Clearing The Air

Richer Than We Know

“Door Open To Energy Future.” “Proven, Clean Fuel Is Found To Be Abundant In America.” 

Those are just a couple of the headlines I long to see when it comes to natural gas, particularly in light of new numbers that should silence those who continue to insist we are running out of natural gas. But I’ve long since learned that one of the more intriguing aspects of the way we use numbers in formulating and reporting on government policy is that while bad news travels fast, bad news accompanied by big numbers tends to travel even faster, however (oddly enough) that’s not usually the case when it comes to good news.

And to say the news is good when it comes to our natural gas supplies is an understatement.  The latest comes from a July 2008 study by Navigant Consulting, Inc. (NCI) commissioned by American Clean Skies Foundation.

To cut to the chase, the NCI study shows that when it comes to domestic natural gas supplies:
•    Our total proved natural gas reserves are growing, not shrinking.
•    Our production of natural gas is increasing.
•    Our current estimates of our reserves are too low.
•    The driver of both reserve growth and production growth is major shale gas plays located in convenience to distribution and demand.

Even the need for the study is telling in itself. To put it simply, because of production from shale, coal-bed methane, and other so-called unconventional natural gas production, America is like a company producing a product faster than can be counted. A kind of mega-study was needed to get a clearer view of what’s happening and its implications for our energy future. Indeed, the NCI study found that most of the gas-supply data available to the public, from both industry and government, understated both the actual contribution and the potential of unconventional resources simply because their emergence has been so rapid that the traditional models used just have not been able to keep up.  Consider: Total U.S. proved natural gas reserves 10 years ago were 167 trillion cubic feet (Tcf). But we produced 170 Tcf, and our proved reserves today are about 212 Tcf. This is because of unconventional gas production, production largely believed to be impossible ten years ago.

Using a model that included actual producer data and analysis, reports in the trade press, government and industry estimates as well as other sources, the NCI study is the first that captures a clear snapshot of what is a speeding train. That picture is made up of numbers that are truly mind-boggling.

At current (2007) production levels, the NCI study puts the conservative estimate of our natural gas resource at 1,680 Tcf, a supply of about 88 years.  Impressive. But when the industry survey of shale production is included, the number goes to 2,247 Tcf, a 118-year supply at current production levels.

And that term “current production levels” is important. The fact is that production from shale is still in its relative infancy, with the vast majority of the potential shale plays in America still being explored.

In recent weeks, the idea of expanding our use of clean-burning, affordable natural gas has received increased attention both inside the beltway and across America. This has been accompanied by continued questioning regarding our supply. The NCI study clearly shows the answers to such questions are positive. To quote directly: “The rapid escalation of unconventional production observed historically is continuing, and the unconventional resource base appears adequate to support that escalation to allow significantly increased volumes of unconventional production to continue for decades.”

More simply: We’re richer than we know.

posted @ Wednesday, July 30, 2008 10:19 AM | Feedback (0)

Revenge of the Nerds - Redux

Energy Nerd (en’er je nurd), n. Slang 1) A person who takes great interest and some pleasure in studying statistics regarding energy production, use, supply, etc. 2) Yours truly.

OK, I admit it. I eagerly grab and review the latest energy stats like a Trekkie jumping at a new video of Star Trek outtakes. But in my defense, there’s a perfectly sound, serious reason: The key to our energy future can only be found in the present. To that end, the present count for rotary rigs drilling for natural gas and oil in the United States is at an all-time high according to Baker Hughes, Inc. As of July 11, there are 1,922 rigs active and 1,544 of those are drilling for natural gas. Oil and Gas Journal reports that, “shale and other unconventional gas plays were claiming large shares of the drilling in Texas and numerous other states.”

“Unconventional natural gas production” is the rather dry term given to a very exciting development - the use of new drilling techniques and technologies to do what only a few years ago was viewed as impossible - successfully producing natural gas from shales, so-called “tight sands,” and coalbeds. What was really unconventional has become conventional.

For those still not familiar with the term, “shale gas production” is production from earth’s most common sedimentary rock. It’s been known for some time that shale can contain natural gas, but it has only been since early 2000 that the key to unlock this treasure chest was discovered. Now new projections show the sheer potential size of the treasure is mind-boggling.

To put this in perspective, first consider that of the 22 major shale basins in the U.S., only a few have been explored. Now take a look at the Energy Information Administration projections. The EIA projects that by 2018 unconventional gas production will reach 26.3 billion cubic feet (Bcf) a day, about 50% of projected domestic U.S. production. That’s impressive. But it pales in comparison to the latest estimates from those who are actually putting hundreds of millions of dollars at risk and already successfully producing natural gas from shale formations in the U.S. They now estimate production from just 4 of the shale formations that are currently being explored and produced will be higher than the EIA’s projection of total production from all unconventional sources.

