RFF: No Discrepancies between USGS and EIA Shale Gas Estimates

By Kennedy Maize

Washington, D.C., October 18, 2011 — Remember the flap about inconsistencies between the Energy Information Administration and the U.S. Geological Survey over shale gas estimates for the Marcellus formation? Forget about it.

According to a new paper from the Washington think tank Resources for the Future, there’s no discrepancy at all: the two government agencies weren’t talking about the same thing.

At issue is the amount of gas sitting in the Marcellus shale formation in the Middle Atlantic region, which EIA had pegged at 410 trillion cubic feet, an astonishing amount of natural gas. Then, last August, USGS released its Marcellus figure, at 84 tcf, still an enormous amount, but clearly much less optimistic than EIA. EIA said, prematurely, it appears, that it would defer to the expertise of the Interior Department geologists. But maybe it won’t work that way at all.

Fossil fuel opponents, and the New York Times, which has been on an anti-gas crusade, pounced on the discrepancy as evidence that shale wasn’t all it was fracked up to be.

But, says EIA analyst Dave McLaughlin, it’s really just a matter of terms. The two estimates don’t contradict, and, in fact, may be additive. In other words, there may be even more Marcellus gas than EIA estimated. What’s at work, says McLaughlin, is “likely a misunderstanding of the definitions of shale gas resource classifications used by the EIA and USGS. Definitions matter here and it is easy to confuse these in particular because the USGS and the EIA use some, but not all, of the same classifications.”

The terms to focus on, says the RFF report, are undiscovered resources and inferred reserves. Both government agencies use the same definition for undiscovered resources. Basically, they mean gas that can be technically recovered outside known fields, which potentially could be added to reserves. But that definition does not include reserves, a more concrete figure. EIA, part of the U.S. Department of Energy, defines inferred reserves based on usage from the Potential Gas Committee, an industry-sponsored group. The 410 tcf figure came from a consultant, INTEK, which specializes in unconventional fuels, such as shale gas, and is consistent with Potential Gas Committee estimates.

Says RFF’s McLaughlin, “When strictly adhering to the aforementioned definitions, the 84 tcf estimate of undiscovered resources should not replace the 410 tcf of inferred reserves, and should only replace the previous estimate of undiscovered resources of 0 tcf for the Marcellus play. In theory, as the 84 tcf becomes discovered and evaluated, some of the estimate will be added to the amount of inferred reserves.”

EIA and USGS are discussing the issue, writes McLaughlin. “If they stick to the definitions,” he says, “the 84 tcf estimated by the USGS will simply replace the previous estimate of undiscovered resources. Hopefully the EIA and USGS will engage in a larger discussion about the wisdom of utilizing a conventional resource base classification on the unconventional shale resources.”

The distinctions are subtle, but real. Want to bet they won’t show up in the New York Times?