Full download ebook at ebookgate.

com

Assessing Gas and Oil Resources in the

Intermountain West Review of Methods and
Framework for a New Approach 1st Edition Tom
Latourette
https://ebookgate.com/product/assessing-gas-and-
oil-resources-in-the-intermountain-west-review-of-
methods-and-framework-for-a-new-approach-1st-
edition-tom-latourette/

Download more ebook from https://ebookgate.com

More products digital (pdf, epub, mobi) instant
download maybe you interests ...

Oil and Gas Production Handbook An Introduction to Oil

and Gas Production Second Edition Håvard Devold

https://ebookgate.com/product/oil-and-gas-production-handbook-an-
introduction-to-oil-and-gas-production-second-edition-havard-
devold/

Geology and Geochemistry of Oil and Gas 1st Edition

Chilingar G.V.

https://ebookgate.com/product/geology-and-geochemistry-of-oil-
and-gas-1st-edition-chilingar-g-v/

High Performance Polymers for Oil and Gas 2013 1st

Edition Smithers Rapra

https://ebookgate.com/product/high-performance-polymers-for-oil-
and-gas-2013-1st-edition-smithers-rapra/

The Application of Contracts in Developing Offshore Oil

and Gas Projects 1st Edition Philip Loots

https://ebookgate.com/product/the-application-of-contracts-in-
developing-offshore-oil-and-gas-projects-1st-edition-philip-
loots/
Meetings at the Margins Prehistoric Cultural
Interactions in the Intermountain West 1st Edition
David Rhode

https://ebookgate.com/product/meetings-at-the-margins-
prehistoric-cultural-interactions-in-the-intermountain-west-1st-
edition-david-rhode/

Corrosion Resistant Alloys for Oil and Gas Production

Guidance on General Requirements and Test Methods for
H2S Service 2nd Revised Edition Efc 17

https://ebookgate.com/product/corrosion-resistant-alloys-for-oil-
and-gas-production-guidance-on-general-requirements-and-test-
methods-for-h2s-service-2nd-revised-edition-efc-17/

Arctic Oil and Gas Sustainability at Risk 1st Edition

Aslaug Mikkelsen

https://ebookgate.com/product/arctic-oil-and-gas-sustainability-
at-risk-1st-edition-aslaug-mikkelsen/

Essentials of Oil and Gas Utilities Process Design

Equipment and Operations 1st Edition Alireza Bahadori

https://ebookgate.com/product/essentials-of-oil-and-gas-
utilities-process-design-equipment-and-operations-1st-edition-
alireza-bahadori/

Metallurgy and Corrosion Control in Oil and Gas

Production Wiley Series in Corrosion 1st Edition Robert
Heidersbach

https://ebookgate.com/product/metallurgy-and-corrosion-control-
in-oil-and-gas-production-wiley-series-in-corrosion-1st-edition-
robert-heidersbach/
 R
Assessing Gas and Oil
Resources in the
Intermountain West
Review of Methods and Framework For
a New Approach

Tom LaTourrette, Mark Bernstein, Paul Holtberg,

Christopher Pernin, Ben Vollaard, Mark Hanson,
Kathryn Anderson, Debra Knopman

Prepared for
The William and Flora Hewlett Foundation

RAND Science and Technology

The research described in this report was conducted by RAND Science and
Technology for The William and Flora Hewlett Foundation.

ISBN: 0-8330-3178-3

RAND is a nonprofit institution that helps improve policy and decisionmaking

through research and analysis. RAND ® is a registered trademark. RAND’s pub-
lications do not necessarily reflect the opinions or policies of its research sponsors.

© Copyright 2002 RAND

All rights reserved. No part of this book may be reproduced in any form by any
electronic or mechanical means (including photocopying, recording, or information
storage and retrieval) without permission in writing from RAND.

Published 2002 by RAND

1700 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138
1200 South Hayes Street, Arlington, VA 22202-5050
201 North Craig Street, Suite 102, Pittsburgh, PA 15213
RAND URL: http://www.rand.org/
To order RAND documents or to obtain additional information, contact Distribution
Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: order@rand.org
 iii

Preface

This report, along with an abridged version released as an Issue Paper

(LaTourrette et al., 2002), is an interim report from a project addressing gas and
oil resource assessments in the Intermountain West. The objective of this work is
to propose, develop, and apply a methodology for assessment that includes
additional economic and environmental considerations. This interim report
describes a set of criteria that can be applied to technically recoverable gas and
oil resource assessments that would allow policymakers to better understand the
economic and environmental implications of federal land use decisions. Because
of the inherent uncertainty in making hydrocarbon resource assessments,
building a comprehensive methodology that includes economic and
environmental considerations is challenging. In the next phase of the project we
plan to more fully develop this assessment methodology and then apply it to
Intermountain West basins.

Given the challenge of developing such a methodology, as well as its relevance to

the current debate on energy policy, we believe that it was important to release
this interim report. By doing so, we have created the opportunity to gather
additional feedback on our proposed methodology as we proceed with the next
phase of work. We welcome comments on this report from interested readers;
please direct comments to Tom LaTourrette at rockies@rand.org.

RAND Science and Technology

RAND is a nonprofit institution that helps improve policy and decisionmaking
through research and analysis. RAND Science and Technology (S&T), one of
RAND’s research units, assists government and corporate decisionmakers in
developing options to address challenges created by scientific innovation, rapid
technological change, and world events. RAND S&T’s research agenda is
diverse. Its main areas of concentration are science and technology aspects of
energy supply and use; environmental studies; transportation planning; space
and aerospace issues; information infrastructure; biotechnology; and the federal
R&D portfolio.
iv

Inquiries regarding RAND Science and Technology may be directed to:

Steve Rattien
Director, RAND Science and Technology
RAND
1200 South Hayes Street
Arlington, VA 22202-5050
703-413-1100 x5219
www.rand.org/scitech
 v

Contents

Preface .................................................. iii

Figures .................................................. vii
Tables .................................................. ix
Summary................................................. xi
Acknowledgments .......................................... xxi
Abbreviations ............................................. xxiii
1. INTRODUCTION....................................... 1
Background and Objectives ................................ 1
Approach............................................. 3
2. TECHNICALLY RECOVERABLE GAS AND OIL RESOURCES ..... 6
Different Definitions of Terms .............................. 7
Assessment Methodologies ................................ 9
Reserve Appreciation ................................... 9
Undiscovered Conventional Resource ....................... 10
Nonconventional Resources .............................. 11
Results for the Lower 48 States ............................. 12
Results for the Rocky Mountain Region ....................... 15
Resource Assessment Evolution ............................ 19
3. LEGAL ACCESS TO RESOURCES IN THE
INTERMOUNTAIN WEST ................................ 22
Methodology .......................................... 23
Results............................................... 26
Recommendations ...................................... 31
4. ECONOMICALLY RECOVERABLE RESOURCES ............... 33
Methodology .......................................... 33
Results............................................... 35
Recommendations ...................................... 38
5. INFRASTRUCTURE ..................................... 41
Overview of Infrastructure Components ...................... 41
Water Disposal ....................................... 42
Compression ......................................... 42
Gathering System...................................... 43
Processing ........................................... 44
Transmission Pipelines.................................. 44
Roads .............................................. 45
Including Infrastructure in Resource Assessments ............... 45
Infrastructure Requirements .............................. 45
Other Considerations ................................... 47
The Viable Resource.................................... 48
vi

6. ENVIRONMENTAL CONSIDERATIONS ..................... 49

Overview of Environmental Impacts ......................... 50
Exploration and Development ............................ 55
Production .......................................... 56
Maintenance ......................................... 57
Accidents ........................................... 58
Waste Disposal ....................................... 59
Orphan Wells ........................................ 59
Transport ........................................... 60
Environmental Considerations and the Viable Resource ........... 60
7. CONCLUSIONS........................................ 63
Implications of Viable Resource Approach..................... 63
Potential Results........................................ 64
Future Work .......................................... 65
Appendix
TECHNICALLY RECOVERABLE RESOURCE
ASSESSMENT SPECIFICATIONS ........................... 67
References................................................ 73
 vii

Figures
S.1. How Viability Criteria Affect the Available Resource ........... xiii
S.2. Potential Effect of Viability Criteria on Gas Resources .......... xviii
1.1. Effect of Viability Criteria on the Available Resource ........... 3
2.1. Hierarchy of Categories to Describe Resources ............... 7
2.2. Comparison of Lower-48 Technically Recoverable
Natural Gas Resource Assessments ........................ 14
2.3. Rocky Mountain Resource Regions ........................ 15
2.4. Comparison of Rocky Mountain Region Technically Recoverable
Natural Gas Resource Assessments ........................ 16
2.5. Basins Containing Coalbed Methane Deposits ................ 18
2.6. Basins Containing Tight Sandstone Gas Deposits .............. 18
2.7. Historical Gas Resource Estimates ........................ 20
3.1. Effect of Including Proved Reserves on Access Levels in the
Rocky Mountain Region ................................ 29
3.2. Effect of Including Non-Federal Lands and All Gas Resources on
Access Levels in the Greater Green River Basin ............... 30
4.1. Economic Recoverability as a Function of Cumulative
Production.......................................... 34
5.1. Framework for Estimating Infrastructure Requirements ......... 46
7.1. Potential Effect of Viability Criteria on Gas Resources .......... 65
 ix

Tables
2.1. Comparison of Lower-48 Technically Recoverable Resource
Assessments ........................................ 13
2.2. Comparison of Rocky Mountain Region Technically Recoverable
Resource Assessments ................................. 17
3.1. Classification of Lease Stipulations and Effect on Gas Drilling .... 24
3.2. Reported Natural Gas Access Restrictions in the
Rocky Mountain Region ................................ 27
3.3. Reported Natural Gas Access Restrictions in the
Greater Green River Basin .............................. 27
3.4 . Natural Gas Drilling Opportunities in the
Greater Green River Basin .............................. 28
4.1. Economically Recoverable Oil and Gas in the United States
(USGS) ............................................ 37
5.1. Infrastructure Components, Cost Items, and Issues Specific to the
Rocky Mountains..................................... 42
6.1. Potential Environmental Impacts from Oil and Gas Extraction .... 51
A.1. Comparison of Resource Assessment Specifications ............ 67
A.2. Comparison of Resource Categories ....................... 70
 xi

Summary

The availability of gas and oil resources in the Intermountain Western United
States has become the subject of increased debate in recent years. Several studies
have concluded that substantial amounts of gas and oil resources in the region
are inaccessible because of legally restricted access to federal lands (e.g., National
Petroleum Council, 1999; Advanced Resources International, 2001). Some
stakeholders have reacted to the studies by calling for reduced access restrictions,
while others have called the studies flawed and support continued restrictions.
The debate has sparked renewed interest in the process of assessing hydrocarbon
fuel resources.

