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ASA Ruling on Breitling Energy Corporation

Breitling Energy Corporation

1910 Pacific Avenue
Suite 12000
Dallas
TX 75201
USA

Date:

3 September 2014

Media:

National press

Sector:

Industrial and engineering

Number of complaints:

1

Complaint Ref:

A14-262157

Background

Summary of Council decision:

Six issues were investigated, all of which were Upheld.

Ad

A press ad in the Telegraph expressed support for the use of hydraulic fracturing to extract natural gas from shale rock. Text stated "Dear Citizens of the United Kingdom, Do you know that your country is blessed with an incredible gift? It's shale gas - natural gas trapped in layers of shale rock deep below the surface of the earth. It's always been there, but it's only recently that industry has figured out how to get to it. The British Geological Survey has recently released new shale gas estimates considerably higher than former estimates. This is fantastic news for the UK - especially in the wake of a near-catastrophic gas shortage last winter, and as resources in the North Sea are on the decline. This means: -Decades worth of natural gas ... -Millions of pounds in tax revenues to support social and other government programs -Freedom from interruptions and stoppages as a result of Russia's political games with your gas supply -Lowering energy prices for millions -Reducing greenhouse gas emissions by replacing coal with natural gas for energy ...".

Issue

The complainant challenged whether the following claims were misleading and could be substantiated:

1. "a near-catastrophic gas shortage last winter", because they considered that it exaggerated the severity of the shortage;

2. "This means: -Decades worth of natural gas", because they understood that the amount of natural gas in the UK, and the economic viability of extracting it, was not yet known;

3. "This means: ... Millions of pounds in tax revenues ...", again because they understood that the amount of natural gas in the UK, and the economic viability of extracting it, was not yet known;

4. "interruptions and stoppages as a result of Russia's political games with your gas supply", because they understood that Russia did not supply gas to the UK and had never interrupted the UK's gas supply;

5. "This means: ... Lowering energy prices for millions", because they understood that the amount of natural gas in the UK, and the economic viability of extracting it, was not yet known, and that in any case domestic extraction would have minimal impact on energy prices because the UK was part of an integrated European gas market; and

6. "This means: ... Reducing greenhouse gas emissions by replacing coal with natural gas for energy", because they understood that there were no reliable estimates for the carbon footprint of shale gas extraction, that extraction carried the risk of methane emissions, which if unburnt was more harmful as a greenhouse gas than carbon dioxide, and that there was no certainty that gas would be used instead of, rather than in addition to, coal.

CAP Code (Edition 12)

Response

1. Breitling Energy Corporation said the claim related to a shortage in gas experienced by the UK in March−April 2013. They supplied a number of news reports dating from that time and shortly afterwards, and pointed out that these referred to the UK (or Britain) having variously been within "six hours" or "two days" of running out of liquified natural gas (LNG) supplies, with back-up supplies being a two-week boat trip away. They acknowledged that it was debatable whether or not the UK would have run out of gas, and noted that the National Grid and the Department of Energy and Climate Change (DECC) had reported that the energy markets were operating in the way they were designed during the period in question. Breitling stated, however, that gas storage levels in the UK did reach record low levels and it was clear that if the supply ship that was on its way to the UK at the time had have been delayed there would have been significant "near-catastrophic" implications. Breitling believed that it would be accurate to describe an event where the UK did in fact run out of gas as "catastrophic" and said gas shortages in other European countries in 2012 had led to fatalities.

2. Breitling provided a copy of the 2013 British Geological Survey (BGS) report referenced in the ad ("The Carboniferous Bowland Shale gas study: geology and resource estimation": "the 2013 BGS report") and noted that it estimated the gas-in-place in the Bowland-Hodder basin (running across central Britain) at 1300 Tcf (trillion cubic feet). They stated that the UK typically consumed around 2.5−2.8 Tcf of gas per year and that, whilst BGS had originally estimated the amount of technically recoverable shale gas in the UK at 5.3 Tcf, revised estimates put that at 26 Tcf within the Bowland-Hodder basin alone. They also highlighted a quote from David Cameron in a national newspaper that if only a tenth of the 1300 Tcf of shale gas now estimated to lie within the Bowland-Hodder basin were to be extracted, the result would be the equivalent of 51 years' gas supply.

