ClimateIntel.com

This is the second of a three-part series discussing select legal or policy aspects of EPA’s proposed rule for regulating commercial scale carbon and capture (CCS) projects, scheduled to close for public comment November 24, 2008.  Friday’s post addressed the proposal’s treatment of financial assurance requirements for project owners and operators.  Today’s post analyzes the proposed standards for care and monitoring of a CCS injection site following closure of the facility.   The final post in the series will analyze the proposal’s treatment of long-term liability issues associated with CCS projects. 

These issues can influence investment in, and public support for, CCS as a climate change mitigation strategy. As such, EPA’s framework must establish the necessary human health and environmental safeguards, without posing unnecessary barriers or costs to deployment of CCS.  In critical respects, EPA’s proposal provide insufficient for stakeholders to evaluate the validity of proposed requirements.

Example 2:  Post-closure monitoring requirements at CCS facilities

With the designed storage life for CCS facilities reaching from hundreds to thousands of years, the time period during which active monitoring and management of CCS sites must continue after sequestration activities cease and closure activities are completed is critical in assessing the practical and economic viability of a specific CCS project. 

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On November 24, the comment period on EPA’s proposed framework for regulating commercial-scale carbon capture and sequestration (CCS) projects under the Safe Drinking Water Act (SDWA) will close.  To date, only 20 stakeholders have commented on the draft rule.  While it is common to submit comments on regulatory proceedings on the deadline, the relatively low stakeholder participation so far is somewhat surprising given the significant role CCS is expected to play in any U.S. effort to reduce carbon emissions - particularly for traditionally coal-driven sectors of the US economy. In light of this surprising occurrence, ClimateIntel will run a three-part analysis of the issues of critical importance to project developers and investors, for which EPA fails to propose serious resolution - even signaling in some cases that decisions will be made through informal guidance. The posts that follow highlight issues that the EPA should address further with stakeholders before issuing its final rule.

Example #1:  Financial Assurance Requirements for CCS Projects

EPA proposes to impose a “general duty” on owners or operators of CCS projects to “demonstrate and maintain financial responsibility and resources” sufficient to cover costs associated with closure and post-closure activities.  73 Fed. Reg. 43537 (proposed as 40 C.F.R. § 146.84(a)).  The costs of financial assurance will depend both on the size and scope of the proposed project and on which financial assurance instruments and options are available to owners or operators under the regulation.  The proposal states only that the Agency “will provide guidance to be developed at a later date that describes the recommended types of financial mechanisms that owners or operators can use to meet this amendment.”  Id. at 43520.

EPA’s failure to clarify its financial assurance policy is notable for two reasons.  First, although EPA already administers financial assurance regulatory requirements governing closure and post-closure of underground injection wells for hazardous waste, hazardous waste treatment, storage, and disposal facilities, and underground storage tanks, EPA’s CCS proposal eschews such precedents, stating:

The [EPA’s Office of the Inspector General]  and [U.S. Government Accountability Office] suggest that EPA may need to update or provide additional guidance in the following areas: Cost estimation methodology; pay-in period for trust funds; the type of insurance provider that may be used; requirements for acceptable surety bonds and/or their providers; and the way by which corporations demonstrate financial strength/credit worthiness…  EPA is considering updating mechanisms for demonstrating financial responsibility for GS projects.

The financial assurance regime established for the CCS facilities is likely to be markedly different from that which investors and industry apply under current business models.

The proposal compounds this uncertainty by suggesting EPA will issue CCS-specific financial assurance standards using mere guidance.  Of even greater concern may be the risk that poorly vetted guidance could hobble US efforts to commercialize CCS when aggressive action is needed to meet US commitments.

To submit comments on EPA’s CCS framework, follow directions provided in the proposed rule.

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Click here to read the next blog post in the three-part series on the proposed rule’s treatment of post-closure monitoring requirements at CCS facilities. 

Also see “With Time Dwindling, Gaps in EPA’s Proposed Carbon Sequestration Framework Remain Unchallenged” for an update on this topic.

In about one month, the Environmental Protection Agency (EPA) will close the comment period on a proposed framework for regulating underground injection and long-term geological sequestration of carbon dioxide (CO2) under its Safe Drinking Water Act (SDWA) authority.  The proposal offers a useful starting point for thinking about many of the technical, policy and legal issues involved in capturing, liquefying, transporting, injecting and storing CO2 deep underground for the next thousand years.  One alarming aspect of the proposal, however, is EPA’s acknowledgment that it still lacks the authority to address many of the most critical regulatory issues related to commercializing carbon sequestration technologies.  If so, neither EPA nor Congress can afford to wait until 2010, when EPA’s final rule is expected, to start filling in the gaps.  (more…)

This week, amidst the dislocations flowing from the global financial markets, lawmakers in the US and EU advanced legislation requiring geological sequestration of CO2 emissions from future coal-fired plants.  It remains to be seen how the unfolding economic landscape may affect the viability of any significant movement on new climate change legislation.  For the moment, however, these proposals are signs that some lawmakers realize that implementing a comprehensive climate change framework in five (or twenty-five) years means laying the legal and regulatory foundation now. 