This report is part of an energy initiative by the Hewlett Foundation. In this

effort the foundation asked RAND to:

• review existing resource assessment methodologies and results

• evaluate recent studies of federal land access restrictions in the
Intermountain West
• consider a set of criteria that can be used to define the “viable” hydrocarbon
resource, with particular attention to issues relevant to the Intermountain
West
• develop a more comprehensive assessment methodology for the viable
resource
• employ this methodology to assess the viable resource in Intermountain
West basins.

This is an interim report that focuses on the first three tasks.

Key Policy Questions Require More Information Than

Provided by Traditional Assessments
The goal of traditional resource assessments is to estimate the nation’s potential
supply of natural gas and oil resources. In this report, we examine four recent
assessments (U.S. Geological Survey National Oil and Gas Resource Assessment
Team, 1995; Minerals Management Service, 2000; National Petroleum Council,
1999; Potential Gas Committee, 2001). Although the assessments vary, they each
indicate that the Intermountain West contains substantial natural gas and oil
xii

resources. Traditional resource assessments, however, are intended to estimate

the “technically recoverable”1 resource, which does not reflect the amount of
resource that can realistically be produced. Technically recoverable resource
assessments, by design, make no assumptions about whether or not the resource
will be developed, and resources are evaluated regardless of political, economic,
and other considerations. The distinction between the technically recoverable
resource and that which is likely to be actually produced is important when
confronting questions about the potential benefits and impacts of increased
natural gas and oil exploration and production.

The amount of resource that is likely to be produced depends on a number of

considerations. The criterion that a resource be technically recoverable is only
one of several that are relevant to determining if that resource is, in fact,
recoverable. Legal access restrictions, as it turns out, may not always be the
pivotal factor for actual resource development, because other factors may play
greater roles in determining if a resource is recoverable. Three key factors are:

• exploration and production costs (those incurred in getting the resource to

the wellhead)
• infrastructure and transportation costs (those incurred in getting the resource
to the market)
• environmental impacts.

The wellhead and infrastructure costs are relevant, because, when compared to
the revenue expected from the resource being considered for development, they
determine whether it is economically feasible to proceed. Environmental impact
can be treated in a similar manner by characterizing different levels of impact
and allowing policymakers to consider effects at different levels. For policy
purposes, these three factors could add significant value to resource assessments.
The resource that satisfies this more expansive set of criteria has a reasonable
likelihood of actually being developed and produced. We call such a resource
the “viable” resource.

The cumulative effect of these additional factors on the available resource is

shown conceptually in Figure S.1. The application of each additional criterion—
wellhead economics, infrastructure economics, and environmental

________________
1The technically recoverable resource refers to the amount that is estimated to be recoverable
given certain assumptions about technical capabilities. In practice, the definition of the term
“technically recoverable” is unclear and is inconsistently applied among the different assessments. A
large part of the differences between existing resource assessments results from differing
assumptions as to what constitutes a technically recoverable resource.
 xiii

RANDMR1553-S.

Technically recoverable resource

Change in available
resource when including
wellhead costs

Change in available
Available supply

resource when also including

infrastructure costs

Change in available
resource when also including
environmental acceptability
e
rc
sou
re
le
ab
Vi

Market price

Figure S.1—How Viability Criteria Affect the Available Resource

acceptability—successively reduces the amount of a resource that might be

available at a given market price. Note that the curve for environmental
acceptability is conceptual only—we do not propose to calculate environmental
costs. Rather, we intend to estimate the amount of economically recoverable
resource that can be extracted within a given level of environmental impact.

These three factors reflect well-known and often cited issues that determine the
availability of gas and oil resources. Aspects of these issues have been addressed
to varying degrees in previous studies (e.g., Vidas et al., 1993; Attanasi et al.,
1998; National Petroleum Council, 1999). However, they are generally not all
considered in resource assessment methodologies.

Limitations of Existing Access Restriction Studies

Existing approaches to understanding resource availability have focused on legal
access restrictions on federal lands. Ongoing efforts have been spurred largely
by the Energy Policy and Conservation Act of 2000, which directs federal land
management agencies to assess the energy potential of public lands and identify
impediments to its development. As a result, considerable effort is being
expended on quantifying the amount of gas and oil resources underlying federal
lands that is subject to various forms of access restrictions.

The recent debates over access to natural gas in the Intermountain West have
centered largely on the conclusions made in two studies. The first, conducted as
xiv

part of the latest National Petroleum Council natural gas study (National
Petroleum Council, 1999), addresses the entire Rocky Mountain Region; the
second, prepared for the U.S. Department of Energy (Advanced Resources
International, 2001), focuses on the Greater Green River Basin in southwestern
Wyoming and northwestern Colorado. In their effort to identify impediments to
energy development, these studies make some important assumptions that have
implications for the impact of access restrictions on the available gas resource.
These assumptions deal with economics, the resource base considered, restriction
enforcement, technology, infrastructure, and drilling schedules. As calculation of
access restrictions continues to be a component of policy guidance (studies of
additional basins are under way), these assumptions should be closely examined
and modified where necessary to provide an unbiased and consistent view of the
impact of access restrictions in the broader context of economic constraints and
the non-federal resource base.

Building Comprehensive Resource Assessments

For making informed decisions, policymakers need to know how much resource
is available, at what cost, and with what impact. Therefore, rather than focus on
the amount of resource that is unavailable as a result of land access restrictions,
we propose an approach of determining the viable resource: that which is
available when considering wellhead costs, infrastructure costs, and acceptable
environmental impact.

Wellhead Costs
Wellhead costs vary depending on a deposit’s geologic characteristics, depth,
and production characteristics. Estimating economic recoverability involves
balancing these costs with anticipated resource revenues to determine if it would
be economically logical to proceed with production (e.g., Vidas et al., 1993;
Attanasi, 1998). The standard costs that need to be included when considering
economic recoverability are:

• exploration and development drilling

• well completion
• lease equipment
• operations and maintenance
• taxes and royalties
• return on investment.
 xv

Incorporating these costs can reduce the amount of gas and oil resources that is
economically viable for production in the foreseeable future. There remains
considerable uncertainty about the economics of gas and oil recovery in the
Rocky Mountain Region and studies are ongoing. However, based on the U.S.
Geological Survey results, adding the economic criterion alone would rule out, in
the near term, the recovery of a large fraction of the gas resource in the Green
River Basin that would otherwise be deemed technically recoverable (Attanasi,
1998). It is important to note that technological improvements and changing
economic conditions will alter these estimates over time.

In updating evaluations of the economically recoverable resource in the

Intermountain West, improvements can be made to the standard economic
models to help tailor our economic evaluation to account for some of the
characteristics of the region and to improve the accuracy of economic modeling
of resource development.

The first is to use data that reflect the region of interest. Costs of gas and oil
development in the Rockies can vary considerably depending on the location and
characteristics of each basin. However, cost data are generally presented either
by state or by a larger region, a practice that impairs the accuracy of the cost
estimates.

The second is to account for the high abundance of nonconventional gas in the
Rockies. One of the primary distinctions of the Rocky Mountain Region is the
very high fraction of undiscovered gas that is contained in nonconventional
formations.2 This distinction is expected to impact costs for well completion,
lease equipment, and operating costs. While existing efforts attempt to account
for these higher costs by including nominal correction factors, the aggregate cost
estimates may still underestimate the real costs of developing Rocky Mountain
gas and oil.

The high fraction of nonconventional deposits may also influence drilling success
rates. The drilling success rate is the fraction of drilled wells that are productive
and influences the total number of wells that must be drilled. The rates used in
existing evaluations reflect regional averages of existing wells and are thus
biased toward conventional deposits.

Other unique aspects of the Rocky Mountain Region that may further influence
the costs of resource extraction include the steep and rugged terrain, remote
locations, low-quality gas, and shallow formations.

________________
2Nonconventional resources in the Rockies include low-permeability (tight) sandstone and
coalbed methane.
xvi

Infrastructure Costs

Much of the gas and oil resource in the Intermountain West cannot be developed
without constructing additional pipeline, processing, and road infrastructure.
While resources may still be economically recoverable when these additional
costs are accounted for, in some cases the infrastructure requirements may
prevent an otherwise attractive development from proceeding. The availability
of infrastructure thus represents an important criterion for defining a resource as
viable.

Typically, resource assessments do not consider infrastructure requirements.

Capital expenditures and operating costs for infrastructure are thought to be
comparatively high in the Rocky Mountain Region, given a lack of infrastructure
relative to other regions. If new infrastructure is required, the additional costs
could be more than 50 percent of the wellhead costs.

Primary infrastructure components include gathering systems, which connect

wells to gas processing plants; gas processing plants, the number of which
depends on the size and type of deposit; and long-haul transmission lines. The
infrastructure requirements and costs depend on a number of factors, including
the number and distribution of wells, well pressures, flow rates, and recovery
rates, resource characteristics, and type of geological formations, all of which can
be highly variable.

