates not falling along with fuel costs Jul. 11, 20122:54 PM ET
PITTSBURGH (AP) — In the debate over natural gas drilling, the companies are often the ones accused of twisting the facts. But scientists say opponents sometimes mislead the public, too.
Critics of fracking often raise alarms about groundwater pollution, air pollution, and cancer risks, and there are still many uncertainties. But some of the claims have little — or nothing— to back them.
For example, reports that breast cancer rates rose in a region with heavy gas drilling are false, researchers told The Associated Press.
Fears that natural radioactivity in drilling waste could contaminate drinking water aren't being confirmed by monitoring, either.
And concerns about air pollution from the industry often don't acknowledge that natural gas is a far cleaner burning fuel than coal.
"The debate is becoming very emotional. And basically not using science" on either side, said Avner Vengosh, a Duke University professor studying groundwater contamination who has been praised and criticized by both sides.
Shale gas drilling has attracted national attention because advances in technology have unlocked billions of dollars of gas reserves, leading to a boom in production, jobs, and profits, as well as concerns about pollution and public health. Shale is a gas-rich rock formation thousands of feet underground, and the gas is freed through a process called hydraulic fracturing, or fracking, in which large volumes of water, plus sand and chemicals, are injected to break the rock apart.
The Marcellus Shale covers large parts of Pennsylvania, New York, Ohio and West Virginia, while the Barnett Shale is in north Texas. Many other shale deposits have been discovered.
One of the clearest examples of a misleading claim comes from north Texas, where gas drilling began in the Barnett Shale about 10 years ago.
Opponents of fracking say breast cancer rates have spiked exactly where intensive drilling is taking place — and nowhere else in the state. The claim is used in a letter that was sent to New York's Gov. Andrew Cuomo by environmental groups and by Josh Fox, the Oscar-nominated director of "Gasland," a film that criticizes the industry. Fox, who lives in Brooklyn, has a new short film called "The Sky is Pink."
But researchers haven't seen a spike in breast cancer rates in the area, said Simon Craddock Lee, a professor of medical anthropology at the University of Texas Southwestern Medical Center in Dallas.
David Risser, an epidemiologist with the Texas Cancer Registry, said in an email that researchers checked state health data and found no evidence of an increase in the counties where the spike supposedly occurred.
And Susan G. Komen for the Cure, a major cancer advocacy group based in Dallas, said it sees no evidence of a spike, either.
"We don't," said Chandini Portteus, Komen's vice president of research, adding that they sympathize with people's fears and concerns, but "what we do know is a little bit, and what we don't know is a lot" about breast cancer and the environment.
Yet Fox tells viewers in an ominous voice that "In Texas, as throughout the United States, cancer rates fell — except in one place— in the Barnett Shale."
Lee called the claims of an increase "a classic case of the ecological fallacy" because they falsely suggest that breast cancer is linked to just one factor. In fact, diet, lifestyle and access to health care also play key roles.
Fox responded to questions by citing a press release from the Centers for Disease Control and Prevention that doesn't support his claim, and a newspaper story that Risser said is "not based on a careful statistical analysis of the data."
When Fox was told that Texas cancer researchers said rates didn't increase, he replied in an email that the claim of unusually high breast cancer rates was "widely reported" and said there is "more than enough evidence to warrant much deeper study."
Another instance where fears haven't been confirmed by science is the concern that radioactivity in drilling fluids could threaten drinking water supplies.
Critics of fracking note the deep underground water that comes up along with gas has high levels of natural radioactivity. Since much of that water, called flowback, was once being discharged into municipal sewage treatment plants and then rivers in Pennsylvania, there was concern about public water supplies.
But in western Pennsylvania, the Pittsburgh Water and Sewer Authority did extensive tests and didn't find a problem in area rivers. State environmental officials said monitoring at public water supply intakes across the state showed non-detectable levels of radiation, and the two cases that showed anything were at background levels.
Concerns about the potential problem also led to regulatory changes. An analysis by The Associated Press of data from Pennsylvania found that of the 10.1 million barrels of shale wastewater generated in the last half of 2011, about 97 percent was either recycled, sent to deep-injection wells, or sent to a treatment plant that doesn't discharge into waterways.
Critics of fracking also repeat claims of extreme air pollution threats, even as evidence mounts that the natural gas boom is in some ways contributing to cleaner air.
Marcellus air pollution "will cause a massive public health crisis," claims a section of the Marcellus Shale Protest website.
Yet data from the U.S. Energy Information Administration show that the shale gas boom is helping to turn many large power plants away from coal, which emits far more pollution. And the U.S. Environmental Protection Agency passed new rules to force drillers to limit releases of methane from wells and pumping stations.
Some environmental groups now say that natural gas is having a positive effect on air quality.
Earlier this year, the group PennFuture said gas is a much cleaner burning fuel, and it called gas-fired power plants "orders of magnitude cleaner" than coal plants.
Marcellus Shale Protest said in response to a question about its claims that "any possible benefit in electric generation must be weighed against the direct harm from the industrial processes of gas extraction."
One expert said there's an actual psychological process at work that sometimes blinds people to science, on the fracking debate and many others.
"You can literally put facts in front of people, and they will just ignore them," said Mark Lubell, the director of the Center for Environmental Policy and Behavior at the University of California, Davis.
Lubell said the situation, which happens on both sides of a debate, is called "motivated reasoning." Rational people insist on believing things that aren't true, in part because of feedback from other people who share their views, he said.
Vengosh noted the problem of spinning science isn't new, or limited to one side in the gas drilling controversy. For example, industry supporters have claimed that drilling never pollutes water wells, when state regulators have confirmed cases where it has. He says the key point is that science is slow, and research into gas drilling's many possible effects are in the early stages, and much more work remains to be done.
"Everyone takes what they want to see," Vengosh said, adding that he hopes that the fracking debate will become more civilized as scientists obtain more hard data.
Associated Press
============
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