The Secret Story of Our Magic Gas Supplies

After writing about my experience in Belleville recently talking about fracking for gas in Ohio, one of the folks I met there asked me an interesting question, which I want to devote an entire post to, as I think it is an important question, and one that many environmentalists don’t necessarily spend enough time on. The question was this:

Do you think there is enough natural gas being produced without having to introduce this unconventional drilling? I didn’t know we were having a shortage. Natural gas prices are down right now. Why this deep shale gas rush?

These are a couple of ways we might try to answer this, but I want to start with the first, which is that it is difficult to get a firm grasp on exactly how much natural gas reserves exist in the US. As Maggie Koerth-Baker writes at BoingBoing in her post Natural gas and the trouble with estimating fossil fuel reserves:

Over the past few years, I’ve heard several people in the natural gas industry estimate that the United States is sitting on 100 years worth of natural gas. Every time I’ve heard the 100-year estimate batted around, it’s been presented as a positive thing…But the critique of that “100 years of gas” estimate goes even deeper. That’s because any estimate of fossil fuel reserves is made under the limitations of corporate secrecy. Different well owners estimate reserves in different ways, so you can’t just add up everybody’s estimates and compare apples to apples. There’s no way for independent sources to check estimates. And there’s not really any independent bodies reviewing the state of fossil fuel reserve estimation science. (The closest you’ll get to that is a review of oil reserves done in 2009 by a small group of researchers in the US and UK.)

And what’s even more telling is the story that Maggie mentions in Slate, written by Chris Nelder, who found when you dig a little deeper that the whole “100 years” and “golden age” mantra is just that, hollow rhetoric with little to back it up statistically or empirically. And what’s best, it all goes back to an extremely shady in-house oil and gas industry report by a group calling itself the Potential Gas Committee. In other words, no modicum of peer review or independent evaluation or anything like public scrutiny of the data.

The claim of a 100-year supply originated with a report released in April 2011 by the Potential Gas Committee, an organization of petroleum engineers and geoscientists. Resident and Chairman Larry Gring works with Third Day Energy LLC, a company based in Austin, Texas, that is engaged in acquiring and exploiting oil and gas properties along the Texas Gulf Coast. Chairman of the Board Darrell Pierce is a vice president of DCP Midstream LLC, a natural-gas production, processing, and marketing company based in Denver. The report’s contributors are from the industry-supported Colorado School of Mines. In short, the Potential Gas Committee report is not an impartial assessment of resources.

So what exactly did the PGC find in its 2011 report? Here’s the relevant finding for our question: “the United States possesses a total resource base of 1,898 trillion cubic feet (Tcf) as of year-end 2010…Most of the increase arose from re-evaluation of shale-gas plays in the Gulf Coast, Mid-Continent and Rocky Mountain areas.”

Ok, so there is around 1,900 Tcf of recoverable natural gas in the US, if we could both land and water reserves. If we add the known reserves from the DOE, that takes us up to 2,170 Tcf. Ok, so now we have a baseline supply number, even if it may be wrong, which is publicly circulated by the gas industry. So next we need to know what the demand is in the US. According to the EIA, “the United States consumed approximately 24 Tcf (trillion cubic feet) of natural gas in 2010.”

So now we can make a supply/demand equation that would look like this:

24 Tfc (annual US usage @ 2010 levels) divided by 2,170Tcf (total estimated recoverable US reserves @ 2010)

24 TCF/(1 year) / 2,170 (infinite usage)= 90.42 years worth of US gas

So we have about 90 years of natural gas left, assuming that we kept the exact same supply and demand level, and did not use any of this reserve for foreign exports. So right off, we can throw out the 100 year estimate, since we can see from a rudimentary calculation that this is false. Problem #1

But embedded in the above equation are two assumptions which we can clearly rule out as false a priori. First, US energy demand will increase, not decrease, as we move further into the 21st century. Even if we were to build in a certain level of energy innovation in technology, the chance of moving backwards in terms of gross energy consumption is simply not realistic. We are a power hungry culture, and this is not going to change. Problem #2.

The second problematic assumption is that not a single drop of that natural gas would be exported abroad. But we know better than to trust in the benevolent US energy company to willingly sit on untapped reserves when they could be exporting it for a profit. After all, another quick glance at the EIA website shows that in 2010 the US exported 1,136,789 MMCF of gas, or about 1.14 TCF in 2010. So if we are exporting a little over 1 TCF per year, every year we export at that rate, our supply drops by an equal percentage–a one-to-one ratio.

So if we have a 90 year supply, and we export 1 TCF/year for the first 45 years of that time, ceteris paribus, by 2057 we will have either used up or sold off the entire 100 year magic supply of US gas–in a mere 45 years! Problem #3.

But don’t stop yet, cause the story gets even better! Salon also came up with this slick graphic, showing the breakdown of the sources of the reserves for this 2,170 TCf estimate.

Graphic courtesy of Slate.

The two most important bars to pay attention to are the “possible” and “speculative”. As the names suggest, they are best guess extrapolations, not actual hard data. So we might have another 1.2 Tcf of natural gas, or then again, we might not. And in light of our ongoing coverage of the fracking debate, it is worth nothing this line from the PGC report on shale gas in these estimates:

The growing importance of shale gas is substantiated by the fact that, of the 1,898 Tcf of total potential resources, shale gas accounts for 687 Tcf (“most likely” value), or approximately 36%.

So that means a lot of potential fracking coming down the proverbial pipeline as well. And as Salon notes:

Assuming that the United States continues to use about 24 tcf per annum, then, only an 11-year supply of natural gas is certain. The other 89 years’ worth has not yet been shown to exist or to be recoverable.

Suddenly the magic 100 year golden gas bubble seems on the verge of popping! As Slate again notes, “the United States could once again become a net natural-gas importer by 2035.” Be sure to check out the whole Slate post for more nuggets like these (and all the dirt on production models used by shale-gas operators, like the finding that reserves “appear to be overstated by more than 100 percent.” Yikes!), but this should give us a good introduction for thinking about the question, how much gas do we have?

Until next time…Don’t Believe the Hype!

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