Several complicating factors in the Rocky Mountain Region may increase

infrastructure requirements and costs. These factors include the remoteness of
existing pipeline infrastructure, particularly transmission pipeline; the rough
terrain, unstable soil, and icing in colder climates; the extensive water disposal
requirements associated with coalbed methane deposits; and the need for
extensive compressor capability to transport the low-pressure gas from
nonconventional deposits.

Infrastructure costs can be assessed for different locations and ultimately

parameterized in terms of a few key variables. Based on these variables, the costs
can be scaled for varying distances from transmission pipelines. Beyond specific
distances, development will no longer be viable.

Environmental Impact

Finally, it is important to evaluate the potential environmental impacts of

exploration and production. Our proposed approach is to classify lands
according to their existing environmental conditions. Individual indicators could
 xvii

track a spectrum of impacts, including air quality, water quality, soil conditions,
hazardous materials, protected species, migration patterns, vegetation habitats,
and land use changes. These conditions can be categorized and mapped to help
policymakers (a) understand the spatial distribution of sensitive environmental
areas within a total resource area and (b) given some acceptable level of
environmental impact, select which areas are best suited to development.

Oil and gas extraction activities are regulated to mitigate environmental impacts
associated with air, water, solid waste, and hazardous waste. Regulation,
however, does not necessarily prohibit projects with significant environmental
impacts. The potential environmental impacts of oil and gas extraction begin
with the construction of the drilling apparatus, service roads, and pipelines.
Solid waste, hazardous waste, and large volumes of wastewater are then
generated during construction, operation, and abandonment of the project, with
potential implications for regional air and water quality. There are also the rare
but potentially serious effects of accidental spills and blowouts. Such disruptions
could adversely affect complex ecosystems.

Potential environmental impacts may also extend beyond ecological resources to

include impacts on historical, anthropological, paleontological, and societal
resources. An additional potential impact with great public interest in scenic
areas such as the Rocky Mountains is the aesthetic impact on landscapes.
Introduction of machinery, development of roads, and the denuding of vegetated
landscapes to support extraction often carry aesthetic implications.

Comprehensive Assessments Will Add Value to

Policymaking
There are two primary motivations for conducting more-comprehensive
assessments of the viable resource. First, it will refocus and broaden the current
debate over access to federal lands. There continues to be much debate about the
amount of gas and oil resources in the Intermountain West that is subject to
various access restrictions. This debate focuses on the technically recoverable
resource and addresses only federal lands. Policymakers and the public would
benefit from a more comprehensive understanding of the broader implications of
economic and environmental constraints on the availability of federal and non-
federal resources. A debate about access restrictions alone does not illuminate
the discussion.

Second, it would be prudent to have a better understanding of the economic

costs, infrastructure requirements, and environmental impacts of increased
xviii

production as policymakers consider changes in energy policy and land

management practices.

At present, it is possible to make only a first-order estimate of the effect of some

of these viability criteria on the amount of gas that could be viable in the Rocky
Mountain Region. Estimates of economic recoverability in the Rocky Mountain
Region are uncertain and studies are ongoing. Figure S.2, based on data from the
U.S. Geological Survey economic analysis (Attanasi, 1998), indicates that the
economic recoverability criterion alone can substantially reduce the amount of
gas that is viable for extraction. At a wellhead price of $3.34 per thousand cubic
feet of gas (equivalent to $30 per barrel of oil), less than 20 percent of the
technically recoverable gas in the total Rocky Mountain Region is economically
recoverable, and only 5 percent of the technically recoverable gas in the Greater
Green River Basin is economically recoverable. Note that these results do not
reflect RAND’s analysis. In particular, the U.S. Geological Survey results reflect
technology current as of the early to mid-1990s and do not account for expected
future technology improvements. The costs of exploring and developing gas and
oil deposits in the Rocky Mountain Region are decreasing with technological
advances. Our economic analysis will use different data and assumptions and
may produce different results.

RANDMR1553-S.2
350
Results from U.S. Geological Survey economic analysis
300
Rocky Mountain Region
Gas resource (trillion cubic feet)

Greater Green River Basin

250

200

150

100

50
? ?

0
Technically Economically Economically Environmentally
recoverable recoverable at recoverable with acceptable
wellhead sufficient
infrastructure

Figure S.2—Potential Effect of Viability Criteria on Gas Resources

 xix

This report lays the foundation for determining the viable gas and oil resource.
The next step will be to apply this methodology to estimate the viable resource in
individual basins. RAND will begin this effort by analyzing the Green River
Basin. The analysis will specify the relationships among gas and oil deposits,
technological options, economic costs, infrastructure requirements,
environmental impacts, and other variables to allow for a comprehensive
assessment of the viable gas and oil resource.

Outputs will be presented both numerically and spatially (in the form of
Geographic Information System maps that show the amount and location of
resources that satisfy the various viability criteria). Such an output will provide a
useful way to characterize the viable resource in the context of many important
variables, such as deposit types, well locations, existing and needed
infrastructure, environmental sensitivities, topography, and other relevant
spatial attributes. This method of conducting and presenting resource
assessments would be a significant enhancement over present practice.
 xxi

Acknowledgments

The authors gratefully acknowledge Robert Hugman and E. Harry Vidas (Energy
and Environmental Analysis, Inc.), Peter Morton (The Wilderness Society and
University of Denver), and Donald Snyder (RAND) for formal reviews that
substantially improved this report. The report also benefited from discussions
with Emil Attanasi (U.S. Geological Survey), John Eagleton (El Paso Field
Services), Alan Wiggins (Conoco), and Blaise Pool and Paul Trousil (El Paso
Western Pipeline Group). We also thank John Godges for assistance in
organizing the report and Lisa Sheldone for technical support.
 xxiii

Abbreviations

ARI Advanced Resources International

BB billion barrels

bbl barrel

BLM Bureau of Land Management

Btu British thermal unit

CSU Controlled Surface Usage

EIA Energy Information Administration

EPA Environmental Protection Agency

EUR Estimated Ultimate Recovery

GIS Geographic Information System

mcf thousand cubic feet

MMS Minerals Management Service

NGL natural gas liquid

NPC National Petroleum Council

PGC Potential Gas Committee

psi pounds per square inch

SLT Standard Lease Terms

tcf trillion cubic feet

TL Timing Limitations

USGS United States Geological Survey

 1

1. Introduction

Background and Objectives

The amount and availability of gas and oil resources in the Intermountain
Western United States have become the subjects of increased interest in recent
years. Recent national resource assessments indicate that the Intermountain
West may be relatively rich in hydrocarbon resources, particularly natural gas
(National Petroleum Council, 1999; U.S. Geological Survey National Oil and Gas
Resource Assessment Team, 1995; Potential Gas Committee, 2001). Roughly two-
thirds of this resource is located under federal lands, some of which is subject to
access restrictions. This has motivated a number of recent studies addressing
access to gas and oil resources in the Intermountain West (Advanced Resources
International, 2000, 2001; National Petroleum Council, 1999; Barlow and Haun,
1994; DuVall, 1997). These studies conclude that substantial amounts of the
resources are inaccessible for production because of various legal restrictions on
access to federal lands.

These studies have elicited divergent responses from different sectors. Industry
has called for reduced restrictions. Stakeholders representing environmental and
recreation interests have called the studies flawed and incomplete (Morton, 2001;
Defenders of Wildlife, 2001). In particular, these stakeholders argue that the
impact of the legal access restrictions on the potential resource base is much
smaller than the studies claim, because much of the legally restricted resources
could never be developed anyway, as they are already inaccessible for other
reasons.

This debate has sparked renewed interest in the process of assessing

hydrocarbon fuel resources. In particular, the debate raises questions about the
ways that resources are defined and about the methods used to conduct resource
assessments. A large part of the difference of opinion regarding the impact of
legal access restrictions stems from the fact that the terms of the debate are
incompletely defined, poorly understood, and inconsistently used. A
fundamental problem permeating discussions of access to resources is that the
existing resource assessment methodologies appear not to be broad enough for
the purpose of making informed policy decisions regarding how much resources
are actually available at what cost and with what impact.
2

In general, the resource assessments entail gathering geologic, geophysical,

engineering, and other types of physical evidence in conjunction with using
various statistical methods to estimate the amount of crude oil and natural gas
that may become available in the future. Resource assessments do not represent
inventories of known quantities, but rather attempt to estimate the amount of as
yet uninvestigated and undiscovered resources that may be added to inventories
of proved reserves.

A critical aspect of resource assessments is the decision as to which resources to

count. Because the assessments focus on undiscovered resources, confidence in
their existence decreases and uncertainty grows as ever-more speculative
resources are considered. Thus, unbounded inclusion of the most speculative
resources serves little purpose for informing policy.

Most assessments attempt to report the “technically recoverable” resource,

meaning that amount estimated to be recoverable given some assumptions about
technical capabilities. In practice, the exact meaning and application of this
criterion is unclear. For example, the U.S. Geological Survey assessment includes
“resources in accumulations producible using current recovery technology,”
while the National Petroleum Council considers resources that will become
recoverable in the future given an assumed rate of technological advancement.
In each assessment, the application of this criterion is made through the
judgment of an analyst or committee.

Uncertainty aside, the criterion that a resource be technically recoverable is only

one of several that are relevant to understanding the available resource base.
From a policymaking perspective, several other factors—such as the costs
involved, the infrastructure requirements, and environmental impacts—play
equally important roles in determining how resources should be assessed. These
three factors reflect well-known and often cited issues that influence the
availability of gas and oil resources. Aspects of these issues have been addressed
to varying degrees (e.g., Vidas et al., 1993; Attanasi et al., 1998; National
Petroleum Council, 1999). However, they are generally not all considered in
resource assessment methodologies. Our goal is to use these factors as the basis
for additional criteria for conducting resource assessments. The resource that
satisfies this more complete set of criteria, here termed the “viable” resource,
more accurately approximates that which has a reasonable likelihood of actually
being developed and produced.