Breitling emphasised that current estimates surrounding the UK's shale gas resources and reserves reflected the still limited understanding of the geology of the area(s) and were early figures only. They said experience of shale gas extraction in the US had demonstrated the fluidity of resource estimates and even proven reserves. An example was given of an area in which the technically-recoverable reserve estimates had increased over time as the site was explored during the course of extraction.

Breitling supplied various supporting documentation in addition to the 2013 BGS report.

3. Breitling noted that the information supplied at point 2 above was relevant to this point. They also commented that, based on extensive experience in the US, shale gas reserve estimates in the UK were likely to continue to rise as new wells were drilled. They stated that, whilst production costs in the UK were currently estimated by the US Energy Information Administration (EIA) to be 50% higher than in the US, those costs had historically declined as technology, knowledge and experience in the industry improved. They said some experts believed that even if production costs in the UK remained higher than in the US, shale gas production would remain an attractive investment target because of the higher gas prices in the UK.

Breitling supplied a copy of a 2013 report produced by the Institute of Directors, "Getting shale gas working", that considered, amongst other issues, the potential impact of the shale gas industry on the UK economy.

4. Breitling stated that approximately 2% of the UK's gas imports came from Russia, and further that the UK would be directly and indirectly affected by shortages and stoppages of Russian gas to other European Union countries. They said the UK was situated at the end of a very long pipeline network with a number of different supplies feeding into it. They acknowledged that the UK's gas supply would logically come from the closest sources, but said any restriction of supply to the network as a whole would result in the redirection of gas flows across the network, and if the limited supply did not match demand there would be supply stoppages. Breitling noted that political disputes had in the past led Russia to cut off its gas supply to Ukraine, which had had knock-on effects across Europe. They supplied documentation relating to the UK's gas supply, including a 2012 report by Ofgem regarding the UK's gas security of supply, an undated parliamentary publication and information about Russia taken from the US EIA website.

5. Breitling said following the development of shale gas, US consumer gas prices had dropped from over $4.80/Btu (British Thermal Unit) to only $2.30/Btu. They said the degree of that drop had been unpredicted and they suggested similar events could occur in the UK. They said whilst the UK was part of the European gas market several other European countries had even larger potential shale gas resources which would also feed into the market; such a massive increase in supply over time would reduce the price of gas. They provided documentation including a 2013 policy brief from the Grantham Research Institute on Climate Change and the Environment and the Centre for Climate Change Economics and Policy entitled "A UK 'dash' for smart gas" that considered the possible future role for natural gas in UK electricity generation. They also pointed to David Cameron's opinion piece, cited at point 2 above, which reported that fracking had "real potential" to drive energy bills down.

6. Breitling said the claim was clearly predicated on the fact of replacing coal with natural gas in electricity consumption. They said based on current research, natural gas had been shown to emit less carbon dioxide and methane than coal. They stated that the extent of methane emissions from shale gas extraction was a subject over which experts disagreed, but that the ad did not mention any such emissions. They provided documentation in support of the claim that included a copy of a 2014 report from the US Environmental Protection Agency detailing greenhouse gas emissions and sinks in the period 1990−2012, and noted that, whilst total US greenhouse gas emissions had increased by 4.7%, they had decreased by 3.4% from 2011 to 2012. Breitling stated that this decrease was directly attributable to the fall in gas prices due to shale gas extraction and a consequent shift towards gas as an energy source.

