Domestic Natural Gas: The Coming Methane Economy
William L. Fisher

The long-term history of global energy use is a fundamental progression of fuel substitution. Up until the industrial revolution, wood was the principal source of energy; and it still is in many of the poorer, energy-impoverished parts of the world. Cut forests dotted the landscape of much of the industrial world during this era. But by the late 1800s, coal, an abundant and higher density form of energy, began to assume prominence. Dirty and fouling as it was, coal use in the United States allowed wood burning to diminish and forests to replenish.

Coal became “King Coal,” but by the early 1900s, as more oil was discovered and as Henry Ford brought forth his Model T, coal’s percentage of energy use began to decline. Oil increased for producing gasoline to fuel internal combustion engines. By the late 1970s, oil peaked as a percentage of total U.S. energy consumed. At the same time, natural gas emerged. Some apprehension regarding natural gas supply in the 1980s stabilized coal consumption as a percentage of energy, and nuclear energy use increased.

Today, nearly all projections through the next two decades and beyond show the role of natural gas increasing and that of oil, coal and nuclear energy decreasing. Methane is a principal ingredient of most natural gases. A methane economy is on the way — one in which modern, highly efficient turbines make natural gas the fuel of choice in electrical generation; and where, through the use of fuel cells, hydrogen derived from natural gas can replace the oil used for the internal combustion engine.

Each time we made historical shifts in energy sources, we moved to an ever more efficient source of energy, one in which the amount of hydrogen increased and the amount of carbon decreased. Today we want to rid ourselves of carbon-based energy because of the fear many have that carbon emissions are causing Earth’s atmosphere to warm. But in reality this trend in decarbonization of fuels, as analyzed by Jesse Ausubel in his 1996 article, “Can Technology Spare the Earth?” (American Scientist, v.84), has been under way for the past 150 years — not because successive fuels were cleaner, which they were, but because they were more efficient. Greater efficiency generally means cheaper, more convenient energy.

There is no reason to believe that this fundamental trend will not continue into the future. As we completely rid ourselves of carbon fuels, we will enter the hydrogen economy, where hydrogen is derived from sources other than fossil fuels. Some estimates suggest that we will enter the hydrogen economy by the middle of this century. We really cannot know for certain, nor can we predict what the specific source of energy to produce hydrogen will be — solar, photovoltaics, wind, nuclear fission or fusion, or something else. But if history is any guide, and it surely must be, the energy source of the latter half of this century will be the cheapest, cleanest and most efficient.

Before we reach our carbon-free, nonfossil fuel economy, we have at least 50 years of transition ahead of us. This transition will be the methane economy. During this time, our use of nonfossil fuels will undoubtedly increase, but the bulk of demand will remain for fossil fuels. The role of oil and coal will continue to decline, although the absolute amounts will be substantial. In the United States, the transition could require about 200 billion barrels of oil — approximately equal to our use in the United States up to the present — and about 30 billion tons of coal as a direct fuel, one-half of our cumulative consumption to date. But the implied U.S. demand for natural gas in a methane economy could well be on the order of 2,500 trillion cubic feet (TCF) or more, an amount 2.5 times our historical consumption.

My current estimate of the remaining natural gas resource base of the United States is about 2,400 TCF, equal to the implied demand of a U.S. methane economy, although other current estimates are less than the implied demand (I reported on this in a December 1999 Environmental Geosciences article.) But estimates are current assessments; resources are elastic, particularly natural gas. Over the past 20 years, consensus estimates of the amount of remaining natural gas have increased an order of magnitude as remarkable advances in technology have greatly expanded our ability to enlarge and develop the resource base. At the same time, wellhead prices — the price producers receive — over the same period have held steady in real terms.

We will most likely continue to expand the natural gas resource base in the United States sufficiently to meet implied demand. The real question is whether that expansion of the resource base can be achieved at a cost competitive with imported liquefied natural gas — which is primarily methane — or gas from coal. The pace of technology growth largely drives the discovery and development of natural gas.

Of the nearly 2,400 TCF of natural gas I estimate to remain in the United States, about 800 TCF is yet to be discovered. As much as 40 percent of new field discovery will be at depths greater than 4,500 meters; about 600 TCF will come from so-called basin center, generally low-permeability formations; about 300 TCF will come from shales and coal beds; something on the order of 500 TCF will come in the form of reserve growth from existing fields; and current proven reserves amount to 177 TCF.

The principal geographic areas for natural gas are and will continue to be the Gulf Coast Basin (onshore and offshore) and the Rocky Mountain basins, as well as the Midcontinent, the Permian Basin and the Appalachians. The Atlantic offshore area has a high potential for gas resources and is promising. But unlike the Scotian shelf offshore of eastern Canada, the U.S. Atlantic offshore is under continuing moratorium prohibiting exploration. If resolved, this lack of access, also an issue in a substantial part of the federal lands of the Rocky Mountain basins, would assist the United States in its transition to a methane economy.

Much of the future of domestic natural gas and its fueling of the methane economy will be determined by the price at which it is available. Using the history of the past 20 years as a guide, we can say that the pace of technology will be a major determinant. The advent of 3-D seismic imaging and its boost both to exploration and production have been especially important in maintaining and increasing production in the Gulf Coast basin. Advances in fracture technology — where injected solutions under high pressures are used to fracture rock and release gas — have been critical to the optimal development of low-permeability gas formations. As we consider natural gas that is harder to access, the resource base enlarges, but so too does our reliance on technology to access and use it, according to a presentation Bello Kuuskraa gave to the Natural Research Council in 2001. Technology has also vastly improved depletion and recovery rates. While improving these rates is important to the economics of gas recovery, it does mean that new wells must be drilled at a substantial pace.

If the pace of technology is maintained and focused more prominently on the unconventional natural gas resources, the long-term price of natural gas, in real terms, should stay below $4.00 per thousand cubic foot (MCF), or most likely below $3.50. Staying below $4.00 per MCF is possible (the Energy Information Administration projects that the 2020 average natural gas price will be $3.26 per MCF).

This level is also essential to maintaining the long-term viability of domestic natural gas. At prices higher than $3.50 per MCF, and certainly at $4.00, domestic natural gas (including imported Canadian natural gas) loses its competitive edge to clean coal technologies and to imported liquefied natural gas. For example, a new form of generation called integrated gasification combined cycle (IGCC), in which coal is converted into a gas that is then burned in a combustion turbine and where carbon dioxide can be captured readily, would compete with natural gas prices of $4.00 per MCF. Given the substantial front-end costs of building liquefied natural gas facilities, domestic natural gas must approach $4.00 MCF and be perceived to stay at such a level to be competitive. However, under such a price situation, the large resource base of natural gas globally would be available and would directly compete with domestic production.

A methane economy in the transition to a carbon-free energy economy will carry with it not only an efficient source of energy but also one that will be vastly cleaner. Some project that the U.S. population will increase 50 percent over the next 50 years and that its economy will increase fourfold. Even if these projections hold true, future carbon emissions from fossil fuels will not be more than cumulative emissions to date (assuming we will use 200 billion barrels of oil, 2,500 TCF of gas and 30 billion tons of coal). Should carbon sequestration become widespread, net emissions would be reduced substantially.

Fisher holds the Leonidas T. Barrow Centennial Chair in Mineral Resources at the University of Texas at Austin and is the director of the university’s Jackson School of Geosciences. E-mail

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