To improve the ability of policymakers to understand how much resources are

available and at what cost and impact, the Hewlett Foundation asked RAND to:
 3

• review the existing resource assessment methodologies and results

• evaluate recent studies addressing federal land access restrictions in the
Intermountain West
• consider a set of criteria that can be used to define the viable resource, with
particular attention on issues relevant to the Intermountain West
• develop a more comprehensive assessment methodology for the viable
resource
• employ this methodology to assess the viable resource in Intermountain
West basins.

This is an interim report that focuses primarily on the first three points.

Approach
The premise of our study is that it is the viable resource, rather than the
traditionally used technically recoverable resource, that is relevant to
policymakers regarding their decisions on gas and oil exploration and
development. The factors that determine viability include technical
recoverability, wellhead economics, infrastructure economics, and environmental
acceptability. The effect of these criteria on the available resource is shown
conceptually in Figure 1.1. Application of each criterion successively reduces the

RANDMR1553-1.1

Technically recoverable resource

Change in available
resource when including
wellhead costs

Change in available
Available supply

resource when also including

infrastructure costs

Change in available
resource when also including
environmental acceptability
ce
our
s
re
le
ab
Vi

Market price

Figure 1.1—Effect of Viability Criteria on the Available Resource

4

amount of resource available at a given price. The axes in Figure 1.1 are
purposely reversed relative to conventional economic supply curves. This choice
of using supply as the dependent variable emphasizes the fact that the amount of
resource available depends on economic and environmental considerations.
Note that the curve for environmental acceptability is conceptual only—we do
not propose to calculate environmental costs. Rather, we intend to estimate the
amount of the economically recoverable resource that can be extracted within a
given level of environmental impact. All of these criteria reflect well-known and
often cited issues that determine the availability of gas and oil resources.
However, though the issues are familiar, little progress has been made toward
including them in traditional resource assessments.

This report is organized around these different factors. Each section reviews
existing studies and results, evaluates the traditional methods, and proposes
alternative approaches. Section 2 presents a critical review of existing
hydrocarbon resource assessments. This review is important for understanding
the basic categories of gas and oil resources and the historical approaches used to
estimate their abundance. These estimates of technically recoverable resources
form the foundation upon which additional criteria can be applied. We review
the traditional methodologies and highlight the key assumptions. We discuss the
results in the context of the differing methods and assumptions made in each
assessment. Evaluations are presented for both the lower-48 states and the
Intermountain West.

Section 3 evaluates two important studies addressing legal access to gas

resources in the Intermountain West. Although we will not include legal access
among the criteria for our definition of the viable resource, recent debate about
access to Intermountain West resources centers largely on conclusions made in
these reports. As a result, it is important to evaluate these studies. One,
conducted as part of the recent National Petroleum Council study (National
Petroleum Council, 1999), addresses the entire Rocky Mountain Region. The
other, led by the Department of Energy (Advanced Resources International,
2001), focuses on the Greater Green River Basin in southwestern Wyoming and
northwestern Colorado. We examine the methods and assumptions used in each
study and summarize the results. We then present calculations illustrating how
some assumptions affect the impact of land access restrictions on the available
gas resource. We also identify additional improvements that could be made to
better evaluate the restricted resource.

Section 4 discusses existing approaches to incorporate economic considerations

into resource assessments. It focuses on the approaches used by the U.S.
Geological Survey (Attanasi, 1998) and in the Hydrocarbon Supply Model (Vidas
 5

et al., 1993) used by the National Petroleum Council. The method used by both is
to balance exploration and production costs with expected resource revenues to
determine if it is economically logical to proceed. After reviewing the methods
and results, we propose several improvements aimed at tailoring the methods to
account for costs specific to the Intermountain West.

Section 5 introduces the concept that resources must be supported by sufficient

infrastructure in order to be viable. The impetus for this criterion is that some of
the otherwise viable resource in the Intermountain West cannot be developed
without substantial increases in the existing pipeline and road infrastructure. For
resources to satisfy this criterion, they must either be located close to existing
infrastructure or be economically recoverable even after all the necessary
infrastructure augmentation costs are accounted for.

Section 6 presents an approach to incorporating environmental impacts into

resource assessments. We introduce this criterion to consider potential changes
in environmental conditions that could result from gas and oil exploration and
production. After discussing the potential impacts of the different steps in the
industrial process, we present a framework for considering overall
environmental impacts. The goal of this approach is to provide policymakers
with a tool to evaluate assumptions about varying environmental impacts that
could occur from gas and oil development, and to provide a framework with
which to identify areas for exploration and development in the Intermountain
West based upon assumed acceptable levels of environmental impact. Section 7
presents our conclusions.
6

2. Technically Recoverable Gas and Oil

Resources

It is impossible to measure the precise volume of natural gas, oil, or natural gas
liquid in deposits under the surface of the earth. Many deposits remain
undiscovered or unexplored. Different methodologies use a combination of
physical evidence (historical production trends, drilling data, seismic
information) and statistical methods to estimate the volumes of resources.
Numerous organizations conduct resource assessments with varying degrees of
complexity. For purposes of this analysis, we compare four assessments
conducted by the National Petroleum Council (National Petroleum Council,
1999), the U.S. Geological Survey (U.S. Geological Survey National Oil and Gas
Resource Assessment Team, 1995), the U.S. Minerals Management Service
(Minerals Management Service, 2000), and the Potential Gas Committee
(Potential Gas Committee, 2001).

The goal of these assessments is to estimate the potential supply of natural gas
and oil resources, which, combined with estimates of the proved reserves, make
it possible to appraise the nation’s long-range gas and oil supply. The
assessments do not necessarily reflect the amount expected to be actually
recovered. For example, in the Potential Gas Committee assessment, “No
consideration is given whether or not this resource will be developed; rather, the
estimates are of resources that could be developed if the need and economic
incentive exist.” Similarly, the U.S. Geological Survey assessment “makes no
attempt to predict at what time or what part of potential additions will be added
to reserves. For the National Assessment, resources and potential reserve
additions are evaluated regardless of political, economic, and other
considerations.”

These assessments estimate the “technically recoverable” resource, or the amount

judged to be recoverable given certain assumptions about technical capabilities.
In practice, the definition of the term “technically recoverable” is unclear and is
inconsistently applied among the different assessments. A large part of the
difference between existing resource assessments results from differing
assumptions as to what constitutes a technically recoverable resource.
 7

This section discusses the different methodologies and assumptions made in each
of the four assessments and consequently the different results, both for the U.S.
lower 48 states in general and for the Rocky Mountain Region in particular. The
section reveals that differences between assessments arise from a variety of
different sources, including varying interpretations of terms, differing
assumptions, and differences in the status of resource exploration, particularly in
the Intermountain West, at the different dates the assessments were conducted.

Different Definitions of Terms

At the outset, the existing resource assessments use different definitions of the
terms used to describe a resource. There is no universally accepted set of
definitions for these terms. For clarity, Figure 2.1 presents a hierarchy of terms
used to describe typical resource categories. The reliability of resource
assessments in each of the different categories decreases from left to right in the
figure as resource abundances become more speculative. The four assessments
cited above define many of these categories differently; details of these
differences are listed in Table A.2 in the Appendix. We use general terms to
describe each category below the figure.

RANDMR1553-2.1

Total “In Place” Resource

Technically Recoverable Resource Unrecoverable Resource

Discovered Undiscovered

Confirmed Unconfirmed

Cumulative Proved Reserve Possible Speculative

Production Reserves Appreciation Resources Resources

Increasing risk and decreasing availability of geologic and engineering data

SOURCE: Modified from Potential Gas Committee (2001).

Figure 2.1—Hierarchy of Categories to Describe Resources

8

Total “In-Place” Resource: The finite volume of the resource that exists on earth
before any production occurs.1

Technically Recoverable Resource: The portion of the total in-place resource that can
potentially be recovered given current or anticipated technology and a
qualitative consideration of expected economic conditions.2 This is the
estimate presented in most resource assessments.

Unrecoverable Resource: A major portion of the total in-place resource is

unrecoverable, including resources scattered in small deposits or in locations
where the resource is virtually impossible to recover with current or
anticipated technology.

Discovered Resource: The technically recoverable resource includes both

discovered and undiscovered resources. The discovered resource includes
both that which has been confirmed (cumulative production and proved
reserves) and unconfirmed (reserve appreciation).

Undiscovered Resource: The resource that may be discovered in new fields in

provinces that are currently productive or unproductive.

Cumulative Production: The historical cumulative volume of resources withdrawn

from producing reservoirs. Reliable historical records of U.S. production date
back to the 1930s, which are estimated to account for 95 percent or more of
total production to date.

Proved Reserves: Estimated quantities of a resource that current analysis and

geologic and engineering data demonstrate with reasonable certainty to be
recoverable in the future from known reservoirs under existing economic and
operating conditions. These resources are deemed to be confirmed, because
they are associated with producing reservoirs or have been extensively tested.

Reserve Appreciation: The resource expected to result from future extensions in

existing pools in known producing reservoirs. The resource is unconfirmed,
because, although they have been discovered, the extent of the pools have not
been completely defined.

________________
1Despite the name, estimates of the total in-place resource typically exclude more exotic
resources such as gas hydrates, geopressured-geothermal accumulations, and deep-earth gas.
2This economic consideration is ill-defined and of little relevance. Technically recoverable
resources are not subject to a rigorous economic analysis such as that described in Section 4 of this
report.
 9

Possible Resources: Undiscovered resources that exist outside known producing

fields but that are associated with productive formations in producing
provinces. Their existence is postulated by the projection of plays into less
explored areas of the same province under both similar and different geologic
conditions.

Speculative Resources: Undiscovered resources in formations or geological

provinces that have not yet proven productive.

In addition, each of these categories can contain conventional and nonconventional

resources. Conventional resources are typified by downdip water contacts and
can be extracted using traditional development practices. Nonconventional
resources, sometimes referred to as continuous deposits, include resources
contained in low-permeability sandstone (“tight sandstone” or “tight gas”),
shale, chalk, and coalbed methane.

