Current discussions of U.S. and global energy supply refer to oil, natural gas, and coal using several terms that may be unfamiliar to some. The terms used to describe different types of fossil fuels have technically precise definitions, and misunderstanding or misuse of these terms may lead to errors and confusion in estimating energy available or making comparisons among fuels, regions, or nations. This report describes the characteristics of fossil fuels that make it necessary to use precise terminology, summarizes the major terms and their meanings, and provides a brief summary of the United States' endowment of fossil fuels and the relationship between the U.S. fossil fuel energy endowment and those of other nations. Fossil fuels are categorized, classified, and named using a number of variables. It is important to keep in mind that naturally occurring deposits of any material, whether it is fossil fuels, gold, or timber, comprise a broad spectrum of concentration, quality, and accessibility (geologic, technical, and cultural). These characteristics are graphically portrayed in Figure 1 as a resource pyramid. At the top of the pyramid are the deposits that are high quality and easy to access. These deposits have been generally discovered and produced first. Examples of the deposits at the top of the resource pyramid are the large oil deposits of Saudi Arabia and the enormous natural gas deposits of Qatar. Moving down the pyramid, the quality and/or accessibility declines, and production becomes more difficult and expensive. A large oil deposit in the deep waters of the Gulf of Mexico would be further down the pyramid than a comparable deposit on land because of the added expense and technology required to produce it. It is important to note that the deposits at the bottom of the pyramid may be quite extensive. Deposits may be of poor quality or diffuse, but may occur in vast quantities. Examples of fossil fuel deposits that would be found at the bottom of the pyramid are oil shale and methane hydrates (both discussed further under " Sub-Economic Oil and Natural Gas Resources "). Oil shale and methane hydrate deposits contain massive amounts of oil and natural gas, but their mode of occurrence, poor accessibility, and difficult recovery make them difficult to produce and/or sub-economic currently. The economic threshold for producing deposits further down the pyramid is partly a function of commodity price. That threshold is also moved by the development of new extraction technologies that make production feasible at lower cost. For U.S. oil deposits, the resource pyramid ( Figure 2 ) indicates that many of the high-quality, easy-to-find deposits have already been produced. Current proved reserves (see " Terminology ") include many deposits that are of lower quality or with poorer access than some historical production, but which are still economic under current market conditions. As long as demand for oil continues, the exploration and production process will move down the pyramid under the influences of price (including environmental costs in some cases) and technology. Whether the vast deposits of oil shale that are lower on the pyramid will be produced depends on the price of oil, the cost of production (including environmental cost), and the availability of technology to produce it. Although this example is for oil, similar relationships exist for natural gas and coal. A search for energy statistics in the literature quickly reveals a large number of terms used to describe amounts of fossil fuels. Most of these terms have precise and legitimate definitions, and even a careful comparison of statistics for diverse forms of fossil fuels can become quite difficult to reconcile or understand. Not only do oil, natural gas, and coal occur in many diverse geologic environments, but each commodity may occur in different modes or in different geologic settings that impose vastly different economics on their recovery and delivery to market. A vocabulary of terms has developed over the decades to capture the nature of deposits in terms of their likelihood of being developed and their stage of development. Examples of terms used for fossil fuel deposits (not an exhaustive list) include Proved reserves Probable reserves Possible reserves Unproved reserves Demonstrated reserve base Undiscovered resources Probable resources Possible resources Speculative resources Potential resources Technically recoverable resources Economically recoverable resources Definitions for several of these terms are included in the Appendix . It is important to note that no systematic statistical data exist for most of these categories. Although data for more categories may be available in the future, the critical categories for which data are currently collected and compiled are proved reserves and undiscovered resources. It is critical to understand some key distinctions among these categories in order to understand statistical reporting of oil and natural gas. The first key distinction is between proved reserves and undiscovered resources; the second key distinction is between conventional and unconventional deposits of fossil fuels. For oil and natural gas, a major distinction in measuring quantities of energy commodities is made between proved reserves and undiscovered resources. Understanding these terms will help avoid confusion about statistical energy data. Proved reserves are