Here’s a breakdown of the projection:  

1)    Barnett shale in Texas – 8 - 9 Bcf a day
2)    Haynesville shale in northern Louisiana: 8 - 10 Bcf a day
3)    Fayetteville shale in Arkansas: 3 - 5 Bcf a day
4)    Marcellus shale from West Virginia to New York: 8 – 15 Bcf a day

Total: Up to 240 trillion cubic feet (Tcf) a year. Again, that’s just from 4 of the 22 major shale formations. In 2007, the total U.S. gas consumption was 23,057,969 Mcf.

Nor is this restricted to the U.S. In Canada, producing gas from shale is just now beginning in several of the provinces - with promising results.  With Canada and the US markets being fully integrated through a network of pipelines it truly is exciting.

Obviously, these numbers fly in the face of those who hold that we’re running out of natural gas. The reality is quite different. We now know that there are abundant, domestic supplies of a resource that can easily be used as a transportation fuel, generating fuel, key component in various industrial manufacturing processes, and most importantly, a key component of a green energy portfolio that includes wind and solar energy.

You certainly don’t have to be a nerd to get excited about that. In the coming weeks, American Clean Skies Foundation will be revealing something else to be excited about – a study that shows the significant impact that shale plays are beginning to have on the supply of natural gas within the United States. It is truly exciting, so stay tuned here and to our websites listed below for more detail.

posted @ Friday, July 18, 2008 9:48 AM | Feedback (0)

Getting More Than You Pay For

“Unleash market creativity.” “Ingenuity and innovation of the American people.” “Collaboration and cooperation.” These are all terms that tend to be used quite often in policy debates regarding a specific problem or issue America must contend with, and our energy crisis is no exception. Indeed, as regular readers know, they are terms that appear quite often in this very column, as they are key elements of what ACSF is all about.

But as I learned first-hand years ago as a newly-minted lawyer, the most high-sounding and well-meant phrases don’t mean much unless you’re able to define them, and the most effective definitions include real-world examples.

The incredible growth and promise of unconventional natural gas production, which is becoming conventional is a perfect example of what can happen when you “unleash market creativity,” and “collaboration and cooperation” becomes a reality. Such production includes producing gas from shale and from coal beds.

At the recent 2008 annual meeting of the Mid-America Regulatory Conference,
MIT Energy Initiative associate director Melanie Kenderdine, Research Partnership to Security Energy for America (RPSEA) President Michael Ming, and Chris McGill of the American Gas Association shared the astounding results of the research that has been done thus far into unconventional production. The numbers were no doubt eye-openers for the state energy regulators in attendance, and show what can happen when the above phrases are put into action.

Take coal bed methane. As Kenderdine noted, the unique research partnership created to do research and development of what was then a largely theoretical proposition has paid huge dividends. Industry provided a 50 percent match to go with the federal funding of what amounted to a research project that totaled 140 million dollars over ten years. It was a partnership of researchers, academia and industry. The end result? Coal bed methane production now accounts for about 10 percent of our domestic gas production, with an estimated value of more than five billion dollars.

When it comes to shale production, the fact is no one knows just how big the payoff could be from research. The reason is simple: the amount of natural gas that we know can be produced from shale is a number that grows monthly. Thanks to the efforts of Kenderdine, Ming, McGill and others, The Energy Policy Act of 2005 contains a provision that creates a public/private partnership similar to, but larger than, the one that tackled coal bed methane production. Total cost: $50 million a year for ten years.

Is it worth it? As Ming pointed out, about 10 years ago the official government estimate of the natural gas resource afforded by the Barnett shale formation in Texas was zero. Thanks to research and development that has for the most part been funded by industry, production from the Barnett shale is a reality, and the Barnett’s resource potential could be 50 trillion cubic feet or more. And the Barnett is just one formation. That is a pretty big bang for your buck. And there are many such formations in the United States, and exploration and production has started on relatively few others. Shale production, while still in its infancy, is a key reason why our natural gas reserves have shown growth for the past eight years, and natural gas production has increased over 9 percent just in the last year.

These are real world examples of what can happen when resources are brought to bear in a sustainable, logical, collaborative manner. They are proof-positive of the results that can be found when research is conducted as defined by biochemist Albert Szent-Gyorgi: “Research is to see what everybody else has seen, and to think what nobody else has thought.” Kenderdine, a former Department of Energy official, noted that the Department of Energy spends only about 8 percent of its budget on actual research and development of energy sources, and a tiny fraction of its time.

ACSF is dedicated to fostering the environment for education and research. After all, as Carl Sagan noted: “Somewhere, something incredible is waiting to be known.”

posted @ Thursday, July 03, 2008 3:08 PM | Feedback (0)