**2.1.1 Volumetric methods and statistical methods**

The first national estimate of oil resources was commissioned from the U.S. Geological survey and integrated into the national inventory of mineral wealth conducted under the

Estimating Oil Reserves: History and Methods 145

method was very simple and dubbed the "per cent decline curve". As its very name indicates, the per cent graph depicted the decline in the production of a well, of a property, or an oil-field by expressing each year's production as a percentage of the first year of output. Under the assumption that nearby wells will return similar "curves", the amount of

Barely on the radar before the assessment undertaken by the U.S. Geological Survey, the "per cent decline curve" subsequently rose to prominence largely on account of its simplicity and utility, particularly for commercial and financial transactions. In one fell swoop, something that was designed with a view to guiding public policy became a decentralized instrument for private calculus applied to such diverse facets as assessing the rate of return on capital; evaluating the amount a company might afford to pay for the rights to a certain oil-land; future property values; and the distribution of quotas or taxes among

Pressed by the political agenda and the deadlines set by the Conservation Commission, the U.S. Geological Survey had to come up with a solution able to transpose the expertise held by regional oil-pool surveys into a national forecast. The mixed bag strategy of resorting in some circumstances to the volumetric approach and in others to the cutting-edge approach of production history statistics became the means of circumventing the practical difficulties. The final figures portrayed bleak prospects for the future. David Day's assessment pointed to 10 to 24 billion barrels of oil left underground, with a general estimation of 15 billion recoverable barrels of oil (15 X 109). This would last for a minimum of 80 years should the 1909 consumption level be somehow stabilized or less than 25 years should the recent upward trend continue (Day, 1909). In short, oil might be about to end quite suddenly.

Although the author recognized the conjectural and indirect nature of the assessment, this did not prevent him from proposing clear-cut policies. For David Day, it was the federal government's responsibility to divert oil from power stations, railways, automobile drivers and exports and channel its usage to vital needs like lubrication and the military for which there were no substitutes. "Waste" was the produce of erroneous choices stirred by market prices, abundant resources and unsuitable lifestyles (Day, 1909). In this vein, depletion ceased to be a demand-side problem like that of uncontrolled wood-cutting in forests and became a moral and social question, a true challenge to citizenship impacting on the everyday life of Americans living off perceivably unsustainable resources. With depletion looming in the next quarter century, mechanisms other than price and individual choice in the allocation of resources seemed all the more justified. Moreover, the case of oil provided the ultimate confirmation of conservationist warnings as it demonstrated that those who had buttressed the moral, patriotic, democratic and ecological character of natural resources

Much like a cause that becomes part of its effects, the conservationist administration of Theodore Roosevelt campaigned for an inventory of American mineral wealth, whose conclusions only underscored the need for conservation. Not only did the conclusions agree with the premises but the conclusions were, to a certain extent, also part of the premises. Identified by the catch-phrase "progressivism", Roosevelt's presidency (1901-1909)

ultimately recovered oil could be estimated for entire oil-pools.

producers (Requa, 1918; Beal, 1919: 80-89).

had been right all along.

**2.1.2 Forest conservation and oil conservation** 

supervision of a new National Conservation Commission, chaired by the head of forestry Gifford Pinchot. The call for a systematic inventory of America's mineral wealth bore President Theodore Roosevelt's personal stamp and thus proved both a scientific project and a political venture. For the U.S. Geological Survey, as an institution, this represented an enormous challenge as oil expertise was concentrated in regional field-surveys and there were no means available to undertake extensive and accurate estimations on a national scale. To overcome tight deadlines and surmount the practical difficulties, the geologist in charge, David T. Day was compelled to resort to indirect forecasting methods that took advantage of the undisputed achievements of geological knowledge. One such undisputed area was the study of oil reservoirs as traps. By the time of this national survey, it had effectively become clear that petroleum needed a particular "trap configuration" to exist. This trap was made up of:


In spite of this common ground, experts did not completely agree on issues including the origin of petroleum (point 1) or the theory of oil accumulation (point 2). Whilst some geologists, for instance, maintained that the oil and gas found in a porous reservoir originated somewhere in that reservoir, others claimed that most oil found its way there from beyond the reservoir's own extent (Johnson & Huntley, 1916). Nevertheless, irrespective of these differences, the trap-configuration approach was solid enough to ensure the understanding that each reservoir enclosed a measurable space from which a commercially relevant amount of oil could be drawn. This enabled the oil reserves in place to be statistically inferred from the analysis of volumetric parameters.

