The New York Times war on cheap energy was dealt yet another blow yesterday. BHP Billiton, the Australian-based mining giant, agreed to purchase American oil and gas company Petrohawk Energy corporation at a huge premium to its stock price. Petrohawk closed yesterday at $23.49 a share and BHP is sweeping in to buy the company for $38.75 in cash for a total purchase price of $12.1 billion dollars. BHP is buying Petrohawk for its shale gas and oil reserves in Texas and Louisiana.

The Wall Street Journal reports:

BHP Billiton Ltd. said Thursday it plans to acquire Petrohawk Energy Corp. for more than $12 billion in cash, giving the Anglo-Australian mining company access to large shale assets in Texas and Louisiana in one of the largest deals of the year...

The transaction reflects the intensifying interest in shale, a rock formation dense with oil and gas. In recent years, energy companies have found a way economically to extract hydrocarbons from shale by injecting a high-pressure stream of water, sand and chemicals into the rock strata.

The technique, known as hydraulic fracturing, has drawn criticisms for potential environmental and safety concerns. But the energy industry sees it as a crucial procedure in unlocking reserves that could reduce U.S. dependence on foreign natural resource imports, and says environmental concerns are overblown.

Shale gas assets have emerged as popular acquisition targets for oil and other companies. Royal Dutch Shell PLC last year said it would pay US$4.7 billion to buy most of the shale gas assets of East Resources and Exxon Mobil Corp. in 2009 paid $31 billion for XTO Energy, the largest natural gas producer in the U.S.

Unlocking natural gas from shale has glutted the U.S. market and kept prices low. BHP's investment is a bet that gas prices will rise as power generators switch from coal to the cleaner burning fuel and U.S. gas can be exported and linked to the world market, where the commodity is more valuable.

In the last few months, the New York Times has engaged in a campaign to call into question the safety and the success of the shale gas and oil industry. The ability to tap oil and gas trapped in shale rock far below our feet has unleashed vast amounts of natural gas - and increasingly oil. The price of natural gas has plummeted, reviving communities in shale gas belt areas, enriching city and state coffers, revitalizing manufacturing and chemical industries that rely on the now cheap natural gas feedstock, and increasingly large amounts are being exported to Mexico (with more exports on the way as orders are placed for Liquefied Natural Gas ships and ports are reconfigured to boost natural gas exports). Yet the Times has been casting aspersions on the viability of the industry.

Their latest effort is to allege that the reserves of shale gas are easily depleted and that the hype regarding its potential is overblown. Robert Bryce comments today in the National Review on the Times war on shale gas:

... two recent articles by Ian Urbina, the Times' designated reporter on shale development, claim that the shale business is overhyped. On Sunday, June 25, the paper ran a front-page story that relied largely on anonymous sources who used phrases such as "giant Ponzi schemes," "inherently unprofitable," and "an Enron moment" to describe the last few years of shale development in the U.S. The story ended with yet another unattributed quote, which discussed a rather lackluster well that had been drilled into a shale bed in Europe. An employee of an oil-field-services company said the well "looked like crap" and that it would likely be sold to another company. According to the anonymous source, there's "always a greater sucker."

What is it that the executives of the world's most successful resource company see that the Times refuses to see? They are paying a huge premium to grab the assets that the Times tries to peddle as the object of a giant Ponzi scheme. The Times articles include the claim that shale gas production in "inherently unprofitable".

Are the executives at BHP suckers and chumps? If so they are not alone , since overseas companies - European, Middle Eastern, and Chinese (as well as domestic ones, such as Exxon) - have been snapping up these shale gas and oil assets as quickly as they can get their checkbooks out.

The Times evidently has been trying to derail shale gas development in New York where efforts are underway by some Democratic politicians to ban shale gas development in that state (the rich Marcellus Shale formation lies beneath part of the state). Ian Urbana, the point man for the Times in this effort, was not objective in his reporting. He relied on "experts" with an agenda against development of our energy resources - including on Art Berman, who proposed that we get rid of private cars. Diana Furchtogtt-Roth exposed the "Demonizers of Shale Gas" in her superb column at Real Clear Markets The Obama administration has also been engaging in suspect methods to try to stop this revolution in its tracks. Her column is a scathing review of the Times agenda-based coverage of the industry.

I have written a number of columns outlining the Obama team's war on the shale gas revolution - a war that will not end until his Presidency does.