STATEMENT OF

DR. P. PATRICK LEAHY

ASSOCIATE DIRECTOR FOR GEOLOGY

U.S. GEOLOGICAL SURVEY

U. S. DEPARTMENT OF THE INTERIOR

BEFORE THE

COMMITTEE ON ENERGY

AND NATURAL RESOURCES

UNITED STATES SENATE

April 3, 2001

Within the Federal Government, the USGS is responsible for assessing undiscovered oil and gas resources of all onshore and State offshore areas of the Nation. In February 1995, the USGS released the National Assessment of United States Oil and Gas Resources. Currently, we are updating that assessment in selected regions thought to have high potential for undiscovered natural gas, including coal-bed methane and gas hydrate. This update will be completed in 2004, with interim products available in early 2002. The updated assessment will include allocations of undiscovered oil and gas resources to Federal lands. Additionally, the USGS is completing a National Coal Resource Assessment during 2001. To date, coal resource assessments of the Colorado Plateau and of the Northern Rocky Mountains and Great Plains have been released, and coal resource assessments of the Appalachian and Illinois Basins, and Gulf Coast Region will be available later in 2001. USGS coal assessments also identify volumes of coal under Federally owned lands, and of Federally owned coal under privately owned lands, where present.

MMS is responsible for developing estimates of Federal offshore crude oil and natural gas resources. The most recent MMS resource assessment was completed in 2000, and I will discuss some of the highlights of that assessment later in my testimony. I would also like to submit for the record a copy of the testimony MMS presented on its most recent resource assessment before the House Resources Subcommittee on Energy and Mineral Resources on March 22, 2001.

USGS 1995 National Assessment of United States Oil and Gas Resources

The 1995 USGS assessment of the Nation's onshore undiscovered oil and gas was published in digital format on a CD-ROM (USGS Digital Data Series-30) and in a non-technical summary, as USGS Circular 1118. The Assessment was conducted in collaboration with State Geological Surveys, with MMS, and with industry geologists under the auspices of the American Association of Petroleum Geologists. Additional cooperation with the Bureau of Land Management, National Park Service, U.S. Forest Service, and Bureau of Indian Affairs was essential for the USGS to generate information regarding oil and gas resources on Federal lands. The current update of the 1995 assessment is being conducted with many of the same partners.

Assuming existing technology, there are approximately 112 billion barrels of technically recoverable oil onshore and in State waters, according to the USGS's most recent assessment. Technically recoverable resources are those that may be recoverable using current technology without regard to cost. Economically recoverable resources are that part of the technically recoverable resource for which economic factors are included and which can be recovered at a given market price. This includes measured (proved) reserves, future additions to reserves in existing fields (reserve growth), and undiscovered resources. The technically recoverable conventional resources of natural gas in measured reserves, future additions to reserves in existing fields, and undiscovered accumulations equal approximately 716 trillion cubic feet of gas.

In addition to conventional gas resources, the USGS has made an assessment of technically recoverable resources in continuous-type (largely unconventional) accumulations. We estimate about 308 TCFG (trillion cubic feet of gas) of technically recoverable natural gas in continuous-type deposits in sandstones, shales, and chalks, and almost 50 TCFG of technically recoverable gas in coal beds. The total technically recoverable oil and gas resource base onshore and in State waters of the United States is displayed in the table below.

Results of the USGS 1995 National Oil and Gas Assessment

Below is a table of the results of the USGS 1995 assessment:

-- Natural Gas

---- OIL ---- ---- GAS ---- Liquids --

(billion barrels) (trillion cu. ft.) (billion barrels)

Resource Category 1995 1995 1995

Undiscovered resources

Conventional Accumulations 30 259 7

Unconventional Accumulations

Sedimentary reservoirs 2 308 2

Coal-bed methane NA 50 NA

Anticipated Reserve Growth 60 322 13

TOTAL 92 939 22

Proved Reserves (in 1994) 20 135 7

TOTAL 112 1,074 29

The estimates presented in this testimony reflect USGS understanding as of January 1, 1994. They are intended to capture the range of uncertainty, to provide indicators of the relative potential of various petroleum provinces, and to provide a useful guide in considering possible effects of future oil- and gas-related activities within the United States.

