2012 Annual Plan Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research and Development Program Report to Congress August 2012 United States Department of Energy Washington, DC 20585 Department of Energy I August 2012 Message from the Secretary Fueling our Nation's economy by making the most of America's natural gas and oil resources continues to be an important part of our Nation's overall strategy for energy security and a clean energy economy. The Department continues its work toward safe and responsible · development of fossil fuels, while giving American families and communities high confidence that air and water quality, and public health and safety will not be compromised. The EPACT Section 999 program (including the NETL Complementary Research program) coordinates with DOE's ongoing natural gas research and development program within Fossil Energy. The natural gas program is the locus of the Department of Energy's (DOE) natural gas R&D work and is focused on a collaborative interagency effort with the Environmental Protection Agency, and the Department of the Interior. A federal R&D plan is being developed for this collaboration, focusing on high priority recommendations of the Secretary of Energy Advisory Board (SEAB) Natural Gas Subcommittee to safely and prudently develop the Nation's unconventional sale gas and tight oil resources. Each agency will focus on specific core research competencies. In the 2012 Annual Plan, and in light of the interagency collaborative work being carried out in DOE's natural gas R&D program onshore, we will focus on supporting the implementation of the priority collaborative research and development initiative. Offshore, we will deepen the collaboration and coordination with the DOl Bureau of Safety and Environmental Enforcement. A number of initiatives, analyses, and recommendations underpin the 2012 Annual Plan. These include coordination with the high priority work being carried out by DOE, EPA, and DOl related to recommendations from the Secretary of Energy Advisory Board regarding shale gas production, insights from our work with the DOl's Ocean Energy Safety Advisory Committee, recommendations from the DOE Ultra-Deepwater Advisory Committee and recommendations from the DOE Unconventional Resources Technology Advisory Committee. Pursuant to statutory requirements, this report is being provided to the following Members of Congress: • The Honorable John Boehner Speaker, House of Representatives • The Honorable Joseph R. Biden, Jr. President of the Senate • The Honorable Fred Upton Chairman, Committee on Energy and Commerce 2012 Annual Plan I Page i Department of Energy I August 2012 • The Honorable Henry A. Waxman Ranking Member, Committee on Energy and Commerce • The Honorable Jeff Bingaman Chairman, Committee on Energy and Natural Resources • The Honorable Lisa Murkowski Ranking Member, Committee on Energy and Natural Resources If you need additional information, please contact me or Mr. Jeff Lane, Assistant Secretary for the Office of Congressional and Intergovernmental Affairs, at (202) 586-5450. Sincerely, Steven Chu 2012 Annual Plan I Page ii Department of Energy | August 2012 Executive Summary This 2012 Annual Plan is the sixth research plan for the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research Program since the launch of the program in 2007. This plan continues the important shift in priorities towards safety and environmental sustainability that was initiated in the last plan, and is consistent with the President’s Office of Management and Budget directive for research that has significant potential public benefits. Onshore, research on Unconventional Resources will focus on protecting groundwater and air quality, understanding rock and fluid interactions, and integrated environmental protection, including water treatment technologies and water management. For Small Producers, the Program will focus on extending the life of mature fields in an environmentally sustainable way. Offshore, research on Ultra-Deepwater will focus on improved understanding of systems risk, reducing risk through the acquisition of real-time information throughout the various systems, and reducing risk through the development of advanced technologies. The research activities will be administered by the Research Partnership to Secure Energy for America (RPSEA), which operates under the guidance of the Secretary of Energy. RPSEA is a consortium which includes representatives from industry, academia, and research institutions. The expertise of RPSEA’s members in all areas of the exploration and production value chain ensure that the Department of Energy’s research program leverages relevant emerging technologies and processes, and that project results will have a direct impact on practices in the field. 2012 Annual Plan | Page iii Department of Energy | August 2012 2012 ANNUAL PLAN ULTRA-DEEPWATER AND UNCONVENTIONAL NATURAL GAS AND OTHER PETROLEUM RESOURCES RESEARCH AND DEVELOPMENT PROGRAM Table of Contents I. Goals and Objectives ....................................................................................................... 1 II. Background ......................................................................................................................... 5 III. Research Activities .......................................................................................................... 6 IV. Administrative Activities ........................................................................................... 16 Appendix A: Current Projects ............................................................................................... 24 Appendix B: RPSEA 2012 Draft Annual Plan ................................................................. 47 Appendix C: Federal Advisory Committee Comments ............................................. 203 2012 Annual Plan | Page iv Department of Energy | August 2012 I. Goals and Objectives An energy strategy for the future – an all-of-the-above strategy for the 21st century that develops every source of American-made energy. - President Barack Obama, March 15, 2012 The Department of Energy continues its commitment to taking bold steps to move our Nation towards a more environmentally sustainable energy supply portfolio. We will continue to ensure that the Federal Government understands the risks associated with development of unconventional gas onshore and ultra-deepwater resources. Natural gas from shale formations continues to be an important part of U.S. energy supply According to the Secretary of Energy Advisory Board (SEAB)1 natural gas is the cornerstone of the U.S. economy, providing a quarter of the country’s total energy. Shale gas production continues to increase strongly through 2035 in the AEO20112 Reference case, growing almost fourfold from 2009 to 2035. While total domestic natural gas production grows from 21.0 trillion cubic feet in 2009 to 26.3 trillion cubic feet in 2035, shale gas production grows to 12.2 trillion cubic feet in 2035, when it makes up 47 percent of total U.S. production—up considerably from the 16 percent share in 2009. Much of the growth in natural gas production is a result of the application of recent technological advances and continued drilling in shale plays with high concentrations of natural gas liquids and crude oil, which have a higher value in energy equivalent terms than dry natural gas. Shale gas production increases from 5.0 trillion cubic feet in 2010 (23 percent of total U.S. dry gas production) to 13.6 trillion cubic feet in 2035 (49 percent of total U.S. dry gas production). Cumulative natural gas production from 2010 through 2035 in the Early Release Report of the AEO20123 Reference Case is 7 percent higher than in AEO2011, even though the estimated natural gas resource base is lower. This primarily reflects increased shale gas production resulting from the application of recent technological advances, as well as continued drilling in shale plays with high concentrations of natural gas liquids and crude oil. Production levels for tight gas and coalbed methane exceed those in the AEO2011 Reference case through 2035, making significant contributions to the overall increase in production. 1 SEAB, Shale Gas Production Subcommittee 90-Day Report, August 18, 2011, page 1. 2 Energy Information Administration, Annual Energy Outlook 2011. 3 Energy Information Administration, Annual Energy Outlook 2012. 2012 Annual Plan | Page 1 Department of Energy | August 2012 U.S. Natural Gas Production (Lower 48 Onshore) 30 25 20 15 10 Trillion Cubic Trillion Feet 5 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Associated-Dissolved Tight Gas Shale Gas Coalbed Methane Conventional Source: EIA, Annual Energy Outlook 2012 Measures can be taken to reduce the environmental impact and improve the safety of shale gas production The advent of shale gas play development also brings a host of safety and environmental issues. Among the issues are: demand for water for use in fracturing; protection of drinking water aquifers; evaluation of the safety of chemicals used in hydraulic fracturing; environmental impacts resulting from the treatment and/or disposal of produced or fracturing flowback water; air quality impacts; and community safety issues. The SEAB recently presented recommendations to address the safety and environmental performance of shale gas production.4 The DOE is engaged in deeper collaboration with the Environmental