Assessment

1. Upheld

The ASA understood that a technical fault in early 2013 had temporarily shut down one of the pipelines supplying the UK with gas, and that a coincidental period of cold weather had led to low gas storage levels that had ended with the arrival of supply ships bringing more LNG. We agreed that an entire lack of gas in the UK would likely have "catastrophic" consequences. However, we considered that the claim that revised estimates relating to shale gas in the UK were "fantastic news" "in the wake of a near-catastrophic gas shortage last winter", which we considered made use of very emotive language, would be likely to be interpreted by consumers as a factual statement that the UK had been in real danger of running out of gas. Whilst some of the news articles supplied by Breitling reported that the UK had been up to only eight hours away from that event, they also included comments from the National Grid to the effect that the low storage levels were not uncommon for the end of the winter and that the UK had a large diversity of supply sources, leading to substantial gas supply resilience. We were also concerned that news reports were unlikely to constitute robust and unbiased substantiation for an objective claim.

We considered that there was insufficient evidence to demonstrate that the UK had been in real danger of running out of gas, and therefore that the reference to a "near-catastrophic" shortage was misleading.

On that point, the claim breached CAP Code (Edition 12) rules 3.1 and 3.6 (Misleading advertising), 3.7 (Substantiation), 3.11 (Exaggeration).

2. Upheld

We understood that there was a significant distinction between estimates of the amount of shale gas in the UK (resource estimates, also referred to as estimates of gas-in-place) and estimates of the amount of that gas that could actually be extracted from those resources (reserve estimates, which could variously encompass "technically" or "technically and economically" recoverable resources). The 2013 BGS report had produced revised resource estimates for the Bowland-Hodder area of the UK which indicated the existence of approximately 1300 Tcf of shale gas within the area, which was based on the central of three possible scenarios presented in the report. We noted that the report had been produced by BGS for the DECC and understood it to be a comprehensive, credible and recent study of shale gas resources within the Bowland-Hodder basin. We were satisfied that it was reasonable to base claims relating to current shale gas resource estimates on the central of the three scenarios presented by the report.

However, whilst the report contained resource estimates, it did not provide corresponding reserve estimates for the area. On that point, it commented that the recovery factor (the proportion of the total gas resource that might be extracted) depended on a number of variables including but not limited to the resource size, and stated that a reliable estimate of recoverable shale gas could not currently be made.

We noted that an opinion piece by David Cameron published in a national newspaper stated that if 10% of the resource estimate given in the 2013 BGS report were to be extracted, the result would be the equivalent of 51 years' gas supply. Notwithstanding our concerns that the press article in itself did not constitute robust documentary evidence as to likely shale gas reserves, we considered that David Cameron's statement was distinct from the claim in the ad in being clearly predicated on a specified recovery factor.

Other documentation supplied by Breitling included an earlier report produced by BGS for the DECC that suggested that UK shale gas reserve potential could be as large as 5.3 Tcf, by analogy with similar producing gas plays in the US ("The Unconventional Hydrocarbon Resources of Britain's Onshore Basins - Shale Gas", 2012) and a news article referring to an estimate by the US EIA, that the UK's technically recoverable resources were 26 Tcf. We understood that the former was based on an earlier estimate of shale gas resources and further noted that it strongly emphasised that until more drilling, fracture stimulation and testing had been carried out by the UK shale gas industry, there were no reliable indicators of potential productivity and that the analogy to the productivity of US shale gas plays might prove invalid. Whilst the US EIA report had not been supplied, we considered that at best it would demonstrate the division of informed opinion as to the likely recovery factor of shale gas resources in the UK. We also noted that 26 Tcf appeared to amount to approximately nine years', rather than several decades', worth of gas for the UK, based on current consumption.

We considered that consumers would be likely to understand from the claim "The British Geological Survey has recently released new shale gas estimates considerably higher than former estimates ... This means: - Decades worth of natural gas" that the estimates released in the 2013 BGS report directly indicated that likely shale gas reserves would be sufficient to supply the UK with natural gas for decades. Because the report related to shale gas resources only and not reserves, and because we understood that informed opinion was at best divided as to the likely recovery factor of those resources, we concluded that the claim was misleading.

On that point, the claim breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation) and 3.11 and 3.13 (Exaggeration).