David T. Day resorted to the volumetric method in regions where no other accurate information was available. In order to complete the survey's blanks, he made a simplified calculation based on the average porosity of oil-bearing sands and the amount of crude oil obtained per cubic foot of pay sands. He then extrapolated this cubic foot gauge into a rough forecast of entire oil-pools and applied a value for the recovery factor, setting a ratio between the total oil found underground and the oil that could actually be raised to the surface under the technical conditions prevailing. Curiously, the volumetric method came to be tested on the regions David Day knew best from previous geological field work: Pennsylvania, New York, West Virginia, Kentucky, Tennessee, Ohio, and Indiana (Day, 1909).

The process turned out rather differently when the geologist gained access to primary sources containing oil-well production statistics. In this case, the future recovery could be estimated from the past yield, since the record of the actual output of a well was interpreted as an index to the quantity of recoverable oil. Texas, Louisiana, Oklahoma and California were the regions selected to apply this method of statistical forecasting. Actually, the

supervision of a new National Conservation Commission, chaired by the head of forestry Gifford Pinchot. The call for a systematic inventory of America's mineral wealth bore President Theodore Roosevelt's personal stamp and thus proved both a scientific project and a political venture. For the U.S. Geological Survey, as an institution, this represented an enormous challenge as oil expertise was concentrated in regional field-surveys and there were no means available to undertake extensive and accurate estimations on a national scale. To overcome tight deadlines and surmount the practical difficulties, the geologist in charge, David T. Day was compelled to resort to indirect forecasting methods that took advantage of the undisputed achievements of geological knowledge. One such undisputed area was the study of oil reservoirs as traps. By the time of this national survey, it had effectively become clear that petroleum needed a particular "trap configuration" to exist.

1. a source rock of shale or limestone where a type of organic matter that gives rise to

2. a layer or formation of rock, generally a sandstone or a limestone, both porous and permeable to allow for the formation of a reservoir in the pore spaces, cavities or

3. a cap rock or "cover", commonly a strata of shales, clays or marls, located above the

4. a structural fault in the strata or a geological "unconformity" through which the reservoir was sealed while in this fold trap "gravitational factors" would impel oil to

In spite of this common ground, experts did not completely agree on issues including the origin of petroleum (point 1) or the theory of oil accumulation (point 2). Whilst some geologists, for instance, maintained that the oil and gas found in a porous reservoir originated somewhere in that reservoir, others claimed that most oil found its way there from beyond the reservoir's own extent (Johnson & Huntley, 1916). Nevertheless, irrespective of these differences, the trap-configuration approach was solid enough to ensure the understanding that each reservoir enclosed a measurable space from which a commercially relevant amount of oil could be drawn. This enabled the oil reserves in place

David T. Day resorted to the volumetric method in regions where no other accurate information was available. In order to complete the survey's blanks, he made a simplified calculation based on the average porosity of oil-bearing sands and the amount of crude oil obtained per cubic foot of pay sands. He then extrapolated this cubic foot gauge into a rough forecast of entire oil-pools and applied a value for the recovery factor, setting a ratio between the total oil found underground and the oil that could actually be raised to the surface under the technical conditions prevailing. Curiously, the volumetric method came to be tested on the regions David Day knew best from previous geological field work: Pennsylvania, New York,

The process turned out rather differently when the geologist gained access to primary sources containing oil-well production statistics. In this case, the future recovery could be estimated from the past yield, since the record of the actual output of a well was interpreted as an index to the quantity of recoverable oil. Texas, Louisiana, Oklahoma and California were the regions selected to apply this method of statistical forecasting. Actually, the

reservoir to retain the petroleum and block any possible surface outflow;

to be statistically inferred from the analysis of volumetric parameters.

West Virginia, Kentucky, Tennessee, Ohio, and Indiana (Day, 1909).