The geographic information system (GIS) coverages contained in this assessment and related databases provide the capability to estimate oil and gas resource potential on specific tracts of land, including those owned and/or managed by the Federal Government. This process is called allocation, based on expert opinion, and is accomplished using a methodology that takes into consideration all geologic information available about the basin.

1995 National Oil and Gas Assessment and Onshore Federal Lands (1998)

In January 1998, the USGS published an Open-File Report (OFR 95-0075-N) that reported estimates of volumes of undiscovered oil and gas on Federal lands. Estimates of oil in undiscovered conventional fields range from 4.4 to 12.8 billion barrels (BBO), with a mean value of 7.5 BBO. Estimates of technically recoverable gas in undiscovered conventional fields range from 34.0 to 96.8 trillion cubic feet (TCF), with a mean value of 57.9 TCF. Almost 85 percent of the assessed natural gas in undiscovered conventional accumulations was non-associated gas, that is, gas in gas fields rather than gas in oil fields. Estimates of technically recoverable resources in conventional (continuous type) accumulations for oil are from 0.2 to 0.6 BBO, with a mean value of 0.3 BBO, and for gas, from 72.3 to 202.4 TCF, with a mean value of 127.1 TCF. These ranges of estimates correspond to 95 percent probability (19 in 20 chance) and 5 percent probability (1 in 20 chance) respectively, of a least those amounts occurring.

An economic evaluation was applied to these technically recoverable estimates. Our study concluded that at $30 per barrel for oil and $3.34 per thousand cubic feet of gas, 3.3 BBO oil and 13.6 TCF in undiscovered conventional fields can be found, developed, and produced. In addition, at these estimated prices, 0.2 BBO oil and 11.4 TCF in continuous-type accumulations and 11.8 TCF of coalbed gas can be developed.

Estimated volumes of undiscovered oil, gas, and natural gas liquids in onshore Federal lands, as of January 1994 are displayed in the table below.

Applications of the USGS 1995 National Oil and Gas Resource Assessment

The results of the USGS National Oil and Gas Resource Assessment have been used by the Energy Information Administration for its Annual Energy Outlook, by the California Energy Commission and Canadian Energy Board to model inter-regional natural gas supply and demand and the resulting economic impacts, and by numerous petroleum companies as a basis for evaluating risk associated with exploration and development of domestic oil and gas resources.

Many Federal agencies use the information in the USGS National Oil and Gas Assessment for land-use planning, energy policy formulation, and economic forecasting. Customers include the Department of the Interior, Bureau of Land Management, National Park Service, U.S. Forest Service, Bureau of Indian Affairs, Energy Information Administration, and the Department of Energy, among others. In addition, most State Geological Surveys and/or State Divisions of Oil and Gas use the USGS assessment for regional and local resource evaluation and lease planning purposes. Many private sector organizations also use the digital oil and gas assessment results, including environmental protection advocacy groups, petroleum exploration companies, and utility companies (including natural gas and electricity utilities).

Sec. 604 Energy Act of 2000

The Secretary of the Interior is charged with conducting an inventory of energy resources and the restrictions and impediments to their development on Federal Lands in Section 604 of the Energy Act of 2000, signed into law on November 9, 2000. The exact text is given below:

SEC. 604. SCIENTIFIC INVENTORY OF OIL AND GAS RESERVES.

IN GENERAL.--The Secretary of the Interior, in consultation with the Secretaries of Agriculture and Energy, shall conduct an inventory of all onshore Federal lands. The inventory shall identify--

(1) the United States Geological Survey reserve estimates of the oil and gas resources underlying these lands; and

(2) the extent and nature of any restrictions or impediments to the development of such resources.

(b) REGULAR UPDATE.--Once completed the USGS reserve estimates and the surface availability data as provided in subsection (a)(2) shall be regularly updated and made publicly available.

(c) INVENTORY.--The inventory shall be provided to the Committee on Resources of the House of Representatives and to the Committee on Energy and Natural Resources of the Senate within 2 years after the date of the enactment of this section.

