A congressional study has concluded that the Devonian shale deposits of Appeachia are a significant "exotic source" of new natural gas.
Known as brown shale, the deposits in 13 Eastern states could produce up to 1 trillion cubic feet of natural gas a year, or about 5 per cent of current U.S. production, in the next 20 years, the study says.
The analysis also concludes that natural gas from Devonian shale can be produced utilizing existing drilling technology, unlike other exotic energy sources.
Devonian shale - meaning that it was deposited in the Devonian Era, 350 million years ago - can make "a significant contribution" to domestic natural gas supplies, the Office of Technology Assessment study says. Domestic natural gas production has been declining since 1973.
The office's estimates of potential production, set at 15 trillion to 25 trillion cubic feet of natural gas over the next 20 years, are less optimistic than previous estimates prepared by the National Academy of Sciences and the Energy Research and Development Administration. ERDA has since been folded into the newly formed Energy Department.
The study was issued days before the Senate and House energy conferees are to consider an obscure privision in the Senate energy tax bill tht would provide hundred of million of dollars in special tax credits for producers who drill for unconventional gas sources, including Devonian shale.
Production of gas from Devonian shale, the study says, will depend largely on "price and tax incentives." The office's analysis, which was requested by Sen. Ted Stevens (R-Alaska), suggests that these incentives could include deregulation of gas production from brown shale, or increasing the depletion allowance and tax credit available to producers.
Limited existing production of this gas, centered mostly in Kentucky and West Virginia, receives no special tax or price treatment. New gas today in the regulated interstate market sells for $1.46 per thousand cubic feet, compared to the $2 to $3 per thousand cubic feet OTA says may be necessary to stimulate significant production from Devonian shale.
Energy Secretary James R. Schlesinger, however, has repeatedly told Congress and oilmen that his department's Federal Energy Regulatory Commission, which sets prices on natural gas, would provide higher wellhead prices for exotic sources and gas such as brown shale, tight formations, and geo-pressurized methane gas.
The Senate-passed energy tax bill would provide a 50-cent per thousand cubic feet tax credit for exotic gas sources, including Devonian shale. Finance Committee estimates say that this credit would provide $194 million in additional income to the industry, saving an estimated 45,000 barrels of oil a day by fiscal 1985.