This trap was made up of:

fissures;

petroleum could once have been deposited;

rise above water and gas to rise above oil.

method was very simple and dubbed the "per cent decline curve". As its very name indicates, the per cent graph depicted the decline in the production of a well, of a property, or an oil-field by expressing each year's production as a percentage of the first year of output. Under the assumption that nearby wells will return similar "curves", the amount of ultimately recovered oil could be estimated for entire oil-pools.

Barely on the radar before the assessment undertaken by the U.S. Geological Survey, the "per cent decline curve" subsequently rose to prominence largely on account of its simplicity and utility, particularly for commercial and financial transactions. In one fell swoop, something that was designed with a view to guiding public policy became a decentralized instrument for private calculus applied to such diverse facets as assessing the rate of return on capital; evaluating the amount a company might afford to pay for the rights to a certain oil-land; future property values; and the distribution of quotas or taxes among producers (Requa, 1918; Beal, 1919: 80-89).

Pressed by the political agenda and the deadlines set by the Conservation Commission, the U.S. Geological Survey had to come up with a solution able to transpose the expertise held by regional oil-pool surveys into a national forecast. The mixed bag strategy of resorting in some circumstances to the volumetric approach and in others to the cutting-edge approach of production history statistics became the means of circumventing the practical difficulties.

The final figures portrayed bleak prospects for the future. David Day's assessment pointed to 10 to 24 billion barrels of oil left underground, with a general estimation of 15 billion recoverable barrels of oil (15 X 109). This would last for a minimum of 80 years should the 1909 consumption level be somehow stabilized or less than 25 years should the recent upward trend continue (Day, 1909). In short, oil might be about to end quite suddenly.

Although the author recognized the conjectural and indirect nature of the assessment, this did not prevent him from proposing clear-cut policies. For David Day, it was the federal government's responsibility to divert oil from power stations, railways, automobile drivers and exports and channel its usage to vital needs like lubrication and the military for which there were no substitutes. "Waste" was the produce of erroneous choices stirred by market prices, abundant resources and unsuitable lifestyles (Day, 1909). In this vein, depletion ceased to be a demand-side problem like that of uncontrolled wood-cutting in forests and became a moral and social question, a true challenge to citizenship impacting on the everyday life of Americans living off perceivably unsustainable resources. With depletion looming in the next quarter century, mechanisms other than price and individual choice in the allocation of resources seemed all the more justified. Moreover, the case of oil provided the ultimate confirmation of conservationist warnings as it demonstrated that those who had buttressed the moral, patriotic, democratic and ecological character of natural resources had been right all along.

## **2.1.2 Forest conservation and oil conservation**

Much like a cause that becomes part of its effects, the conservationist administration of Theodore Roosevelt campaigned for an inventory of American mineral wealth, whose conclusions only underscored the need for conservation. Not only did the conclusions agree with the premises but the conclusions were, to a certain extent, also part of the premises. Identified by the catch-phrase "progressivism", Roosevelt's presidency (1901-1909)

Estimating Oil Reserves: History and Methods 147

problems in putting this down in black and white: "I have come to think of geology more

Once the case of impending depletion spilled over into public opinion and the "oil fraternity" at large, two areas of federal and state intervention surfaced with paramount urgency: one was precautionary action so as to guarantee the fundamentals of national security; the other involved rationalizing measures to tackle all sources of waste and find means to economize on oil consumption. On both fronts, petroleum geologists filled an important role by placing themselves as interpreters of the national interest. Unsurprisingly, the very first measures devised to face possible exhaustion mirrored the very same that had been applied in forest conservation. Security concerns prompted a strong position over oil-land ownership with rationalization efforts triggering a debate over tighter regulation. Globally, the 1909 oil survey proved instrumental in tilting the balance of power towards the "permanent public good" and against the "merely

The idea of ring-fencing strategic natural resources away from commercial usage by placing them under the management of the federal state had been enacted by the Amendment to the Land Revision Act of 1891. Though this, the U.S. Senate recognized the President's authority to establish forest reserves by proclamation, leading to the constitution of a non-market sector removed from lands that would otherwise be available. However, it was only during Theodore Roosevelt's presidency that the purchase of Western and even Eastern lands shot up and leading to the founding of a Federal reserve of 150.8 million acres embracing 159 forests and extending over 27% of the U.S. forested extent (Hays, 1959; *Brown, 1919:3-7).*  Nevertheless, the more Roosevelt's policy moved towards public ownership, the more Congress responded with hostility towards conservation and bowed to local commercial pressures for quicker private sector exploitation. The clash came to a head in 1907 when Congress forbade the creation of more forest reserves in Western states in arguing that the creation of public property and environmental concerns were just a means to expand

