You have probably heard or read the talking point many times: The United States consumes nearly one-quarter of the world’s oil but we have only 2-3% of the world’s proved reserves (here, here, here), hence we cannot drill our way out of high gasoline prices (here, here, here), and should instead adopt policies (cap-and-trade, biofuel quota, fuel-efficiency mandates) to accelerate America’s transition to a low-carbon future.

A new report by the Institute for Energy Research (IER), North American Energy Inventory (December 2011), demolishes the gloomy assessment underpinning demands for centralized planning of America’s energy future.

Proved reserve estimates actually tell us relatively little about America’s energy resources. Proved reserves refer to oil and gas deposits that have already been discovered, and which can be economically recovered today. But much larger quantities are technically recoverable, and advances in technology continually make more oil and gas economical to recover. Moreover, new deposits are continually discovered as proved reserves are exploited.

Consequently, proved reserves can — and often do – increase as more oil and gas are consumed. “For example,” notes the IER report, ”in 1980, the U.S. had oil reserves of roughly 30 billion barrels. Yet from 1980 through 2010, we produced over 77 billion barrels of oil. In other words, over the last 30 years, we produced over 150 percent of our proved reserves.”

Just a few short years ago, it was assumed that U.S. reserves of natural gas would decline and we would have to import increasing amounts of high-priced liquefied natural gas (LNG) from the Middle East. But the combination of horizontal drilling and hydro-fracturing (“fracking”), which releases gas trapped in shale, has created a boom in the production of this “unconventional” resource, which was once uneconomical to develop. IER notes:

In its Annual Energy Outlook 2010 (AEO 2010), EIA predicted that by 2035, shale gas would account for 26 percent of total U.S. natural gas production. But in 2010, shale gas was already accounting for 23 percent of domestic production. In its latest Annual Energy Outlook (AEO 2011), the EIA projects that by 2035, shale gas will account for an astounding 46 percent of total U.S. natural gas production.

The same technological combo — horizontal drilling and fracking — is also revving up production of “unconventional” oil from shale deposits such as the Bakken formation in North Dakota and the Eagle Ford formation in Texas. IER comments:

 In 2002, the United States Geological Survey (USGS) estimated the [Marcellus] area held about two trillion cubic feet of natural gas and .01 billion barrels of natural gas liquids. By 2011, however, the USGS estimated the area held 84 trillion cubic feet of natural gas and 3.4 billion barrels of liquids. Within a span of 9 years, technology increased estimated natural gas supplies in the Marcellus 42-fold, and liquids 340-fold. Similarly, the Bakken formation in North Dakota and Montana was estimated to have 151 million barrels of oil in 1995, but by 2008, the USGS had increased its estimate to between three and 4.3 billion barrels, 25 times the 1995 estimate. History is rampant with these types of increased estimates of resources as improved technology enables more resources to be produced.

Similarly, technological advances such as steam assisted gravity drainage (SAGD) have turned Canada’s vast tar sands deposits into a gigantic source of economically recoverable oil. Notes IER:

Oil sands production has allowed Canada to increase its proved reserves of oil from five billion barrels to 170 billion barrels, making its oil reserves third only to those of Saudi Arabia and Venezuela.

What energy consumers should worry about is not resource depletion but politically-contrived roadblocks to safe and responsible energy production, IER argues. Fortunately, ”The truth that is finally becoming clear is that North America is not only blessed with huge quantities of energy, but also could become the single largest producer in the world, with all of the attendant manufacturing, technological innovation and re-industrialization that would provide generations with good jobs and sustainable futures.”

The IER report offers a tour of North American oil, gas, and coal resources with maps, charts, and data based on U.S. Government and other public sources. Here are the key numbers:

Oil

Total Recoverable Resources: 1.79 trillion barrels.

•  Enough oil to fuel every passenger car in the United States for 30 years
• Almost twice as much as the combined proved reserves of all OPEC nations
• More than six times the proved reserves of Saudi Arabia

Natural Gas

Total Recoverable Resources: 4.244 quadrillion cubic feet.

• Enough natural gas to provide the United States with electricity for 575 years at current
  natural gas generation levels
• Enough natural gas to fuel homes heated by natural gas in the United States for 857 years
• More natural gas than all of the next five largest national proved reserves (more than
  Russia, Iran, Qatar, Saudi Arabia, and Turkmenistan)

Coal

Total Recoverable Resources: 497 billion short tons.

• Provide enough electricity for approximately 500 years at coal’s current level of
  consumption for electricity generation
• Provide enough electricity for approximately 500 years at coal’s current level of
  consumption for electricity generation
• More coal than any other country in the world
• More than the combined total of the top five non-North American countries’ reserves
  (Russia, China, Australia, India, and Ukraine)
• Almost three times as much coal as Russia, which has the world’s second largest reserves

Last night over dinner with a knowledgeable source, I heard the skinny on the $7 billion Keystone XL pipeline extension that would double U.S. imports of tar sands oil from western Canada…if the Obama administration allows it.

The 1,700 mile pipeline would link expanding Canadian crude production with America’s first-class refining hub in the Midwest and along the Gulf. It was one of three diplomatic priorities articulated by Canadian Prime Minister Stephen Harper during his February sit-down with President Barack Obama (the other two were Afghanistan and trade policy). That’s why the State Department is behind it.

However, oil production from tar sands is more carbon-intensive than traditional production, so environmentalist groups are staunchly opposed to the Keystone XL pipeline. As a result of the greens’ organized opposition, the Environmental Protection Agency in July, 2010, rebuked the State Department’s draft Environmental Impact Assessment* of the pipeline, stating that it contained “inadequate information.”

*[Because the pipeline crosses an international border, the primary permitting agency is the State Department. Under the National Environmental Protection Act (NEPA), any federal agency action (ie, permitting) must adequately account for the environmental impact of the permitted action. Generally speaking, there are two ways to do so: with a less detailed “Environmental Assessment” and a more detailed “Environmental Impact Statement.” Because of the magnitude of the Keystone XL pipeline, the State Department had to conduct a detailed Environmental Impact Assessment. This is the document that the EPA critiqued.]

In order to address the EPA’s concerns, the State Department in March undertook a supplemental Environmental Impact Assessment, for which the comment period ended in mid-April. A final draft has not yet been issued.

For now, the project is in limbo, and the pipeline’s proponents are worried that the Environmental Impact Statement might be referred to the Council on Environmental Quality, the bureaucracy responsible for administering NEPA. Such a referral could lead to lengthy, costly delays.

Of course, all these agencies (State, EPA, and CEQ) work for the President. So what does he think about this inter-agency conflict? I believe it’s his doing, to provide himself political cover. Canada is out closest friend, literally and figuratively, and the pipeline is a major priority for our northern neighbors. I can’t imagine that the President would check such a vital Canadian interest. At the same time, he must cater to the needs of his environmentalist base. It would be politically savvy of the President, knowing full well that he will approve the pipeline, to have the EPA question the pipeline as a sop to the greens, and then have the State Department answer the EPA’s questions. The politics of high gas prices further suggests that the President is a pipeline proponent.

Then again, this Administration is waging war on domestic energy production, so maybe I’m giving the President too much credit.