On Wednesday, October 7, the EU Parliament’s Environment Committee added carbon capture and sequestration (CCS) provisions to the comprehensive climate package scheduled for a vote by Parliament in December 2008.  The provisions establish an “emission performance standard” of 500 grams CO₂ per kilowatt hour for large power plants constructed after 2015 and establish a comprehensive scheme for regulating the carbon capture and sequestration (CCS) sites that likely would be required to meet such a standard.  As part of that scheme, CCS project developers would contribute to a CCS fund during the active life of a sequestration site, and remain liable for a 50-year period after the CCS site is closed.  

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Late last night, the Senate passed the ‘‘Emergency Economic Stabilization Act of 2008,” a 450-page Bill designed to stabilize the highly-publicized crisis within domestic financial markets. Largely lost in the mass of financial stabilization provisions, the Bill also breathed new life into several clean energy provisions that had appeared moribund after public concern about a potential financial meltdown tabled movement on a comprehensive energy bill.

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For clean coal advocates, the energy bill passed in the House Wednesday reflects the tough reality of getting a comprehensive bill passed by the end of the current session.  Speaker Pelosi indicated last week that the House Bill would incorporate the $10 billion funding mechanism for accelerating investment in carbon capture and sequestration (CCS).  On Tuesday when Democrats introduced the bill, the CCS funding provision was gone.  Instead it included modest changes to existing tax credits targeting integrated gasification combined cycle (IGCC) systems, carbon sequestration and other clean coal technologies.  Such changes include:

• Providing an additional $950 million in additional tax credits (based on a credit of 30 percent of the investment) for certain qualified advanced coal projects, and requiring that companies seeking such tax credits provide for capture and storage of at least 65 percent of its carbon emissions (Sec. 811);
• Providing an additional $150 million in additional tax credits (based on a credit of 30 percent of the investment) for qualifying coal gasification projects that include equipment to separate and sequester at least 75 percent of the project’s total carbon emissions (Sec. 812);

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EPA is requesting comments on proposed standards for Underground Injection Control (UIC) of carbon dioxide (CO2) at commercial sequestration facilities. When finalized, these standards should provide commercial sequestration project developers with a more consistent and predictable regulatory environment in which to carry out ambitious carbon capture and sequestration projects.

EPA already regulates most underground injection of liquids, gasses, and slurries under existing SDWA regulations, including programs addressing the use of CO2 in enhanced oil recovery activities and pilot CO2 sequestration projects. Because large-scale injection of CO2 for long-term sequestration raises unique technical and safety issues, however, EPA had previously stated that more targeted regulations for commercial projects would be necessary.

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EPA has announced that it will propose regulatory standards for underground injection wells at commercial-scale carbon sequestration projects tomorrow, July 15, 2008. The announcement strikes a positive note for an Administration that, only four days earlier, announced that it had no intention of taking further action to regulate greenhouse gas emissions under the Clean Air Act.

Under the Safe Drinking Water Act, EPA must review and permit any project that places fluids underground for storage or disposal to ensure that the project will not endanger drinking water sources. To date, EPA has established five classes of underground injection wells, each subject to its own unique set of regulatory standards and requirements for siting, constructing, operating, and closing regulated facilities.

In the absence of a separate standard for commercial CO2 sequestration, EPA has regulated sequestration projects on a case-by-case basis. More uniform standards for carbon capture and sequestration (”CCS”) projects would provide a greater level of certainty to the CCS industry at a time when the US and other G-8 countries are placing great hopes on CCS as pillar of their respective long-term greenhouse gas mitigation strategies.

EPA will release the proposed standards to the press tomorrow at 1:30 p.m., eastern time. Once available, ClimateIntel.com will make the regulations available through this site.

UPDATE 7/15/08: Carbon Sequestration Standards Proposed by EPA

The U.S. Department of Energy (DOE) yesterday announced plans to award $290 million by early December 2008 to advance the development of carbon capture and storage (CCS) technology at coal power plants. This most recent chapter in the “restructuring” of the FutureGen project comes after the Department rejected the billion-dollar, single-site funding model that it had embraced between 2003 and 2007. DOE argues that its shift to multiple smaller grant projects is better for taxpayers and will promote faster commercialization of CCS technology than the larger project.

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Just weeks after the G8 Energy Ministers called for “20 large-scale CCS demonstration projects…to be launched globally by 2010,” the US Department of Energy (DOE) formally withdrew from a 5-year partnership with the FutureGen Alliance to develop a model clean-coal energy facility in the United States. While DOE claims it will continue to support a “restructured” FutureGen project (or group of projects), policymakers are rightly concerned with DOE’s decision. With oil and gas prices at record highs, growing calls for the US to reduce its carbon emissions, and abundant domestic coal reserves that could prove impractical in a carbon constrained economy, the US needs to be on the forefront of developing new clean-coal technologies rather than ceding leadership to Europe or China.

The Original FutureGen

In February 2003, President Bush announced a new public-private partnership project to develop a single 275-megawatt coal-fired electric and hydrogen production plant that would utilize and showcase the latest in clean-coal, carbon capture, and coal-to-hydrogen technologies. With an initial price tag of 1 billion dollars, a five-year schedule for construction, and a goal of 90 percent sequestration, the FutureGen program was an ambitious project intended to boost US efforts to find coal-based solutions to US energy needs and climate concerns.

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