Congress Gets Serious About Geological Sequestration (Part 2)
This is the second post in a two-part series reviewing recent congressional efforts to encourage development of the carbon capture and sequestration (CCS) industry in the US. The first post addressed the House Climate Bill, H.R. 2545, that recently cleared the House Energy and Commerce Committee. This post focuses on two recently introduced Senate bills, the Department of Energy (DOE) Carbon Capture and Sequestration Program Amendments Act of 2009, S.1013, and the Responsible Use of Coal Act, S. 1134. Both offer additional perspectives on policy approaches to promote CCS.
In the Senate
While all eyes have been on the House Energy and Commerce Committee in the recent push to send The American Clean Energy and Security Act of 2009 (ACES), H.R. 2545, to the House floor, the Senate also has introduced several alternative (or complementary) bills to promote the development of the US CCS industry. Two recently introduced Senate bills offer interesting counterpoints to the CCS provisions contained in the ACES. These bills, combined with a recent Senate Hearing on CCS, suggest that Congress is developing an awareness of the range of legal and policy issues that could influence the future of CCS and the US coal industry.
S. 1013
On May 7, Senator Jeff Bingaman (D-NM), Chairman of the Energy and Natural Resources Committee, introduced S. 1013, the Department of Energy (DOE) Carbon Capture and Sequestration Program Amendments Act of 2009. The 14-page bill would build on the existing federal carbon capture and storage research development program by providing technical and financial assistance for up to 10 different CCS projects, with a goal of demonstrating the capability for sites to capture and store at least 1 million tons of carbon dioxide each year from industrial sources. DOE would provide the funding through competitively-awarded, cooperative agreements. The agreements would be subject to all applicable regulatory requirements, as well as additional financial assurance and post-injection closure and monitoring requirements. Most notably, and unlike other measures under consideration, the bill would authorize DOE to enter into long-term liability indemnification agreements for selected projects, assume title to CCS sites for long-term stewardship efforts and charge fees to cover the cost of the long-term liability protection. The challenge of managing risk and long-term liability at CCS projects with a thousand-year storage life was avoided previously, so the Bingaman bill provides an important starting point for addressing this issue.
S. 1134
On May 21, Senator Robert Casey (D-PA) introduced the Responsible Use of Coal Act, S. 1134, which would authorize $3.8 billion for additional CCS and related clean coal research and development cost-share projects, including-
- $1.45 billion for a CCS demonstration program
- $420 million to support research into improved carbon capture technology
- $820 million for research into geological storage for enhanced oil and natural gas recovery and carbon sequestration
- $1.12 billion for advanced clean coal power technologies.
Technically and economically feasible CCS is essential given the extent to which electricity generation in the U.S. comes from coal, especially in the face of future climate legislation (or EPA-driven climate regulations). Senator Casey’s bill would provide additional research and development to expedite CCS development.
May 14 Hearings
Beyond the pending bills themselves, a recent hearing on CCS in the Senate Energy and Natural Resources Committee offered constructive dialogue on the challenges and requirements to support widespread commercialization of CCS technologies. The hearing brought together a mix of federal, state, industry and public interest witnesses. Some notable points raised during the hearing included the below.
- Lowering Cost of CCS Operation: Current estimates indicate that CCS increases the cost of electricity generated in new pulverized facilities by 80% and in advanced gasification facilities by 35%. DOE’s Office of Fossil Energy hopes to reduce these costs to 30 percent and 10 percent, respectively. Along with the capital costs of installing CCS equipment, the cost of CCS system operation is a major economic barrier to widespread adoption of CCS on both new and existing electric facilities.
- CO2 Transportation Infrastructure Needs: DOE’s Office of Fossil Energy is sponsoring a study by the Southeast Regional Carbon Sequestration Partnership (SECARB) and the Interstate Oil and Gas Compact Commission (IOGCC) to evaluate the legal and regulatory feasibility of developing a pipeline infrastructure in the U.S. dedicated to the transport and storage of CO2. As ClimateIntel noted in its earlier post, developing a network of CO2 transport pipelines is necessary to implement CCS technology in areas with limited access to nearby geological storage capacity. The original Waxman-Markey Discussion Draft provided for such a pipeline study. The revised Waxman Markey Bill, H.2454, removed that provision, perhaps as a result of DOE’s commitment to support the study.
- Clarifying Subsurface Property Rights: Federal, state and private witnesses addressed the need for state or federal officials to develop a workable scheme for allocating property rights for pore space, the tiny spaces in and between subsurface rocks that can store oil, water or injected CO2. Currently, subsurface property rights are handled on a state-by-state basis. States with significant oil, gas or mineral extraction tend to have more established rules governing allocation of subsurface rights. Even there, however, existing property rights are not always suited to address injection rights rather than extraction rights. This patchwork property right structure could impede the development of future geological sequestration storage sites on a national scale.
- Long-Term Liability and Moral Hazard. Hearing witnesses agreed that managing long-term liability at CCS sites was a key policy issue in any CCS regulatory framework. In the short-term, the government may need to take a larger role in helping the CCS industry estimate and hedge against uncertain long-term risks and risk management costs. Parties generally agreed that what may make sense for early movers may not make sense once the CCS industry (and the supporting private-sector risks management tools) have evolved.
Notably, the draft bills and the related hearing discussions in the Senate address many of the specific issues ClimateIntel identified as deficiencies in the final Climate Bill awaiting action on the House floor. If the Senate and House can find a way to merge some of the ideas that currently reside in the various bills and testimony between the two chambers, Congress could be on its way to developing a fairly comprehensive package of CCS legislation that advances the interests of both coal and climate advocates.