3. Upheld

The Institute of Directors’ report provided by Breitling suggested that the production of domestic shale gas could help to replace part of the projected decline in tax revenues from North Sea production. We accepted that if large-scale shale gas extraction were technically and economically viable in, and adopted by, the UK, there was likely to be a resultant impact on tax revenues paid to the Treasury. However, as noted at point 2 above, we understood that the gas estimates cited in the ad did not relate to UK shale gas reserves and that informed opinion as to the amount of shale gas that could be extracted from identified resources was divided. We considered that it was not possible definitively to calculate the likely tax revenues resulting from the resources identified by the BGS report and, as outlined above, considered that the claim "The British Geological Survey has recently released new shale gas estimates considerably higher than former estimates ... This means: - Millions of pounds in tax revenues ..." implied otherwise. We therefore concluded that the claim was misleading.

On that point, the claim breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation) and 3.11 and 3.13 (Exaggeration).

4. Upheld

We considered that consumers would be likely to understand from the claim that shale gas extraction in the UK would mean "freedom from interruptions and stoppages as a result of Russia's political games with your gas supply" that the UK's gas supply had suffered those consequences in the past owing to deliberate action by Russia towards the UK, and that without adopting shale gas there remained real potential for the same thing to happen again.

We noted that a political dispute between Russia and Ukraine in January 2009 had led to Russia temporarily severing gas supplies to (and consequently through) Ukraine. According to the 2012 Ofgem report for government, "Gas Security of Supply", approximately half of the gas supply routes from Russia to Europe ran through Ukraine. The same report noted that the dispute had led to a civil "crisis" in those countries almost wholly dependent on Russian imports, including for example Bulgaria and Serbia.

The documentation supplied by Breitling indicated that the UK had a diversity of supply sources, with only approximately 2% of its gas supply coming from Russia. In particular, the UK was a major importer of LNG (by ship), and the Ofgem report indicated that on the highest winter demand days during 2011 and 2012, LNG supplies (in combination with gas held in storage) were used to a greater extent than pipeline imports to meet high demand.

We understood that the impact of the 2009 Russia−Ukraine dispute on the UK's gas supply had been minimal, and that the supply to end users had been neither interrupted nor stopped. Furthermore, we noted from the Ofgem report and the parliamentary publication that since the dispute the opening of a new pipeline had reduced Russia's dependency on Ukraine for its supply to Europe, and that a European Regulation had been established to safeguard the security of gas supply.

We recognised that disruption to one part of the gas supply network that spanned Europe would always carry some potential to impact upon the network as a whole. However, having assessed the documentation supplied by Breitling, we understood that previous political disputes involving Russia had had minimal consequences for the UK and had not directly impacted upon end users, that those disputes had not been a deliberate action by Russia to interrupt or stop the UK's gas supply specifically, and that in any case, steps taken since the last event had further minimised the likelihood of a repeat occurrence causing a supply crisis across Europe. We concluded that the claim "interruptions and stoppages as a result of Russia's political games with your gas supply" exaggerated the outcome of the 2009 Russia−Ukraine dispute for the UK and misled as to both the direct intent of Russia's actions and the probability of future similar events causing interruptions or shortages in the UK.

On that point, the claim breached CAP Code (Edition 12) rules 3.1 (Misleading advertising), 3.7 (Substantiation) and 3.11 (Exaggeration).

5. Upheld

We acknowledged that significantly increased supply of a product or service, alongside stable demand, could in general lead to a fall in its price. However, as noted at points 2 and 3 above, we understood that informed opinion as to the scale of likely UK shale gas reserves, including those which could economically be extracted, was divided. Whilst we acknowledged the view expressed by David Cameron that fracking in the UK had "real potential" to drive down energy bills, we noted that that view was contingent upon a number of assumptions as to the size of UK shale gas reserves and the scale upon which extraction would be adopted, and were concerned in any case that the press article did not constitute robust documentary evidence in support of the claim "This means ... lowering energy prices for millions".

