100 Years of Natural Gas
President Obama is right about the bright future of American energy.
"We have a supply of natural gas that can last America nearly 100 years," declared President Barack Obama in his State of the Union speech last month. "And my administration will take every possible action to safely develop this energy. Experts believe this will support more than 600,000 jobs by the end of the decade." Hooray, right? Some environmental lobbyists aren't exactly celebrating'"and some analysts say that the president doesn't know what he's talking about.
Burning natural gas adds far less of the greenhouse gas carbon dioxide to the atmosphere than does burning coal, but many activists fear that cheap, abundant natural gas will out-compete the renewable energy sources'"e.g., solar and wind'"that they prefer. "Every dollar spent on new natural gas wells, pipelines, processing and infrastructure does not bring us closer to wind, solar, and energy efficiency," asserted Jennifer Krill, program director of the anti-mining Earthworks advocacy group last year. "Quite the opposite: It is taking us in the wrong direction by delaying the transition."
In addition, analysts who worry that the global production of oil is nearing its maximum rate and will begin to decline forever afterwards, a.k.a. peak oil, similarly fear that natural gas production will peak, and soon. They claim that the president's assertion that there is a 100-year supply of natural gas is a "myth." Other doubters argue that the president has been misled by a confusion over proven reserves versus highly speculative resource estimates.
In fact, these doubts about future natural gas supplies seemed to have been bolstered by a new report issued just the day before the president's speech by the Department of Energy's independent statistics agency, the Energy Information Administration (EIA). In its preliminary Annual Energy Outlook 2012 [PDF] report, the EIA cut back its natural gas resource estimates from shale formations from 827 trillion cubic feet (Tcf) to 482 trillion Tcf, a drop of 40 percent.
The U.S. currently consumes a bit more than 22 Tcf of natural gas per year producing electricity, heating buildings, and providing feedstock to chemical plants. Proven reserves are 273 Tcf which would be completely depleted at the current rate of consumption in about 12 years. So if known reserves are so small, is it delusional to think that the U.S. has a 100-year supply of natural gas? Perhaps not.
The new EIA report did cut shale gas resource estimates, but as that report explains it did so chiefly based on estimates derived from U.S. Geological Survey (USGS) modeling of technically recoverable gas reserves in the Marcellus Shale deposits that stretch through the northeastern Appalachian mountains. Keep in mind that back in 2002, the USGS estimated that the Marcellus Shale would yield only 2 Tcf of natural gas. The new median Marcellus shale gas estimate is now 84 Tcf. However, other knowledgeable experts think that estimate is way too conservative. Given the history of steadily increasing reserve and resource estimates of domestic supplies of natural gas, this is very likely to be the case.
Consider that 15 years ago, the EIA estimated that U.S. proven reserves amounted to just 166 Tcf [PDF]. At the time the country was burning natural gas at a rate of 19 Tcf per year, implying that if proven reserves had not somehow increased the U.S. would have completely run out of natural gas five years ago. In fact, since then the country has cumulatively produced and burned twice the amount of proven 1996 reserves. Yet, here we are merrily still burning natural gas'"and even more than we did back then.
So proven reserves must have increased. Back in 1997, the EIA subtracted the proven reserves from its technically recoverable resource estimate to conclude that total U.S. unproved gas resource amounted to 1,166 Tcf, which even then would have supplied domestic consumption for the next 59 years. Interestingly, just a year later in its Annual Energy Outlook 1998, the EIA reported [PDF], "Total unproved gas resources are assumed to be 870 trillion cubic feet with 1990 technology and 1,186 trillion cubic feet with 2020 technology."
The point is that proven reserves are far from the whole story. Just as you don't buy your entire lifetime supply of groceries all at once, neither does the natural gas industry drill holes accessing all of the possible gas reserves for the next 100 years.
So how does the new EIA estimate of Marcellus shale gas affect estimates for total domestic natural resources? First, it could be wrong. Using gas well production data from the 16 most productive counties in Pennsylvania, Pennsylvania State University geologist Terry Engelder says, "We calculate a 10-year production of 189 Tcf." Consequently, he adds, "To our way of looking at the Marcellus, we in Pennsylvania are well on our way of achieving the 410 Tcf that EIA predicted last summer."
But assume that the new EIA estimate is correct, does that mean that President Obama is wrong about the 100-year supply of natural gas? Not really. As John Staub, the team leader for exploration and production analysis at the EIA concedes, the cutback in shale gas production estimates simply drops the EIA's domestic natural gas resource total from last years' 2,543 Tcf to 2,214 Tcf. Dividing the newer and lower estimate by current consumption of 22 Tcf per year, yields a ballpark figure of a 100-year supply of natural gas.
Other natural gas resource estimates are fairly close to the new EIA one. Last September, in a report to the Secretary of Energy, the National Petroleum Council (NPC) issued a study reviewing a number of technically recoverable natural gas resource estimates ranging from a low of 1,500 Tcf to over 3,600 Tcf [PDF]. The report by the NPC, whose members are appointed by the Secretary of Energy to advise the federal government on oil and natural gas issues, noted, "This resource base could supply over 100 years of demand at today's consumption rates." In its 2010 The Future of Natural Gas [PDF] report, the Massachusetts Institute of Technology Energy Initiative reviewed the literature and settled on a technically recoverable resource estimate of 2,100 Tcf of natural gas.
Of course, future gas production depends on both technological advances and the price of natural gas. Since 2008 the price of natural gas [PDF] has fallen from over $12 per thousand cubic feet (Mcf) to just over $2.50 per Mcf now, so it's not surprising that drilling activity has dropped off recently. Low prices means less demand* less effort will be put into finding new supplies or developing advanced production technologies.
With regard to future advances in gas production technologies, recall that back in 1997 the EIA estimated using "2020 technology" that total domestic natural gas resource would amount to 1,186 Tcf. "We are certainly not able to foresee what technological breakthroughs are going to happen," acknowledged the EIA's Staub. He's right. After all, using "2012 technology," the new domestic resource estimate is almost twice the 1997 estimate.
The bottom line: President Obama does not appear to be deluded or peddling a myth when he states that the country likely has a 100-year supply of natural gas. On the other hand, overzealous regulators could see to it that the country has access to considerably less than its 100-year supply, but that's a story for another time.
Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.
*Grrrr. That will teach me to try to shorthand demand and supply. Thanks to the commenters who reminded me of downward sloping demand curves.