U.S. Gas Resources: Julian Simon Lives! (Malthus, Hotelling, Hubbert are wrong again)
The Potential Gas Committee has issued its new biennial gas resource estimate for the United States and once again raised its estimate, this time by 15%, or from 1,321 trillion cubic feet (Tcf) to 1,525 Tcf. This equates to a 70-year domestic cushion, given annual U.S. consumption of 20 Tcf. The evaluation of available shale gas, production of which is now soaring, played a major role in this re-evaluation and potently demonstrates how new technology (aka human ingenuity, what the late Julian Simon called the ultimate resource) creates resources, refuting the static fixity/depletion view of the mineral-resource world.
Few realize that the PGC has been raising the estimates of conventional resources throughout history, even as the United States has consumed large amounts of natural gas. Thus gas has been and is an expanding resource, not a depleting one.
In 1966, the PGC’s estimate of ultimately recoverable resource (i.e., including cumulative production) was 1,283 Tcf, versus the current estimate of approximately 2,600 Tcf, including 1,100 Tcf of cumulative production. While that includes several hundred Tcf of shale gas and coal-bed methane (CBM), conventional gas resources have surpassed 2,000 Tcf and are far beyond even the most optimistic estimates of a quarter century ago.
An excellent summary of those estimates can be found in the Office of Technology Assessment’s U.S. Natural Gas Availability: Conventional Gas Supply Through the Year 2000, which noted that the pessimistic projections for production in 2000 were about 9 Tcf. Total production that year proved to be over twice that amount, at 18.7 Tcf, of which less than 2 Tcf were shale gas and CBM.
In fact, resource estimates from that era have proved wildly pessimistic. A review of URR estimates from 11 different sources, including M. King Hubbert and Richard Nehring, found none that came close to current levels, with the highest at 1,800 Tcf. Indeed, five of the nine estimates of lower-48 remaining undiscovered resources came in below 200 Tcf, whereas production since then has been 500 Tcf.
Against this background, we have any number of pundits decrying the optimists arguments that resources will be sufficient for our needs, pointing to a few years of elevated prices, and encouraging the building of numerous—now idle—LNG import terminals. Even more, arguments that global gas resources are somehow constrained should be put to bed.