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Just How Much Gas are We Actually Sitting on?

J. Mijin Cha

Recently, a lot of attention was given to the prediction that the U.S. would become energy independent by 2035. Shale oil and gas driliing is the main reason U.S. energy production has increased and shale gas now accounts for 40 percent of all gas production. President Obama himself is fond of saying that we are sitting on a 100-year supply of gas. However, sitting on top of a gas supply and being able to access that supply are two very different realities.

A new report, Drill, Baby, Drill, looks at the production capacity of shale gas. More important than resource supply is the rate of supply. Having a large supply of gas is not very helpful if getting the gas out is prohibitively expensive and time-intensive. The report looks at fracking and tar sands and finds that even though there is large in situ resource (supply available), the production rate is too small. Tar sands, for example, produce less than two percent of the world's oil requirement despite four decades of very large capital inputs and collateral environmental impacts.

As for fracking, the report finds that production has been on a plateau since December 2011. And, it's not due to a lack of effort. It's just that after a while, fracking wells stop performing. Analysing the production of 65,000 shale gas wells, the report fond that the vast majority of the wells are depleted within five years. The high decline rate requires continuous capital inputs—at least $42 billion per year to drill more than 7,000 wells. Yet, the value of shale gas produced in 2012 was only $32.5 million. In other words, while the gas may be there, the time and cost needed to extract it will only be worthwhile if the price of gas goes up substantially, which could seriously harm our already fragile economic recovery.

As New York state still debates whether to allow fracking, the graph below shows how existing production in the Marcellus Shale is declining:

Given all the environmental, economic, and health damage imposed by fracking, isit worth it for a gas supply that will peak after only five years? Taking that capital and investing it in expanding renewable energy production has more bang for the buck and is a better investment in an energy source that can fuel the economy of the future.