As much as 489 Tcf of technically recoverable natural gas resources may be held in the Marcellus Shale, according to Terry Engelder, a geosciences professor at Pennsylvania State University.

Engelder, who had estimated the Marcellus’ technically recoverable gas at approximately 392 Tcf as recently as last November, said his calculation was ratcheted up 25% as more production data became available in recent months.

“Before gas production occurs in any play the estimates are based on volume calculations,” Engelder told NGI. When he and Gary Lash, a professor at State University of New York at Fredonia, made their first Marcellus volume calculation of 50 Tcf in January 2008, “we purposefully made that extraordinarily conservative, knowing it was likely to be revised based on production data,” Engelder said.

In the fall of 2008 Engelder revised that estimate, based again on volume calculations, to 392 Tcf — a figure he said was still on the conservative side (see Daily GPI, Nov. 4, 2008). The revised calculation was based on data provided by Chesapeake Energy and included a new estimate for the thickness of the Marcellus rock, which Engelder initially believed to be 50 feet, but had decided could range up to 300 feet.

“After the breakout year, which was 2008, enough production data had become available that one could then go back and understand the potential for the Marcellus from a statistical point of view based on production data,” Engelder said.

Because Pennsylvania state law keeps production data proprietary for five years, Engelder said his estimate was based on information — generally initial production tests of the 24-hour variety — that operators place in public documents, usually associated with investor and analyst workshops and in quarterly calls to shareholders. Engelder’s latest estimate was published in Fort Worth Oil and Gas Basin magazine.

Engelder’s study assumed that 70% of the sections in each of the 117 counties within the five-state Marcellus region are accessible and that wells will have 80-acre spacing.

At present consumption rates, the Marcellus alone could meet the gas demand of the United States for more than 20 years, “if the gas could be produced fast enough — which, of course, it can’t,” Engelder said. Still, federal policy should recognize “the gift for America” that the Marcellus and other domestic shale plays represent, he said.

The Marcellus stretches across Pennsylvania, West Virginia, Ohio, New York and Maryland.

Last month legislation to impose a severance tax on growing gas production in Pennsylvania’s portion of the Marcellus Shale advanced to the state’s House of Representatives (see Daily GPI, June 24). The bill would impose a “privilege tax” on all of the state’s gas producers at a rate of 5% of the gross value at the wellhead, plus 4.7 cents/Mcf. The tax is projected to generate roughly $600 million annually for state coffers by 2013-2014. If the bill is approved by the General Assembly, it would take effect Oct. 1. The legislation resembles an extraction tax implemented by West Virginia in 1987, which levies a 5% tax on the gross value of gas extracted and 4.7 cents/Mcf.

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