All the News That's Fit to Make

Mark Green
Posted December 2, 2011

It's said never get into an argument with folks who buy ink by the barrel, but here goes.

Another salvo has landed in what the Council on Foreign Relations' Michael Levi calls the New York Times' "war on shale gas", with Friday's article on natural gas leases, one that again shows the newspaper's tendency on this issue to push an agenda.

A brief aside. There was a journalistic dust-up last month when the Times said it no longer would use freelancer Natasha Lennard in covering Occupy Wall Street's activities because of her lack of objectivity on the movement. Lennard went on to post a piece saying she was happy not working for the Times because she felt "journalism must break the chains of objectivity and report truth. It's worth noting that the Times had no problem with Lennard's reporting, which makes severing ties with her a bit odd. Even odder is that the Times appears to have no problem with writers on staff committed to breaking the chains of objectivity and reporting on truth - truth it defines, without regard to objective reality.

Which gets us back to the Times' campaign against shale gas. Recall that in October an alarmist article on mortgages and natural gas leases was published. And what was the problem? Well, once you dug through the hype it turns out nobody really thought there was one:

Lenders predict that the conflicts between leases and mortgage rules are not likely to cause foreclosures, nor have they resulted in broad litigation or legislation ... Some lawyers who specialize in oil and gas leases said they were not worried ... Most of the bankers and mortgage experts interviewed also emphasized that they were not opposed to expanded drilling. The surge in such drilling has created thousands of jobs, bolstered American energy supplies and turned some landowners into millionaires, they said.

Excellent! No problems seen by the folks on both sides of the issue, thousands of jobs created, increased energy supplies, landowners making money. The only problem, for the Times, is that there wasn't one. Undaunted, the Times created one:

In September, after The New York Times asked them about the issue, two Democratic congressmen, Edward J. Markey of Massachusetts and Maurice D. Hinchey of New York, asked Fannie Mae and Freddie Mac how they intended to rectify any breaches of their standards caused by drilling leases.

Note: The members of Congress got involved not because landowners contacted them with complaints or because lenders identified a calamity requiring action from Washington. No, Markey and Hinchey joined in "after the New York Times asked them." With drilling on public lands slow-walked to a near stall, the New York Times just happened to ask two congressmen who're opposed to hydraulic fracturing about the possibility that Fannie Mae and Freddie Mac might refuse to buy mortgages for land where hydraulic fracturing is occurring. Guess what: The congressmen obliged the newspaper with Fannie and Freddie. The result is a potential legal snarl where one didn't exist before, creating the possibility of - wait for it - the slow-walking to a near stall of drilling on private property. Now, this original article didn't quite have the effect the Times wanted, so it followed up a few weeks ago on the same theme. The story had many of the same problems as the original, prompting this observation from Pennsylvania real estate attorney John Spall:

No gas company I know of is going to skirt the rules to get a lease recorded that can be stricken in a foreclosure at the loss of hundreds of thousands of dollars. It would be bizarre behavior and I notice Urbina doesn't say it actually occurs. He simply speculates it might. Are the rules followed to the nth degree every single instance? Probably not, but that's true of every legal instrument. The rules are voluminous and complying with all of them is a bit like completing a tax return - no one can be said to get everything correct 100% of the time. Nonetheless, the vast majority of the time the rules ARE followed and as completely as possible ... If there are technical issues, they are extremely limited in number and not impacting the market. As the Farmer Mac representative told Urbina, they do not represent a significant risk. That's the long and short of it.

So having gone long and come up short on the legal side of leasing, the New York Times on Friday turned to emotion, with selective stories of landowners who feel that they didn't understand what they were signing. It seems quite simple as the Times lays it out: big business taking advantage of the little guy.

But it isn't simple at all. Complicated legal documents are, well, complicated, and it is important that landowners take the time and make every effort to know what they are signing. As the Times notes there are "more than 8 million oil and gas leases in the United States." With anything of that scale it isn't going to be hard to find a few dissatisfied buyers, or for that matter a few unethical sellers (though, it should be noted, the Times is lacking in identifying these). Indeed, the paper quoted Mike Knapp, president of a Pennsylvania company that brokers deals between landowners and drilling companies:

"There are bad leases out there, and, as with any industry, there have also been some unscrupulous opportunists. But everyone I know who does this work is on the up and up, and most of the bad actors that there may have been before are no longer in business."

Now, to be fair, if this article were a stand-alone piece, you could argue that the Times is serving a vital function in encouraging landowners to be diligent when selling. But it isn't. It's the latest in a pattern where the Times uses hazy individual anecdotes to paint a speculative picture of a negligent industry. Which may be the paper's notion of reporting the truth. But it's hardly the objective truth about an industry committed to safety, committed to community and committed to getting responsible production.