The policy brief "A UK 'dash' for smart gas" reported that domestic shale gas production was unlikely to result in reduced gas and electricity bills for consumers, except in the event that current estimates of reserves were shown to be significantly under-optimistic or that UK shale gas production was concurrent with a major increase in unconventional gas production around the world. We noted that the claim that the revised BGS estimate "... means: ... Lowering energy prices for millions" was not predicated on either of those two assumptions. We also noted that the Institute of Directors’ report cited at point 3 above commented on the potential impact of UK shale gas on wholesale prices, giving the view that conventional and unconventional gas developments overseas would be the major determinant of wholesale gas prices and agreeing with the conclusion of a report from the Energy and Climate Change Select Committee that it was too early to say whether domestic production of shale gas could result in cheaper gas prices in the UK. An impact on energy prices was not one of the six major benefits of UK shale gas presented by the Institute of Directors’ report. Having considered the information supplied by Breitling, we considered that there was insufficient evidence to support the claim "This means ... Lowering energy prices for millions". We therefore concluded that the claim had not been substantiated and was misleading.

On that point, the claim breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation) and 3.11 and 3.13 (Exaggeration).

6. Upheld

We accepted that the reference to reduced greenhouse gas emissions in the ad was given in the context of "replacing coal with natural gas for energy". However, because of the definitive terms in which the claim was worded, we considered that most readers would understand both the reduction in greenhouse gas emissions and the switch from coal to gas to be natural consequences of the UK adopting large-scale shale gas extraction, rather than only possible outcomes.

We noted that, whilst natural gas (including shale gas) released less carbon dioxide per unit of energy into the atmosphere, it was known to carry the risk of causing large methane leaks, or "fugitive" emissions, and that methane was much more effective than carbon dioxide at trapping heat in the atmosphere. The extent of those emissions was understood to depend largely on site management and efficient monitoring. We understood from documentation supplied by Breitling that the impact on lifecycle greenhouse gas emissions of shale gas relative to both coal and conventional gas production had been the subject of scrutiny in the scientific community, with the weight of opinion being strongly, though not universally, in favour of shale gas over coal and tending towards finding likely emissions similar to those of conventional gas.

We referred to the 2014 US Environmental Protection Agency report supplied by Breitling. We acknowledged that it attributed the reduction in total US greenhouse gas emissions from 2011 to 2012 in part to a shift towards natural gas. However, it was also clear from the report that other factors had played a role, namely, an increase in fuel efficiency across transport modes, limited new demand for passenger transportation and much warmer winter weather, leading to decreased demand for heating fuel.

Although it appeared likely that UK shale gas extraction would deliver a net reduction in greenhouse gas emissions over coal, we noted that this was not a universally accepted opinion and understood that it was itself dependent on the set-up of the extraction site(s) and the success of any measures that would be put in place to mitigate against fugitive methane emissions. Further, we understood that, because of the limited life span of shale gas wells, shale was proposed as a bridge technology rather than a long-term energy option. We noted the concern expressed in the policy brief cited under point 5 that adopting a gas generation infrastructure could undermine wider efforts to decarbonise the UK power sector.

Taking the evidence as a whole, we considered that it was not certain that the development of UK shale gas resources would lead to a reduction in greenhouse gas emissions where that happened alongside a concurrent reduction in the use of coal for energy. We also considered that the wording "by replacing coal with natural gas for energy" implied that shale gas would be used instead of coal, when that was only one of several scenarios including an additional energy source to meet increased future demand. We concluded that, because the claim "This means: ... Reducing greenhouse gas emissions by replacing coal with natural gas for energy" was phrased in definitive terms, but the reduction in emissions was conditional on a number of factors, it was likely to mislead.

On that point, the claim breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation) and 3.11 and 3.13 (Exaggeration).

Action

The claims must not appear again in their current form. We told Breitling Energy Corporation to ensure that they held robust documentary evidence in support of claims likely to be regarded as objective and that were capable of objective substantiation, that matters of opinion were not presented as objective claims, and that their future ads did not suggest that their claims were universally accepted if a significant division of informed or scientific opinion existed.

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