Sustained Outrage

Marcellus potential: Studies offer conflicting views

There’s a new study out from the U.S. Geological Survey that offers that agency’s new analysis of the potential of natural gas reserves that could be recovered from the Marcellus Shale. According to the USGS press release:

The Marcellus Shale contains about 84 trillion cubic feet of undiscovered, technically recoverable natural gas and 3.4 billion barrels of undiscovered, technically recoverable natural gas liquids according to a new assessment by the U. S. Geological Survey (USGS).

But take a look at the headlines we’re seeing about this new assessment:

— Bloomberg: U.S. to Slash Marcellus Shale Gas Estimate 80 percent.

— The Houston Chronicle: New estimate raises Marcellus gas estimate forty-fold.

Huh? Surely, both of these stories can’t be right … well, actually, they are.

As the USGS news release explains:

These gas estimates are significantly more than the last USGS assessment of the Marcellus Shale in the Appalachian Basin in 2002, which estimated a mean of about 2 trillion cubic feet of gas (TCF) and 0.01 billion barrels of natural gas liquids.

But, here’s what the U.S. Department of Energy’s Energy Information Administration had reported only last month:

Eighty-six percent of the total 750 trillion cubic feet of technically recoverable shale gas resources identified in Table 1 are located in the Northeast, Gulf Coast, and Southwest regions, which account for 63 percent, 13 percent, and 10 percent of the total, respectively. In the three regions, the largest shale gas plays are the Marcellus (410.3 trillion cubic feet, 55 percent of the total), Haynesville (74.7 trillion cubic feet, 10 percent of the total), and Barnett (43.4 trillion cubic feet, 6 percent of the total).

So why are the estimates so different? I asked the USGS that question, and got this response from Jim Coleman, the agency’s Eastern Energy Resources Science Center Director:

We have been in discussion with our counterparts at EIA since the release of our assessment August 23 about this and other related items. We are jointly supplying each other with information so that both agencies can understand the differences in assessment methodologies, the data used as input in the assessments, and how the data are summed and presented. We expect to have a much better understanding over the next few weeks and will be working to communicate that understanding effectively to the public. I would ask you to call or email us back in about 2 or 3 weeks and check on our progress.

But it’s probably worth noting that Philip Budzik, an operations research analyst with DOE’s Energy Information Administration, is being quoted by Bloomberg and by The New York Times saying:

We consider the U.S.G.S. to be the experts in this matter. They’re geologists; we’re not. We’re going to be taking this number and using it in our model.

The Times story offered this bit of context:

In their report this week, federal geologists focused on “resource” estimates, which refer to the amount of gas that is in the ground and technically can be extracted. They did not focus on what are known as “reserve” estimates, which refer to how much of this gas can be profitably extracted from the ground. The geologists also did not discuss how high gas prices will have to rise before companies can make enough money to justify increased drilling.

It’s also worth checking out this story by Pam Kasey in The State Journal, reporting additional context and questions about the differing estimates.