New York Subpoenas Frackers over Well Profitability Claims

The New York Attorney General has subpoenaed three natural gas drilling companies engaged in hydraulic fracturing, Range Resources Corp., Goodrich Petroleum Corp. and Cabot Oil & Gas Corporation, asking questions about the profitability of their wells. Among other things, Attorney General Eric Schneiderman wants information pertaining to formulas used by the firms to determine how long their wells can be expected to produce gas without new fracking.

This is just Schneiderman’s latest attempt to challenge the fracking industry. In May, he sued 10 government agencies over plans to allow fracking in the environmentally sensitive Delaware River Basin, which provides drinking water to millions in New York other East Coast cities. In June, he subpoenaed five shale gas companies as part of a probe into whether disclosures they made to investors regarding the environmental risks from fracking were accurate.

According to report from The Wall Street Journal, Schneiderman’s latest maneuver is not concerned with the environmental impacts of fracking. Rather, he is seeking information on the methods the drillers use to value their natural gas discoveries. An unnamed source told the Journal that Schneiderman wants to know, among other things, how the companies calculate their natural gas reserves and how they represent their profitability to investors.

According to a Bloomberg News Report, the subpoenas were sent under New York State’s Martin Act, which allows prosecution for securities fraud which does not require intent to defraud as a prerequisite to prosecution.

While Range Resources, Goodrich Petroleum and Cabot Oil & Gas received subpoenas, The New York Times is reporting that Schneiderman also expanded an existing probe of Chesapeake Energy, and has asked it to respond to similar questions.

The new investigation was apparently launched in response to a New York Times series that raised questions about the accuracy of information natural gas drilling firms were giving investors regarding the true costs and profitability of natural gas extraction. According to the Times, New York State has more than $45 million of its pension money invested with the four companies being targeted by Schneiderman.

Environmentalists are pleased with Schneiderman’s latest move.

“The natural gas propaganda machine has convinced the public that shale gas will power America for a hundred years while making us all rich,” the group Frack Action said in a statement to the Associated Press. “But significant questions have been raised about how much gas can actually be extracted from shale, and whether this industry is in fact profitable. This investigation is critical not only for investors, but for the landowners who staked their future on the claims of the gas industry.”

This entry was posted in Hydraulic Fracturing / Fracking. Bookmark the permalink.

© 2005-2016 Parker Waichman LLP ®. All Rights Reserved.