Under these circumstances, it would be mightily hard to transpose the recipe for public forest ownership onto the oil realm. All the more so when the geological warning about forthcoming depletion was clearly offset by the intuitive evidence of prices, driven down to an average of \$70 cents for the 42-gallon barrel (Williamson, 1968:38-39). Inasmuch as the current evidence ran counter to the geological forecast, there was a kind of pathological split in public opinion. However, against all odds, a small but influential group of oil geologists backed by the director of the U.S. Geological Service, George Otis Smith, was able to circumvent opposition and carve a federal oil reserve through the withdrawal of Californian public lands, and their subsequent conversion to supply the navy. Working behind the scenes and taking advantage of consolidated intra-governmental networks, geologists were able to seize the opportunity that came about in California, firstly by withdrawing prime oil land from the agricultural register, and then by switching its usage to public property. As a result, in September 1909, roughly three million acres of oil-rich lands became the future Naval Petroleum Reserves (Shulman, 2003). This pro-active course of events was particularly significant because when the breakthrough decision was made, the Navy

as a phase of citizenship than as merely a branch of science" (Smith, 1920).

temporary private gain" (Roosevelt, 1909:4).

presidential authority (Penick, 1968).

**2.1.3 Shortage fears, precautionary action and regulation** 

prompted a period of soul searching for an American identity deeply rooted in the President's personal fondness for the "true" American values and way of life such as the open country, breathtaking scenery, the wild and everything associated with the outdoor life: hunting, fishing, horse riding and wood-chopping. The great and fair America envisioned by progressivism required an active stance at the federal level on environmental issues, sometimes stretching presidential powers well beyond the limits set by the constitution (Cooper, 1990). Roosevelt's personal inclinations were further reshaped by increasingly closer contact with the Forest Bureau Director, Gifford Pinchot, appointed to advise Roosevelt on forestry matters. However, the mutual friendship and admiration that ensued brought Pinchot into the inner circle of the White House, making him into one of the most influential advisers on political questions with a say over all the critical points on the presidential agenda (Steen, 2001: 133-141). Pinchot's political weight meant the conservation policy became attuned to a commercially oriented perspective based on competitive bidding, the regulation of big business and a call for citizenship. The very language of foresters, with their emphasis on "repairing" forests destroyed by settlers or "restoring" virgin lands, had clear affinities with Roosevelt's message of "regeneration". Culturally, both stressed a return to America's roots. In accordance with key principles such as generational responsibility, social justice and industrial liberty, the government claimed natural resources should be handed back to the average citizen. In Roosevelt's words, the function of "Government is to ensure to all its citizens, now and hereafter, their rights to life, liberty, and the pursuit of happiness. If we of this generation destroy the resources from which our children would otherwise derive their livelihood, we reduce the capacity of our land to support a population and degrade the standard of living"(Roosevelt, 1909: 3). Emboldened by the idea of change and reform, the Federal state pushed the institutions designed for the conservation of natural resources to the forefront of national policy and into the headlines of the press.

With the President's second term drawing to an end and the survey's discovery that oil would run out in 25 years, the eyes of the administration fastened on petroleum with enhanced drama and urgency. Whereas forest conservation had been the hallmark of Theodore Roosevelt's time in office, oil conservation would prove its legacy. Continuity meant that much of the oil related public policy was outlined by the agenda, the knowledge and the legal instruments previously applied to forestry. Furthermore, this also meant that oil geologists, after the foresters, joined the rank and file in the protection of national resources in siding with the Federal State. It is important to note that progressivism consolidated a group of highly trained and qualified civil servants imbued with a sense of mission and whose careers depended on the ability to wield preservation as a key political issue for public opinion. The very program of American regeneration was anchored on a powerful social network of university friendships and further cemented through highly personalized and faithful administrative bureaucracies (Schulman, 2005). Because corporate actions were sometimes "illegitimate", "under cover" and lacking in "industrial democracy", they ought to be counteracted by equidistant public powers exercised by leading experts in transportation, agriculture, geology, utilities and public health (Miller, 2009). The best antidote to "the relentless exercise of unregulated control of the means of production" was joint action by government, scientific expertise and citizenship. This triple alliance formed the core message of progressivism. Indeed, the Director of the U.S. Geological Service had no