Assessment Methodologies
Each assessment uses a different methodology to estimate reserve appreciation,
undiscovered resources, and nonconventional resources. In general, the U.S.
Geological Survey and U.S. Minerals Management Service assessments were
done at the play level using various simulation techniques, whereas the National
Petroleum Council and Potential Gas Committee were done at the region or
basin level, relying on individual estimators and expert panels using statistical
methods. An important distinction between the different methodologies is their
assumption regarding technology impacts. The U.S. Geological Survey assesses
only resources available using current recovery technology, while the National
Petroleum Council and Potential Gas Committee assessments assume a certain
rate of technology advancement. Further details of the specifications used in
each assessment, such as effective dates, commodities and resource categories
assessed, and areas covered, are listed in the Appendix.

Reserve Appreciation

The resource in a producing field is proved over a period of years or decades.

Only a portion of the particular resource in a field will be proved and available
for production in a given year. Estimated Ultimate Recovery (EUR) is the term
used to describe the total resource in a field, or the sum of cumulative production
plus proved reserves at any given date. In general, EUR increases over time. The
10

difference between the current EUR and ultimate total production from a field is
reserve appreciation.

The National Petroleum Council estimated reserve appreciation using a statistical

approach that assumes that successive drilling produces declining additions to
EUR. In other words, the largest resource pockets in a field are typically targeted
and found first, and then the producer moves onto successively smaller pockets.
By extrapolating the decline in recoveries, it is possible to estimate the total
reserves and, by subtraction of proved reserves, the reserve appreciation.

The U.S. Geological Survey and U.S. Minerals Management Service, in contrast,
relied on growth functions that related total field size (cumulative production
plus proved reserves) to field age. Field age is used as a proxy for the degree of
field development. The key assumptions here are that (1) the amount of growth
in any one year is proportional to the size of the field and that (2) this
proportionality varies inversely with the age of the field. To estimate reserve
appreciation, the growth functions projected growth out 80 years.

The Potential Gas Committee divides the potential resource into three categories:
probable, possible, and speculative. The probable category represents the further
development of fields that have already been discovered, including extensions
and new pool discoveries. This category is equivalent to reserve appreciation.3
An expert panel derived the estimates based on comparative factors of known
resources, either in the same geological province or in similar provinces. The
committee’s documentation states, “In its simplest form, the estimate of the
potential gas supply is derived by (1) estimating the volume of potential gas-
bearing reservoir rock, (2) multiplying this volume by a yield factor, and (3)
discounting to allow for the probability that traps and/or accumulations exist.”
Under this approach, the judgments and experience of the individuals are central
to the credibility of the estimate.

Undiscovered Conventional Resource

The National Petroleum Council estimate of undiscovered conventional resource

was derived through a consensus update of a resource assessment completed as
part of an earlier natural gas study (National Petroleum Council, 1992). The 1999
assessment update was based on discussions among people from industry,
government, and associations, published information dating back to 1992
(including the 1995 U.S. Geological Survey assessment), discovery and

________________
3Confirmed through personal communication with John Curtis, director of the Potential Gas
Agency (the body charged with completing the Potential Gas Committee estimate).
 11

production trends between 1992 and 1999, and unpublished company resource
estimates. The 1999 assessment did not involve extensive modeling or analysis,
but did include analysis of discovery trends by basin and depth interval and a
complete review of the deep-water Gulf of Mexico. The resource estimates were
revised where current industry expectations differed from the 1992 assessment.

In contrast, the U.S. Geological Survey and U.S. Minerals Management Service
based their assessments on detailed quantitative analyses. For example, the U.S.
Geological Survey first estimated the possible size, number, and type of resource
accumulations within a geologic play and the associated play risk. Play risk
expresses the probability of hydrocarbon occurrence based on charge, reservoir,
and trap. Plays were not assessed when the play probability was 10 percent or
less. Estimators then employed discovery-processing modeling, reservoir-
simulation modeling, play analogs, and spatial analyses. The assessments
evaluated both confirmed and unconfirmed (or hypothetical) deposits.

The Potential Gas Committee includes both possible and speculative resources in
its estimate of undiscovered resources. The general methodology used here was
identical to that described for reserve appreciation: An expert panel derived its
estimates based on comparative factors of known resources, either in the same
geological province or in similar provinces.

Nonconventional Resources

Nonconventional resources include tight sandstone, chalk, shale, coalbed

methane, and low-Btu gas. Among these, typically only the potential formations
that are well known and have had some exploration or development activity are
included in resource assessments.

The National Petroleum Council nonconventional resource assessment covered

tight sandstone, shale, and coalbed methane. As was the case with undiscovered
resources, the 1999 assessment was largely a consensus update of the 1992 study.
In the 1992 study, the nonconventional gas assessment was completed using a
consensus approach in which subgroups examined each type of nonconventional
resource. Data for the 1992 study were collected through a variety of means: for
tight sandstone, a confidential survey of operators in known formations; for
shale, 1980s data combined with subsequent company field experience; and for
coalbed methane, data from 20 coalbed methane basins, 8 of which included
detailed data. For the 1999 assessments, the study participants reviewed the
earlier estimates and compared them with actual discovery and production
trends since 1992. The existing National Petroleum Council assessments of coal-
bed methane were also compared with the 1995 U.S. Geological Survey
12

assessments and, in some cases, the USGS assessments were used. Adjustments
were made where it was felt the resource estimates were inconsistent with more
recent trends. However, no detailed survey of operators or other analytical
method was used for the 1999 study.

The U.S. Geological Survey defined two types of nonconventional deposits: (1)
tight sandstone, shale, and chalk and (2) coalbed methane. The methodology to
assess tight sandstone, shale, and chalk followed a four-step process of
mathematical modeling that incorporated no explicit consideration of
technological improvements or economics. Future expectations were based on
historical production and modeling patterns. The methodology to assess coalbed
methane was similar, but it also relied heavily on production forecasting using a
reservoir simulator.

The U.S. Minerals Management Service did not consider nonconventional

resources in federal offshore areas.

The Potential Gas Committee assessed only coalbed methane among the
nonconventional resources. Its assessment nominally includes some tight
sandstone and shale gas with its conventional resource estimate, but they are not
inventoried separately and thus cannot be compared with the other assessments.
The methodology used to estimate the coalbed methane resource was very
similar to the technique used by the committee for reserve appreciation and
undiscovered conventional resources, estimating the recoverable resource based
on assumptions about a range of recovery factors. Once again, the knowledge
and experience of the estimators were key to developing the assessment.

Results for the Lower 48 States

Table 2.1 compares the assessments of the technically recoverable resource for
the U.S. lower 48 states. The results for the main categories for natural gas are
displayed in Figure 2.2. In terms of conventional resources, the National
Petroleum Council’s estimate is the largest; the combined U.S. Geological Survey
and U.S. Minerals Management Service assessment is the smallest. In terms of
nonconventional resources, the Potential Gas Committee appears pessimistic,
because it includes the fewest resource categories.

The variations between the assessments result from differences in insight into the
size and distribution of the resource base, assumptions about the effect of current
 13

Table 2.1
Comparison of Lower-48 Technically Recoverable Resource Assessments (as of
December 31, 2000)a

Natural Gas (tcf) Oil (BB)

NPC USGS/MMS PGC USGS/MMS
Conventional resources
Reserve appreciation b 272 291 170 i 59
New fieldsc 620 408 572 i 77
Subtotal 892 699 742 136
Nonconventional resources
Tight sandstone 218 280 f –g
Devonian shale 50 -g –g
}2
Coalbed methane 70 45 98
Other 13 –h –h
Subtotal 351 d 325 e 98 2
Total potential resources 1,243 1,014 840 138
Proved reserves 168 168 168 21
Total future supply 1,411 1,182 1,008 159
Cumulative production 936 936 936 172
Total ultimately recoverable 2,347 2,118 1,944 331
aEach of the resource assessments was dated using a different end point. The NPC, USGS, MMS,
and PGC assessments were dated 1/1/1998, 1/1/1994, 1/1/1999, and 12/31/2000, respectively. All
of the assessments have been adjusted to reflect an end date of 12/31/2000.
bReserve appreciation resources are assumed to account for 50 percent of gas and 70 percent of
oil production plus transfers to proved reserves between assessment end point and 12/31/2000.
Reported reserve appreciation values were reduced by 33 tcf, 61 tcf, and 7.8 BB for NPC gas,
USGS/MMS gas, and USGS/MMS oil, respectively, to reflect this assumption.
c New field resources are assumed to account for 20 percent of gas and 30 percent of oil
production plus transfers to proved reserves between assessment end point and 12/31/2000.
Reported new field resource values were reduced by 13 tcf, 25 tcf, and 3.4 BB for NPC gas,
USGS/MMS gas, and USGS/MMS oil, respectively, to reflect this assumption.
dNonconventional resources are assumed to account for 30 percent of gas production plus
transfers to proved reserves between NPC end point and 12/31/2000. Reported nonconventional
resource values were reduced by 20 tcf to reflect this assumption. This was distributed as 12.6 tcf to
tight sandstone, 4 tcf to coalbed methane, 2.6 tcf to shale, and 0.8 tcf to Other.
eNonconventional resources are assumed to account for 30 percent of gas production plus
transfers to proved reserves between USGS end point and 12/31/2000. Reported nonconventional
resource values were reduced by 37 tcf to reflect this assumption. This was distributed as 31.9 tcf to
tight sandstone and 5.1 tcf to coalbed methane.
f Includes tight sandstone, shale, and chalk.
gNot reported as a separate category.
h Not assessed.
iIncludes tight sandstone and shale.
NOTE: tcf = trillion cubic feet, BB = billion barrels.

and future technology on resource recovery, the estimator’s judgment, and

variations in the resource categories included in each assessment. Under
conventional resources, for example, the Potential Gas Committee estimates the
14

RANDMR1553-2.2
1,600
NPC
1,400
USGS/MMS
1,200 PGC
Trillion cubic feet

1,000
Conventional
800

600

400

200

0
Reserve New fields Nonconventional Proved Total future
appreciation reserves supply

Figure 2.2—Comparison of Lower-48 Technically Recoverable Natural Gas Resource

Assessments

lowest potential for reserve appreciation, but relatively high potential for
undiscovered conventional resources. These results reflect differing assumptions
about the remaining resource in existing fields and the impact of new
technology.

