The Haynesville Shale natural gas play in north Louisiana has been the darling of the industry over the past few years, but does the perception of this gold mine of natural gas match long-term reality?

Not according to emails from industry insiders, 487 of them posted over the weekend by The New York Times in an investigative report that details how energy execs and their lawyers, along with geologists and analysts, have in private raised serious red flags about the economics of shale gas. In one of those emails, an analyst from IHS Drilling Data, an energy research company, wrote Aug. 28, 2009: “The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work.”

Thanks to advances in technology, particularly controversial hydraulic fracturing or fracking, natural gas levels in Louisiana have reached their highest level in more than 25 years. Without a doubt, the Haynesville Shale’s economic impact has been staggering, but insiders are questioning whether this financial bubble is about to burst: “Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”

And it’s not just emails the story is built around. Companies' own data for more than 10,000 wells in three major shale gas formations raise even more questions about the industry’s prospects, the NYT reports. Though noting there remains vast amounts of gas in the formations, the story explores just how affordably it can be extracted:

The data show that while there are some very active wells, they are often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth. Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted by energy companies, making it more difficult for them to turn a profit over the long run.

Read more of this weekend’s piece, "Insiders Sound an Alarm Amid a Natural Gas Rush," here.

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