prompted a period of soul searching for an American identity deeply rooted in the President's personal fondness for the "true" American values and way of life such as the open country, breathtaking scenery, the wild and everything associated with the outdoor life: hunting, fishing, horse riding and wood-chopping. The great and fair America envisioned by progressivism required an active stance at the federal level on environmental issues, sometimes stretching presidential powers well beyond the limits set by the constitution (Cooper, 1990). Roosevelt's personal inclinations were further reshaped by increasingly closer contact with the Forest Bureau Director, Gifford Pinchot, appointed to advise Roosevelt on forestry matters. However, the mutual friendship and admiration that ensued brought Pinchot into the inner circle of the White House, making him into one of the most influential advisers on political questions with a say over all the critical points on the presidential agenda (Steen, 2001: 133-141). Pinchot's political weight meant the conservation policy became attuned to a commercially oriented perspective based on competitive bidding, the regulation of big business and a call for citizenship. The very language of foresters, with their emphasis on "repairing" forests destroyed by settlers or "restoring" virgin lands, had clear affinities with Roosevelt's message of "regeneration". Culturally, both stressed a return to America's roots. In accordance with key principles such as generational responsibility, social justice and industrial liberty, the government claimed natural resources should be handed back to the average citizen. In Roosevelt's words, the function of "Government is to ensure to all its citizens, now and hereafter, their rights to life, liberty, and the pursuit of happiness. If we of this generation destroy the resources from which our children would otherwise derive their livelihood, we reduce the capacity of our land to support a population and degrade the standard of living"(Roosevelt, 1909: 3). Emboldened by the idea of change and reform, the Federal state pushed the institutions designed for the conservation of natural resources to the forefront of national

With the President's second term drawing to an end and the survey's discovery that oil would run out in 25 years, the eyes of the administration fastened on petroleum with enhanced drama and urgency. Whereas forest conservation had been the hallmark of Theodore Roosevelt's time in office, oil conservation would prove its legacy. Continuity meant that much of the oil related public policy was outlined by the agenda, the knowledge and the legal instruments previously applied to forestry. Furthermore, this also meant that oil geologists, after the foresters, joined the rank and file in the protection of national resources in siding with the Federal State. It is important to note that progressivism consolidated a group of highly trained and qualified civil servants imbued with a sense of mission and whose careers depended on the ability to wield preservation as a key political issue for public opinion. The very program of American regeneration was anchored on a powerful social network of university friendships and further cemented through highly personalized and faithful administrative bureaucracies (Schulman, 2005). Because corporate actions were sometimes "illegitimate", "under cover" and lacking in "industrial democracy", they ought to be counteracted by equidistant public powers exercised by leading experts in transportation, agriculture, geology, utilities and public health (Miller, 2009). The best antidote to "the relentless exercise of unregulated control of the means of production" was joint action by government, scientific expertise and citizenship. This triple alliance formed the core message of progressivism. Indeed, the Director of the U.S. Geological Service had no

policy and into the headlines of the press.

problems in putting this down in black and white: "I have come to think of geology more as a phase of citizenship than as merely a branch of science" (Smith, 1920).

Once the case of impending depletion spilled over into public opinion and the "oil fraternity" at large, two areas of federal and state intervention surfaced with paramount urgency: one was precautionary action so as to guarantee the fundamentals of national security; the other involved rationalizing measures to tackle all sources of waste and find means to economize on oil consumption. On both fronts, petroleum geologists filled an important role by placing themselves as interpreters of the national interest. Unsurprisingly, the very first measures devised to face possible exhaustion mirrored the very same that had been applied in forest conservation. Security concerns prompted a strong position over oil-land ownership with rationalization efforts triggering a debate over tighter regulation. Globally, the 1909 oil survey proved instrumental in tilting the balance of power towards the "permanent public good" and against the "merely temporary private gain" (Roosevelt, 1909:4).