In contrast, the low estimate for the new field resource from the U.S. Geological
Survey and U.S. Minerals Management Service assumes that resources are
generally more mature. In addition, the U.S. Geological Survey assessment
emphasizes established plays and places little resource in unconfirmed plays.
The assessment also reflects the less advanced state of drilling technology at the
time the assessment was conducted. Onshore drilling technology has improved
substantially since the U.S. Geological Survey completed its onshore assessment
in 1995.

The National Petroleum Council assessment, being the most recent, shows the
highest amount of coalbed methane resource. Spurred by federal tax credits
enacted in the early 1980s, development of coalbed methane has been increasing
rapidly in the past two decades. The higher coalbed methane estimate in the
National Petroleum Council assessment simply reflects the newness of
information about this particular resource.
 15

Results for the Rocky Mountain Region

The primary focus of this analysis is the Rocky Mountain Region. For the
purposes of comparison between assessments, we use the National Petroleum
Council’s definition for the Rocky Mountain Region, which includes their
Williston Basin, Overthrust Belt, Rocky Mountain Foreland, and San Juan Basin
assessment provinces, as shown in Figure 2.3. These provinces include the entire
states of Colorado, Wyoming, Montana, and North Dakota and major portions of
Arizona, New Mexico, Utah, South Dakota, and Nebraska. The U.S. Geological
Survey and Potential Gas Committee delineate a larger number of assessment
provinces, allowing us to select provinces to closely match the National
Petroleum Council assessment regions.

There are a large number of plays within the area experiencing varying levels of
activity. The greatest resource potential in the Rocky Mountain Region is
concentrated in the Uinta/Piceance Basin in northwestern Colorado and
northeastern Utah, the Greater Green River Basin in southern Wyoming, the
Powder River Basin in northern Wyoming, the San Juan Basin in northwestern

RANDMR1553-2.3

WL ME
OV

FR

SJB

WL—Williston Basin
OV—Overthrust Belt
FR—Rocky Mountain Foreland
SJB—San Juan Basin

Figure 2.3—Rocky Mountain Resource Regions

16

Mexico, the Wind River Basin in central Wyoming, and the Montana Folded Belt
in western Montana.

Table 2.2 compares the Rocky Mountain Region resource assessments for the four
geologic provinces shown in Figure 2.3. This table excludes the federal offshore
assessment from the U.S. Minerals Management Service, which is irrelevant in
the Rocky Mountain Region. The results for the main categories for natural gas
are displayed in Figure 2.4.

The focus of our comparison is the potential gas resource. Once again, the
National Petroleum Council is the most optimistic regarding both conventional
and total resources. The U.S. Geological Survey estimates the least conventional
resources but greatest nonconventional resources. Again, the Potential Gas
Committee estimate for nonconventional resources includes only coalbed
methane.

Nonconventional resources are particularly important in the Rocky Mountain

Region. As Figures 2.5 and 2.6 show, coalbed methane and tight sandstone
constitute a major portion of the total resource in the Rocky Mountain Region.
Tight sandstone, in fact, accounts for 37 to 65 percent of the total resource in the
region (Table 2.2), so excluding it distorts any comparison of the total potential
resource.

RANDMR1553-2.4
400
NPC
350 USGS
300 PGC
Trillion cubic feet

250

200
Conventional
150

100

50

0
Reserve New fields Nonconventional Proved Total future
appreciation reserves supply

Figure 2.4—Comparison of Rocky Mountain Region Technically Recoverable Natural

Gas Resource Assessments
 17

Table 2.2
Comparison of Rocky Mountain Region Technically Recoverable Resource
Assessments (as of December 31, 2000)a

Natural Gas (tcf) Oil (BB)

NPC USGS PGC USGS
Conventional resources
Reserve appreciation b 34 6 41j 10.6
New fieldsc 107 24 83j 4.9
Subtotal 141 30 124 15.5
Nonconventional resources
Tight sandstone 132 195 f –g
Devonshire shale 0 –g –g
}1.0
Coalbed methane 38 24 59
Other 0 –h –h
Subtotal 170 d 219 e 59 1.0
Total potential resources 311 249 183 16.5
Proved reserves 49 49 49 2.3
Total future supply 360 298 232 18.8
Cumulative productioni 99 99 99 NA
Total ultimately recoverable 459 397 331 NA
aEach of the resource assessments was dated using a different end point. The NPC, USGS, and
PGC assessments were dated 1/1/1998, 1/1/1994, and 12/31/2000, respectively. All of the
assessments have been adjusted to reflect an end date of 12/31/2000.
bReserve appreciation resources are assumed to account for 50 percent of gas and 70 percent of
oil production plus transfers to proved reserves between assessment end point and 12/31/2000.
Reported reserve appreciation values were reduced by 10 tcf, 16 tcf, and 1.2 BB for NPC gas, USGS
gas, and USGS oil, respectively, to reflect this assumption.
c New field resources are assumed to account for 20 percent of gas and 30 percent of oil
production plus transfers to proved reserves between assessment end point and 12/31/2000.
Reported new field resource values were reduced by 4 tcf, 6.6 tcf, and 0.5 BB for NPC gas, USGS gas,
and USGS oil, respectively, to reflect this assumption.
dNonconventional resources are assumed to account for 30 percent of gas production plus
transfers to proved reserves between NPC end point and 12/31/2000. The nonconventional resources
were reduced by 6.0 tcf to reflect this assumption. This was distributed as 4.6 tcf to tight sandstone
and 1.4 tcf to coalbed methane. Data for shale and other were not available on a regional basis.
eNonconventional resources are assumed to account for 30 percent of gas production plus
transfers to proved reserves between USGS end point and 12/31/2000. The nonconventional
resources were reduced by 9.7 tcf to reflect this assumption. This was distributed as 8.6 tcf to tight
sandstone and 1.1 tcf to coalbed methane.
f Includes tight sandstone, shale, and chalk.
gNot reported as a separate category.
h Not assessed.
iRAND estimate.
jIncludes tight sandstone and shale.
NOTE: tcf = trillion cubic feet, BB = billion barrels, NA = not available.

The U.S. Geological Survey assessment for conventional resources is quite low
and may be inconsistent with recent production rates. Between 1994, the date of
the U.S. Geological Survey assessment, and 2000 there was about 20 trillion cubic
18

RANDMR1553-2.5

ME

Powder
Wind River River
Northern
Appalachian
Green River
Forest
Uinta-Piceance City Illinois

Raton
Cherokee
San Juan Central
Appalachian
Arkoma

Warrior

Figure 2.5—Basins Containing Coalbed Methane Deposits

RANDMR1553-2.6

ME

Wind River

Green River
Denver
Uinta
Piceance
Anadarko
Raton

San Juan Appalachian

Arkoma

Permian
East
Texas Arkla

Texas Gulf Coast

Figure 2.6—Basins Containing Tight Sandstone Gas Deposits

 19

feet (tcf) of natural gas production in the Rocky Mountain Region, with
production rates increasing substantially since 1997 (Energy Information
Administration, 2001). While much of the recent focus of activity in the Rockies
is on coalbed methane, there is still substantial conventional resource activity.
This high and increasing production activity suggests that substantial resource
remains and that the U.S. Geological Survey conventional resource estimate,
while consistent with assumptions at the time it was made, may not reflect recent
discovery trends, reserve appreciation, and technical advances.

The case for coalbed methane is similar. The U.S. Geological Survey estimate is
substantially lower than the others. Initially spurred by section 29 federal tax
credits and intensified by relatively higher gas prices in recent years, there has
been a great deal of coalbed methane exploration and development activity in the
Rocky Mountain Region. Over this time, the assessments of the resource have
generally expanded. Preliminary results from the new U.S. Geological Survey
assessment, for example, show a 14-fold increase in the coalbed methane
resource in the Powder River Basin (Energy Information Administration, 2002).

The higher value of the tight sandstone resource in the U.S. Geological Survey
assessment appears to reflect its earlier effective date. As more has been learned
from actual exploration and production activity in recent years, some resource
assessments have gradually reduced their expectations for the tight sandstone
resource.

Gas production in the Rocky Mountain Region grew from 1.4 tcf in 1986 to
almost 3.7 tcf by 2000, accounting for over 80 percent of the total growth in
lower-48 natural gas production during this period. The growth occurred
despite lease restrictions, difficult terrain, and constraints on take-away pipeline
capacity in the region.

Although the assessments vary, they suggest that the Rocky Mountain Region
has the potential to remain a major contributor to U.S. energy supply for many
years to come. However, the very high proportion of nonconventional resources
in the region introduces a higher than normal degree of uncertainty on the
amount of that resource that is ultimately recoverable.

Resource Assessment Evolution

It is important to reiterate that resource assessments are highly uncertain. By
definition, assessments exclude major portions of potential resources because of
assumptions about technological improvements, economics, and other factors.
By and large, assessments only consider those resources that are familiar to the
20

energy industry. That does not mean that the excluded resources are necessarily
unknown, only that an implicit assumption is made that they will not be
recoverable in the foreseeable future. However, as illustrated in Figure 2.7 (from
Holtberg, 2000), resource assessments have grown with time. This increase
results primarily from two causes: increased understanding of the resource
(gained from new exploration) and increased ability to recover the resource
(resulting from technological improvements).