(d) AUTHORIZATION OF APPROPRIATIONS.--There are authorized to be appropriated such sums as may be necessary to implement this section.

It is our understanding that the role of the USGS will be to assess the oil and gas resources of oil and gas-bearing basins with Federal land ownership, consistent with the USGS assessment and allocation methodology. Then, USGS geologists will allocate resource estimates to those specific land parcels owned by the Federal government. The USGS resource estimates will be combined with reserve volumes from the DOE/EIA, and will be incorporated into a geographic information system (GIS) that shows the spatial distribution of those potential resources and known reserves. The resource and reserve GIS will be integrated with a GIS of restrictions and impediments constructed by BLM and USFS. The USGS has met several times with representatives of the Bureau of Land Management (BLM), the US Forest Service, the US Department of Energy and their Energy Information Administration and the staff of this committee to discuss plans to produce this inventory.

The USGS intends to use some of the resource estimates from the 1995 National Oil and Gas Assessment, for which there are not significant new data, and will update resource estimates for the gas-prone areas of the country for which we have new data and are developing improved assessment methods.

The Minerals Management Service's 2000 OCS Resource Assessment

As background, MMS's mission consists of two major programs: Offshore Minerals Management and Minerals Revenue Management. The leasing and oversight of mineral operations on the Outer Continental Shelf (OCS) and all mineral revenue management functions for Federal (onshore and offshore) and American Indian lands are centralized within the bureau. In 2000, OCS oil and natural gas production accounted for roughly 25 and 26 percent, respectively, or our nation's domestic energy production - oil production was over 500 million barrels and natural gas production was over 5 trillion cubic feet. The amount of oil and natural gas production in 2000 was the most ever produced on the OCS. In addition, in fiscal year 2000, MMS collected and distributed about $7.8 billion in mineral leasing revenues from Federal and American Indian lands.

In its role as manager of the Nation's OCS energy and non-energy mineral resources, MMS is responsible for assessing those resources; determining if they can be developed in an environmentally sound manner; and if leased, regulating activities to ensure safety and environmental protection. An integral element in that mission is to identify the most promising areas of the OCS for the occurrence of crude oil and natural gas accumulations and to quantify the amounts of oil and natural gas that may exist in these areas.

Since its creation in 1982, MMS has completed four systematic assessments of Federal OCS undiscovered oil and natural gas resources, including its most recent assessment. The 2000 resource assessment was done to support staff work and analysis needed in formulating the next 5-Year Oil and Gas Leasing Program covering the timeframe 2002-2007. It should be noted that the methodology for the 2000 assessment has not changed significantly from that used in the previous 1995 assessment.

The 2000 assessment presents the updated assessment results since the 1995 assessment for the Alaska, Atlantic, and Gulf of Mexico OCS Regions. In the Alaska Region only the Beaufort and Chukchi Seas, Hope Basin, and Cook Inlet areas were updated, as other planning areas lacked new data and changes since the last assessment. The Pacific OCS Region was not updated for the same reasons. The Atlantic OCS Region was re-evaluated to reflect recent exploration results offshore Nova Scotia, current exploration and production technologies, and to make the water depth divisions compatible with the ones now being used in the Gulf of Mexico.

The MMS has recently made public the 2000 assessment, and I have included a copy of the assessment with my written testimony for the hearing record. MMS estimates that the total mean undiscovered, conventionally recoverable resources for the United States OCS are 75.0 billion barrels of oil and 362.2 trillion cubic feet of natural gas. Within that total, MMS determined that the undiscovered conventionally recoverable resources foregone by the 1998 moratoria (i.e., the President's June 1998 OCS decision) would be approximately 16 billion barrels of oil and 62 trillion cubic feet of gas.

The total mean undiscovered economically recoverable resources for the United States OCS are 26.6 billion barrels of oil and 116.8 trillion cubic feet of gas at prices of $18 per barrel and $2.11 per thousand cubic feet, respectively, and 46.7 billion barrels of oil and 168.1 trillion cubic feet of gas at prices of $30 barrel and $3.52 per thousand cubic feet, respectively.

Mr. Chairman, this concludes my remarks. However, I would be happy to respond to any questions Members of the Committee may have.