those amounts of oil, natural gas, or coal that have been discovered and defined at a significant level of certainty, typically by drilling wells or other exploratory measures, and which can be economically recovered. In the United States, proved reserves are typically measured by private companies, who report their findings to the Energy Information Administration (EIA), and to the Securities and Exchange Commission because those reserves are considered capital assets. Because proved reserves are defined by strict rules, they do not include all of the oil or gas in a region, but only those amounts that have been carefully confirmed by drilling or some other geophysical technique. Because proved reserves are, by definition, economically recoverable, the proportion of the oil in the ground that qualifies as proved reserves increases when prices are high, and decreases when prices are low. That is, even without new discoveries, oil that may be sub-economic at $70 per barrel might become economic at $100 per barrel and so the total proved reserves increase simply because price increases. In addition to the volumes of proved reserves, there are other deposits of oil and gas that have not yet been discovered, which are called undiscovered resources. The term "resource" has often been used in a generic sense to refer to quantities of energy (or other) commodities in general. Observers may refer to resource-rich nations, or speak about a large resource base, for example. But the phrase "undiscovered resources" has a specific meaning. Undiscovered resources are amounts of oil and gas estimated to exist by examining geologic characteristics in unexplored areas. Certain geologic processes and characteristics are required for the formation and accumulation of hydrocarbons, and careful geologic study can reveal whether those characteristics exist in a particular area, and whether the potential for hydrocarbon resources is large or small. The proportion of undiscovered resources that might be recovered is determined by comparing the area with production wells in a known area and volumes are constrained by current technology and production practices. Thus the phrase "undiscovered technically recoverable resources" (UTRR) refers to estimates of oil and gas that might be produced in the future using current proven technology, but without regard to cost. The cost factor is an additional applied to UTRR to determine the "economically recoverable" resources for an area, which are reported as separate figures. Estimates of undiscovered resources for the United States are made by the U.S. Geological Survey for resources on land, and by the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement (formerly the Minerals Management Service) for resources offshore. These assessments are based on observation of geological characteristics similar to producing areas and many other factors. Reported statistics for undiscovered resources may vary greatly in precision and accuracy (determined retrospectively), which are directly dependent upon data availability, and their quality may differ for different fuels and different regions. Because estimates of undiscovered resources are based partly on current production practices, they are generally reported as undiscovered technically recoverable resources. Another term sometimes used in the fossil fuels literature is "in-place" resources. In-place resources are intended to represent all of the oil, natural gas, or coal contained in a formation or basin without regard to technical or economic recoverability. Because only a small proportion of the total amount of the fossil fuel in a deposit is ever recovered, there are often large discrepancies between volumes of in-place resources and the proportion of those resources that are technically recoverable. In-place resource estimates are sometimes very large numbers, which may be misleading if the reader does not appreciate that usually only a small proportion of the in-place volume of a resource can ever be produced or recovered. Research by a USGS geologist during the 1980s and 1990s revealed that a rock formation in the Williston Basin of North Dakota, South Dakota, Montana, and southern Canada contained an abundance of hydrocarbons dispersed throughout layers of shale and sandstone. The numbers reported were quite impressive; estimates of 271 to 503 billion barrels of oil attracted the attention of the oil industry. However, those estimates, while huge, represented "in-place" oil. That is, the total volume of oil was huge, but it was disseminated throughout thousands of square miles of shale and only a small portion of that total would be technically recoverable using technologies available at that time. With the development of new production technologies, some of the oil in the Bakken Formation has become producible and, subsequently, the USGS has conducted a more detailed and thorough estimate of the technically recoverable resources. USGS now estimates that the Bakken Formation contains 3.65 billion barrels of undiscovered technically recoverable oil and 1.85 trillion cubic feet (tcf) of undiscovered technically recoverable natural gas. These estimates are still substantial in volume, and production in the Bakken Formation is increasing. But the gap between estimates of in-place oil and technically recoverable oil demonstrates vividly the importance of knowing what the numbers represent.