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Meet the man the shale gas industry hates

Arthur Berman, an energy consultant, was photographed in the offices of Middlefield Capital Corp. in Toronto on Dec. 9, 2010. He is one of a handful of experts who believes that the boom in shale gas supplies is certain to fizzle because the geology doesn't support long-term production.

Peter Power/The Globe and Mail

In the war of words over shale natural gas, his name is frequently invoked by environmental activists, and alternately cursed and ridiculed by shale proponents. But Arthur Berman insists he's no enemy of the industry.

"I am absolutely 100 per cent in favour of shale plays succeeding," said Mr. Berman, the mild-mannered Texas geologist whose skepticism about the economics of the booming U.S. shale-gas business has repeatedly landed him in controversy. "I've dedicated my entire professional life to this industry – why would I be sabotaging my own industry? It's crazy."

But to some of the biggest natural gas producers in the United States, Mr. Berman is the kind of "friend" who keeps tattling to your mom. The 34-year industry veteran, who operates a modest one-man consulting and research business from his Texas home, has risen from obscurity to media prominence because he has spent the past five years raising doubts about the shale gas business – even in the face of an unprecedented boom that has seen production increase roughly five-fold, from a mere blip in U.S. supplies to now roughly one-quarter of total natural gas production.

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Mr. Berman's analyses of drilling and financial data tell him there's less economically recoverable gas in the shale deposits than others have been saying, that production rates decline more rapidly than anticipated, and that natural gas prices would need to more than triple to make most shale production profitable.

While his stance has made him popular among opponents of shale development as well as the media, it has drawn venom from pro-shale forces. Executives at shale-gas giants Chesapeake Energy Corp. and Devon Energy Corp. have disputed the validity of his research. Energy websites and pro-shale bloggers have called him everything from an under-qualified crackpot to an egotistical attention seeker to a fraudster.

"They feel that the message that I give makes their investors feel uncomfortable," he said. "They hate that I actually dig into the data more deeply than a research analyst for an investment bank."

Chesapeake took a swipe at Mr. Berman even as it declined comment for this article. Company spokesman Jim Gipson said chief operating officer Steven Dixon, who has publicly criticized Mr. Berman before, was too busy "working on things that actually matter."

Yet, Chesapeake still has on its website a scathing attack against Mr. Berman that Chesapeake posted in mid-2011, shortly after a controversial New York Times story on shale gas was published. The posting, written by business-ethics commentator Jon Entine and originally published on Internet news site Real Clear Politics, went well beyond the science of Mr. Berman's views, questioning his motives and even his professional ethics.

"Berman has direct and indirect financial ties to a range of critics of shale gas," the posting said. "Did Berman tell his strategic partners and clients [in advance about the Times article] and directly profit from the Times story?"

"That was a sobering experience," Mr. Berman said. "I realized that these organizations and their professional writers had escalated this to another level … Suddenly, I'm unpatriotic, I'm opposed to jobs, I'm a disreputable person who's possibly being investigated for insider trading, shorting stock – I wouldn't even know how to short a stock if I wanted to!"

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Chesapeake went after Mr. Berman again last month, after Rolling Stone magazine quoted him in an article highly critical of shale gas plays and of Chesapeake specifically. In a formal rebuttal to the article, Chesapeake took aim at Mr. Berman's forecasting abilities, specifically in the Haynesville play in the southern U.S. – an area that Mr. Berman once doubted could ever become commercially viable.

"In March 2011, the Haynesville became the top producing natural gas field in the U.S., and now stands among the top 10 producing fields in the entire world," Chesapeake said. "For years, Mr. Berman has been underestimating natural gas reserves and the promise presented by the industry."

To many of his critics, this is where the most damning evidence against Mr. Berman's arguments lies: in the performance of the major shale plays themselves. They point out that Mr. Berman has already been forced to change his tune on the commercial viability of shale, and argue that his warnings look less relevant with each passing quarter that production continues to boom.

"We kind of look at Arthur Berman as a dinosaur," said Devon Energy spokesman Chip Minty. "With every day that goes by and these shale production numbers come in, the validity of Arthur Berman's claims becomes more questionable."

"Art Berman clearly has the best intentions," said Skip Horvath, president of U.S. gas producers' group the Natural Gas Supply Association, which invited Mr. Berman to speak to its members at a conference last month. "He's just out of step with the rest of the geological community."

Mr. Berman, for his part is sticking to his guns – simply, he says, because the numbers he's crunching tell him to.

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"I'm not on any kind of crusade, I'm not trying to bring these guys down," he said. "It's just the facts, man. Are these wells are as good as you say they are? I don't think they are. Are you making as much money as you say you are? I don't think you are."

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About the Author
Economics Reporter

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. More

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