For example, the deep waters of the Gulf of Mexico were often called a “dead
sea” during the early to mid-1980s, because it was felt that the resource was
inaccessible. As a result, the deep-water resource was often totally excluded or
underassessed in resource assessments. With advances in technology, the Gulf is
now one of the fastest growing areas of exploration and production. Not only is
the resource in the Gulf now assessed, but the estimates of the size of the
resource have grown rapidly over the last decade. Another example is the
coalbed methane resource in the Rocky Mountain Region. The resource was
known to exist for decades, but an implicit assumption was made that it would
never be recoverable due to technological and economic limits. In 2000, roughly
1.3 tcf of natural gas was produced from coalbed methane basins in the Rocky
Mountain Region (up from about 0.5 tcf in 1985). Coalbed methane is now

RANDMR1553-2.7
2,800

2,400
Gas resource assessment (tcf)

2,000

1,600

1,200

800

400

0
1975 1980 1985 1990 1995 2000
Year

Figure 2.7—Historical Gas Resource Estimates

 21

included in resource assessments, and the amount assessed is rapidly being

revised upward as experience grows.
22

3. Legal Access To Resources in the

Intermountain West
Much of the current debate over resource development in the Intermountain
West stems from restrictions on federal land use and their implications for
accessing gas and oil resources. While interest in access restrictions has existed
for some time, recent efforts to evaluate these restrictions and their impact have
been spurred largely by the Energy Policy and Conservation Act of 2000, which
directs federal land management agencies to assess the energy potential of public
lands and identify impediments to its development. As a result, considerable
effort is being expended on quantifying the amount of gas and oil resources
underlying federal lands that is subject to various forms of access restrictions.
Two important studies addressing gas resource access on federal lands in the
Intermountain West have been completed recently. One, conducted as a part of
the National Petroleum Council's 1999 natural gas report (National Petroleum
Council, 1999), addressed the Rocky Mountain Region, while the other, prepared
for a multi-agency audience led by the Department of Energy (Advanced
Resources International, Inc., 2001), focused on the Greater Green River Basin.

These studies conclude that substantial amounts of gas resources in the

Intermountain West are inaccessible or accessible with restrictions as a result of
various types of federal lands access restrictions. These restrictions, formally
known as lease stipulations, are conditions accompanying a lease, usually for
environmental protection reasons (but also for historical and cultural reasons),
that dictate where, how, and when drilling activities may be conducted. The
results of these studies have led industry to call for reduced restrictions and to
“continue the work begun with this [National Petroleum Council] study to
inventory existing information on the resource base in the Rocky Mountains and
analyze the impact of access restrictions.” Work is currently under way to assess
access restrictions in a number of Rocky Mountain basins.

In their effort to identify impediments to energy development, these studies

make some important assumptions that have implications for the impact of
federal land access restrictions on the accessibility of gas resources. Below, we
identify areas in which the approach could be enhanced and illustrate how some
simple modifications in the approach influence the outcome of the analysis.

While efforts to quantify resources subject to access restrictions may be

important, they bypass the more fundamental question of how much viable
 23

resource is present in the areas being considered. It is of limited value to

estimate the amount of technically recoverable resource that is subject to legal
access restrictions because much of this resource will remain inaccessible for
other reasons. Nonetheless, because of the debate prompted by these studies, the
ongoing efforts to conduct this type of analysis throughout the Intermountain
West, and the potential for the results of these efforts to influence policy
decisions regarding access to federal lands, it is important to evaluate this work.

Methodology
The methodology used in the Rocky Mountain and Greater Green River Basin
studies is similar. The first step entails collecting lease stipulation information
from the agencies with jurisdiction over the federal lands in the study area. Over
80 percent of the federal land in the Rockies is managed by the Bureau of Land
Management, the Forest Service, and the Bureau of Indian Affairs. The
remaining land is split among a number of classifications and agencies, including
Wilderness Areas, the National Park Service, the Fish and Wildlife Service,
National Recreation Areas, and several others. Geographic Information System
(GIS) files of federal and Indian lands, obtained from the Bureau of Land
Management, were used to inventory the acreage within the study areas. The
access status of federal lands was then identified from maps showing the
environmental stipulation areas as well as descriptions of the stipulations in each
of the areas.

The Greater Green River Basin study lists 108 different lease stipulations
collected from Bureau of Land Management and Forest Service offices in the
study area. The stipulations specify the terms of protection of land attributes
(e.g., cannot disturb elk calving). With the help of federal agencies, analysts
interpreted the area that the stipulations would cover and the effects of the
stipulations on access for drilling. Table 3.1 lists the stipulation categories and
their effects on gas drilling, as used in both the Rocky Mountain and Greater
Green River Basin studies, as well as the access levels that the National
Petroleum Council assigned to the different stipulation categories in the Rocky
Mountain study.

Both the Rocky Mountain and Greater Green River Basin studies use townships
(six miles by six miles) as the basic unit of land measurement. Where multiple
stipulations apply to one location, the most restrictive was assigned to that
location. Where multiple timing limitation stipulations specifying different parts
of the year apply to a given location, the location was assigned the cumulative
time limitation of all applicable stipulations. In the Greater Green River Basin
24

Table 3.1
Classification of Lease Stipulations and Effect on Gas Drilling

Rocky Mtn.
Stipulation Category Effect on Drilling Access Level
No Access (statutory) No drilling
No Access No drilling
(administrative)
(includes No Leasing
and No Surface
Occupancy)
Timing limitations Precludes drilling No Access
during portions of
the year
> 9 months/year

6 - 9 months/year High Cost

3 - 6 months/year
< 3 months/year Standard Lease
Terms
Controlled Surface Varied, may be High Cost
Usage mitigated
Combinations of
Controlled Surface
Usage and Timing
Limitations
Standard Lease Terms No restrictions Standard Lease
Terms
SOURCES: National Petroleum Council (1999); Advanced Resources International
2001).

study, the resources within a township are allocated in proportion to the area
covered by each of the stipulation categories.

In the Rocky Mountain study, the lease stipulation categories were estimated by
extrapolating the results of analyses of six “calibration areas.” The calibration
areas consisted of three Bureau of Land Management districts (Pinedale, Price,
Rock Springs) and three Forest Service districts (Bridger-Teton, Manti-La Sal,
Uinta). These areas total 14.8 million acres of federal land, or 10 percent of the
federal land in the Rockies, and contain about 30 percent of the gas resources in
the study area. These calibration areas were chosen because of their high
resource levels and industry activity.

Lease stipulation categories for the Bureau of Land Management and Forest
Service lands in the complete Rocky Mountain Region study area were assigned
by applying the apportionment determined from the calibration areas. Of the
remaining federal lands in the region, the lands of the National Park Service, Fish
and Wildlife Service, National Recreation Areas, and Wilderness Areas were
classified as No Access. Apportionment of lease stipulation categories to Bureau
 25

of Reclamation, Department of Defense, Department of Energy, Indian, and other

federal lands was made by educated guesses by the National Petroleum Council
Policy Group.

The final step was to estimate the impact of the lease stipulations on the amount
of resource available. For the National Petroleum Council Rocky Mountain
study, gas resources were assigned to one of three access levels: No Access, High
Cost, and Standard Lease Terms (Table 3.1). Resources in areas subject to
stipulations that restrict drilling for nine months per year or more were classified
as No Access based on the typical drilling times required in the majority of areas.
Similarly, areas subject to stipulations that restrict drilling for three months per
year or less were classified as Standard Lease Terms. Areas subject to
stipulations that restrict drilling from three to nine months per year were
classified as a “gray area” in which resources are available, but only with a
penalty of higher cost and delayed development.

The Greater Green River Basin study did not assign access levels. Results were
presented simply as the amount of gas resources underlying federal lands in each
of the stipulation categories shown in Table 3.1. However, Advanced Resources
International also outlined a more complex method for estimating the impact of
the lease stipulations on resource access in the Greater Green River Basin based
on drilling opportunities. For each township, the time required to drill a well
was compared with the time allowed to drill to determine whether drilling could
proceed. The analysts first assumed that all wells would be drilled to a depth
half-way to the Precambrian basement rocks (this was intended to approximate
the depth to the lower Cretaceous section, the location of much of the tight
sandstone). Then the analysts presented drilling depth versus time relationships
for wells of 10,000, 14,000, and 18,000 feet in depth. Based on these relationships
(and assuming that drilling must be completed in one season), wells that are
14,000 feet deep or less are precluded only in locations in which cumulative
Timing Limitations amount to more than nine months per year. Wells deeper
than 14,000 feet are precluded in areas restricted for more than six months per
year. Using GIS to correlate the locations of gas plays, Timing Limitations, and
the depth to the basement (used to estimate well depths), the analysts then
indicated for each township whether or not industry would be able to drill at
least one well in a season.

The Greater Green River Basin study does not explicitly report the amount of
resources underlying townships in which drilling is precluded. It does, however,
present a map showing the drilling opportunity status (possible or precluded) of
each township, as well as the resource amount under each township. From these
26

we were able to estimate the amount of restricted resource, which we present

below.

Results
The results of the access restriction studies are presented in Tables 3.2–3.4. Table
3.2 shows the unproved gas resources in the Rocky Mountain Region as a
function of access level. The results show that approximately 60 percent of the
unproved gas is available under Standard Lease Terms, with the remaining 40
percent available at High Cost or Inaccessible.

Table 3.3 shows the amount of undiscovered conventional and nonconventional

gas resources underlying federal lands in the Greater Green River Basin in each
lease stipulation category. Compared to the entire Rockies, more resource is
subject to access restrictions in the Greater Green River Basin, with 29.5 percent
closed to development and 38.5 percent available with restrictions; 32 percent is
available under Standard Lease Terms.

Based on the previously described drilling opportunities approach, however, we

find that 66 percent of the gas in the Greater Green River Basin is accessible
(Table 3.4). This amount is only slightly less than the combined total of gas
subject to Standard Lease Terms and available with restrictions (70.5 percent,
Table 3.3). This result indicates that nearly all of the gas in the Greater Green
River Basin in areas subject to Timing Limitations and Controlled Surface Usage
is accessible for production using standard drilling operations. Given the rather
simple assumptions regarding drilling time and drilling depth in the drilling
opportunities analysis, the exact amount of accessible gas is highly uncertain.
Nonetheless, this exercise demonstrates that land access restrictions do not
necessarily prohibit resource extraction, even when using standard-cost, single-
season drilling techniques.

