In it for the short haul
September 22, 2011 —
As the national jobs situation continues to deteriorate, voices calling for gas drilling as the only way out of our local economic dilemma become all the more strident. But several recent studies suggest that if we rush into a gas drilling economy, it may be only to find ourselves rushing out again, with less to show for it, even in the short term, than has been commonly assumed—especially as compared to other avenues likely to offer better long-term solutions.
One important study whose impact, we feel, has not been fully recognized, is a new USGS estimate of the total gas reserves contained in the Marcellus Shale, which comes in at 83 trillion cubic feet. There has been some controversy as to whether this represents a massive increase, or a massive decrease, in the amount of recoverable gas assumed to be available. Industry advocates like The Wall Street Journal compared the number to the USGS’s 2002 estimate of two trillion cubic feet, thus hailing it as a 40-fold increase. Of course, nobody inside the industry or out has paid attention to that estimate for years. Terry Engelder, the Penn State geoscientist whose generous estimate of Marcellus reserves in January of 2008 played a key role in inspiring the current boom, has been using an estimate of 489 trillion since 2009. The U.S. Energy Information Agency, back in April, briefly increased its estimate from 410 to 844 trillion cubic feet. (It has now adopted the new USGS number.) Compared to these assumptions, the USGS number represents a drop off from 80% to 90%.
These reduced estimates not only have implications for the balance sheets of natural gas companies that have leased land for drilling, they also mean that the bust that can be expected from the boom-bust cycle of a natural-gas-driven economy will come that much sooner. To get a sense of perspective, the United States currently consumes about 24 trillion cubic feet of gas per year. Under the 489 trillion cubic foot assumption, one could argue that the Marcellus alone could provide 20 years of U.S. consumption. Under the 83 trillion cubic foot estimate, it can supply only about three and a half years worth.