Musings: Marcellus Shale Resources: 'Just one more thing'

Peter Falk, the actor who created the television character Police Lieutenant Columbo, employed many disarming tricks to keep his co-actors off-stride. Their surprise to his actions helped make them more irritated in their responses to Columbo's questions. His most famous trick was the "false exit" when he would turn and say, "Just one more thing…" The TV mystery 'who-done-it' was actually a 'how-did-he-catch-them' since the show began by showing the murder and the perpetrator so that was no longer the mystery, only how he will get caught. Maybe solving the Marcellus Shale missing resources is similar to a Columbo show. That shale has an estimated 410 trillion cubic feet (Tcf) of possible reserves according to the Energy Information Administration (EIA). So was the recent Marcellus Shale assessment by the U.S. Geological Survey (USGS) of only 84 Tcf of undiscovered potentially technically recoverable resources merely a Columbo distraction? 

The European Energy Review reported on the discrepancy between the two U.S. government agencies and the ensuing debate about the significance. In its article, it "quoted J. David Hughes, a geoscientist connected with the Post Carbon Institute, who noted that 'the new estimates represent a considerable downgrade from the widely used study by Engelder (2009) of Penn State which estimated 489 Tcf of technically recoverable P50 gas from the Marcellus and the estimate of 410 Tcf published by the EIA in July, 2011, based on work done by its consultant INTEK. The new USGS resource estimates for the Marcellus are likely to be much more rigorous than the Engelder and EIA estimates. It should also be noted that the USGS estimates include gas underlying areas which are off limits for drilling but, as they are "undiscovered" resource estimates, they do not include the actual booked reserves of companies for SEC filings (which are very small by comparison).'"

This statement appeared to capture the nature of the resource estimate debate, and the possible impact – a huge discounting of the potential for America's largest shale deposit. 

Exhibit 1.  Marcellus Shale Deposit Is Large

The Marcellus Shale Coalition issued a release calling on the writers of articles emphasizing the nearly 80% smaller Marcellus resource estimate were wrong because the two estimates were like comparing apples and oranges. In response to an email from a reader, the Review dug deeper into the estimates and talked to both the EIA and the USGS. In a Columbo-like false exit, they wrote "A spokeswoman of USGS told us: 'The USGS assessment is only of the undiscovered resources (not reserves) of the Marcellus Shale.  Because they are "undiscovered," they are resources in those areas yet to be found (or drilled), thus outside of currently producing areas. Resources and reserves in currently producing areas are discovered or known, and we do not assess those.'" This would suggest that the USGS undiscovered resource estimate should be added to the EIA's estimated resources bringing the total for the deposit closer to 500 Tcf. 

Before we know whether Lt. Columbo has caught his man, we need to know whether the EIA advisors, who prepared the 410 Tcf assessment, based their estimate on the entire areal extent of the basin or only those areas being drilled. In that regard, the EIA's advisor's assessment was based on data known as of January 1, 2009. According to the USGS assessment release, "The USGS worked with the Pennsylvania Geological Survey, the West Virginia Geological and Economic Survey, the Ohio Geological Survey, and representatives from the oil and gas industry and academia to develop an improved geologic understanding of the Marcellus Shale." An interesting question is whether the USGS and its helpers sat down and drew maps of the Marcellus Shale and redlined those areas where wells have been and are being drilled and production is underway, putting them outside of the USGS's recent resource assessment. If so, then we should have been told. 

As Peter Falk's Columbo character would have said: Just one more thing… if "the USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources of onshore lands and offshore state waters" as its press release states, why didn't the EIA ask the USGS to provide the national shale resource assessment rather than a consulting firm? Were they afraid of the answer they would have gotten?

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.


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