The results summarized in Tables 3.2–3.4 indicate that moderate to substantial

fractions of the gas in the Rockies are subject to access restrictions. However,
care should be used in interpreting these studies. For example, the access
restrictions in the Greater Green River Basin shown in Table 3.3 represent only
the resources underlying federal lands. Non-federal lands are generally
considered accessible to industry. This distinction has generated confusion about
the results of this study. Using the total land as a basis would reduce the fraction
of resources subject to federal lease stipulations and associated access
restrictions.
 27

Table 3.2
Reported Natural Gas Access Restrictions in the
Rocky Mountain Region

Unproved Gas
Resourcesa
Access Level tcf %
No Access 29.2 8.6
High Cost 108.0 31.7
SLT 203.0 59.7
Total 340.2 100.0
SOURCE: National Petroleum Council
(1999).
aWhile the National Petroleum Council report
text suggests that these results are for gas resources
on federal lands only (National Petroleum Council,
1999, v. II, p. S-20), comparison with the raw data in
Appendix J and discussions with H. Vidas and
B. Hugman indicate that these results reflect both
federal and nonfederal lands.
NOTE: tcf = trillion cubic feet; SLT = Standard Lease
Terms.

Table 3.3
Reported Natural Gas Access Restrictions in the
Greater Green River Basin

Undiscovered Conventional and

Nonconventional Gas on Federal
Lands
Access Level Stipulation Category tcf %
No Access (Statutory) 1.4 1.2
Closed to
development No Access 33.0 28.3
(Administrative) and
No Surface Occupancy
Subtotal 34.5 29.5
Available with restrictions TL > 9 mos. 0.50 0.4
TL 6 to 9 mos. 20.3 17.4
TL 3 to 6 mos. 21.5 18.4
TL < 3 mos. 0.86 0.7
CSU 1.8 1.5
Subtotal 44.9 38.5
SLT 37.4 32.0
Total 116.8 100.0
SOURCE: Advanced Resources International (2001).
NOTE: tcf = trillion cubic feet, TL = Timing Limitations, CSU = Controlled Surface
Usage, SLT = Standard Lease Terms.
28

Table 3.4
Natural Gas Drilling Opportunities in the
Greater Green River Basin

Undiscovered
Conventional and
Nonconventional Gas
on Federal Lands
Access Level tcf %
Inaccessible 40.2 34
(drilling precluded)
Accessible 76.6 66
(drilling possible)
Total 116.8 100
SOURCE: Advanced Resources International (2001).
NOTE: tcf = trillion cubic feet.

In addition, it is important to understand the resource basis upon which the

access restrictions are applied. As discussed in Section 2, hydrocarbon resources
are classified into many different categories, including proved reserves,
undiscovered conventional reserves, nonconventional reserves, and reserve
appreciation. The Rocky Mountain Region contains substantial amounts of gas
in all of these categories. The access restriction results presented in the studies,
however, do not include proved reserves or, in the case of the Greater Green
River Basin study, reserve appreciation. The effect of excluding proved reserves
from the basis is to overestimate the impact of access restrictions because proved
reserves are not subject to lease stipulations and hence fall into the Standard
Lease Terms category. Excluding reserve appreciation has a similar effect.
Reserve appreciation to existing fields is generally subject either to Standard
Lease Terms or to some degree of restriction but is generally considered a
resource that is available to industry.

To evaluate access restrictions in the context of the total gas resource in the Rocky
Mountain Region, we have recast the lease stipulation and access restriction
results according to a basis that includes all lands and all gas resources and
reserves in the study areas. For the Rocky Mountain Region, Figure 3.1 shows a
comparison between the results when including only unproved resources (as
listed in Table 3.2) and when adding 35.1 tcf of proved reserves (National
Petroleum Council, 1999) to the Standard Lease Terms category. The inclusion of
proved reserves results in a relatively small decrease (<4 percent) in the fraction
of gas that is inaccessible or available at increase cost.1

________________
1The effect on the distribution of access levels of including proved reserves would be greater
when considering only the economically recoverable resources, because proved reserves are by
definition all economically recoverable.
 29

RANDMR1553-3.1

No Access No Access
8% (29 tcf) 8% (29 tcf)

High Cost
SLT High Cost 29%
SLT
60% 32% (108 tcf)
63%
(203 tcf) (108 tcf) (238 tcf)

(a) Unproved resources (b) Unproved resources

plus proved reserves

Figure 3.1—Effect of Including Proved Reserves on Access Levels in the Rocky

Mountain Region

In the case of the Greater Green River Basin, adjusting the basis has a much
larger effect on the relative proportion of access-restricted land. Figure 3.2 shows
a comparison between the distribution of access levels when including only
undiscovered conventional and nonconventional gas underlying federal lands
(as reported in Table 3.3) and when adding proved reserves, reserve
appreciation,2 and gas resources underlying non-federal lands to the Standard
Lease Terms category. This adjustment results in a large (24 percent) decrease in
the fraction of gas that is inaccessible or available with restrictions.

An additional important issue that is not addressed in the existing studies is that
access restrictions have practical impact only on resources that are actually
recoverable. This means that, in contrast to the technically recoverable resource
estimate, the basis upon which the access restrictions are relevant is the viable
resource estimate. The viable resource estimate considers factors in addition to
technology and is smaller than the technically recoverable estimate. Thus, when
considering the viable resource, the amount of resource that is subject to access
restrictions will be less than that reported for the technically recoverable
resource.

While the distinction between the technically recoverable and viable resource
basis is important when discussing the absolute amount of restricted resource,

_________________
2Gas from reserve appreciation divided between Restricted Access and SLT (see Figure 3.2
notes).
 30

RANDMR1553-3.2

Restricted
Access
38% (45 tcf)
SLT
57%
(111 tcf)
Restricted
Access
SLT 26%
32% (37 tcf) (52 tcf)

No Access
30% (35 tcf) No Access
17% (35 tcf)

(a) Undiscovered conventional (b) Total resources plus

and nonconventional proved reserves on all lands
resources on federal lands

NOTES:
SLT = Standard Lease Terms; tcf = trillion cubic feet.
SLT category in (b) includes 42.7 tcf of gas on non-federal lands (ARI, 2001), 26.4 tcf proved
reserves, and 4.6 tcf reserve appreciation.
Restricted Access category in (b) includes 6.8 tcf reserve appreciation.
Proved reserves and reserve appreciation are estimated for individual plays from the difference
between undiscovered conventional or nonconventional gas (ARI, 2001, Table 2) and total gas
(NPC, 1999, Appendix J, Table 9), assuming that reserve appreciation applies to conventional plays
only and equals the amount of undiscovered conventional reserves, consistent with U.S. Geological
Survey data for Rockies in Table 4.1.
Gas from reserve appreciation in (b) (11.4 tcf) is divided between Restricted Access (60 percent)
and SLT (40 percent), according to NPC estimates (NPC, 1999).

Figure 3.2—Effect of Including Non-Federal Lands and All Gas Resources on Access
Levels in the Greater Green River Basin

estimates of the potential impact of access restrictions on gas supply and prices
do not depend on this distinction. These effects depend only on the fraction of
total resource that is subject to restrictions. Thus, the calculations presented by
the National Petroleum Council (1999) illustrating the effect on supply and prices
of increased and decreased access restrictions remain valid despite the fact that
they are based on the technically recoverable resource base.

Beyond the resource base upon which the access restrictions are applied, there
are other aspects in the existing access restriction analyses that could be
improved upon. These include assumptions about restriction exemptions,
technology, infrastructure, and restriction workarounds. These assumptions,
along with issues with the resource basis discussed above, lead us to make the
following recommendations.
 31

Recommendations
• Consider Only the Restricted Portion of the Viable Resource
Access restrictions effectively apply only to resources that could be extracted
were the restrictions not in place. Thus, it is important to consider not only
the technically recoverable resource, but the economically recoverable and
infrastructure-supported resource when discussing legal access restrictions.
• Evaluate Access Restrictions in the Context of All Resources
Access restrictions should be evaluated in the context of all resources
available to industry. Both studies exclude proved reserves in their
published estimates of the accessible resource base; these reserves are
substantial (14 to 21 percent of the gas in the Rockies; Table 2.2) and not
subject to access restrictions. In addition, the Greater Green River Basin
study includes only federal lands in the resource base, despite the fact that
over 25 percent of the gas in the basin lies under non-federal lands, which are
not subject to access restrictions.
• Account for Stipulation Exemptions
Federal land management agencies determine which stipulations apply to a
given lease on a case-by-case basis and typically record exemption requests
and grants. The proportion of stipulations that are exempted can therefore
be considered when estimating their impact on access to gas and oil
resources in the Rockies. The Greater Green River Basin study finds that
exemptions for three important types of stipulations (big game, raptors, and
sage grouse) are granted in 20 to 30 percent of cases. These exemptions are
included in the sensitivity case (a re-analysis with more liberal assumptions).
Continuing efforts should include exemptions in the primary analysis.

• Account for Directional Drilling and Other Low Environmental Impact

Technologies
Technologies that allow access to resources without violating the stipulations
will reduce the amount of restricted resource. One important example is
directional drilling. Despite the common use of directional drilling to reach
horizontal distances of 18,000 feet in Alaska (National Petroleum Council,
1999), the existing analytical approach considers a horizontal reach of less
than 1500 feet and only in the sensitivity case analysis. In principle,
directional drilling can be used to recover resources in regions where access
is available on the scale of a few miles. Based on the distribution of
accessible and restricted lands in the Greater Green River Basin (Advanced
Resources International, 2001), a substantial fraction of nominally
inaccessible gas may be recoverable with directional drilling.
Another random document with
no related content on Scribd:
back
back
back
back
back
back
back
back
back
back
back
back
back
back
back
back
back
back
back
back
back