RAND Report Demonstrates New Method of Assessing Natural Gas and Oil Resources

A RAND report issued today recommends a new and more comprehensive approach that land management agencies and energy consumers can use to better evaluate proposals for future natural gas and oil development on public lands.

The new approach for the first time includes economic and environmental factors to more completely describe potential energy resources in terms of production costs and potential environmental concerns on associated lands. This can help federal and state land managers and policymakers at all levels set priorities for development and strategically plan for long-term resource use.

The RAND report says that when evaluating the feasibility of energy resource development on a regional scale, public land management agencies should consider the costs of exploring for and extracting natural gas and oil, the costs of transporting it to utilities and other customers, and the characteristics of the overlying lands that may help to understand potential impacts of resource development.

The report illustrates how the new approach works by applying it to the Greater Green River Basin in the Rocky Mountains.

Approximately 35 to 45 percent of the natural gas in the Greater Green River Basin could be produced at less than $3 per million British thermal units (BTU), according to the report. Today's natural gas prices are around that level. The estimate is presented as a range to reflect uncertainties in geology and economics, but it nonetheless captures the magnitude of the resource likely to be available at that price. As the price of natural gas rises, more of the Greater Green River Basin's resource would likely be developed.

The basin, located primarily in southwestern Wyoming and extending into Colorado and Utah, contains between 135 trillion and 160 trillion cubic feet of natural gas—about 10 percent of the technically recoverable natural gas supplies in the United States.

The study is titled “Assessing Natural Gas and Oil Resources: An Example of a New Approach in the Greater Green River Basin,” and was funded by the William and Flora Hewlett Foundation. The authors are Tom LaTourrette, Mark Bernstein, Mark Hanson, Christopher Pernin, Debra Knopman and Adrian Overton.

The new assessment method was applied to the Rocky Mountain region because of that area's growing importance in natural gas production. Natural gas consumption in the United States is projected to rise by 50 percent over the next 25 years, with much of that increase expected to be met by new production in the Rocky Mountain region. Since more than 60 percent of the potential natural gas in the Rocky Mountain region is located on federal land, resource development decisions will increasingly become the responsibility of federal land managers.

Estimates from several sources suggest that the Rocky Mountain region contains roughly 15 percent of the nation's natural gas reserves and potential resources, according to the RAND report.

“While existing assessments provide a great deal of basic information to federal land managers making a land use decision, we are building upon these estimates by including economic and environmental factors that allow land managers to better distinguish resources in different areas. This provides more information to help set priorities for strategic land use decisions about energy resource development,” said LaTourrette, lead author of the report.

The RAND report is designed to demonstrate a regional assessment approach that is appropriate for strategic planning and could be used to help inform subsequent leasing decisions, but it is not intended as a substitute for detailed lease-specific assessments by government or industry.