Technology Deployment within a Complex World: Carbon Capture and Sequestration

1. Technology Deployment within a Complex World: Carbon Capture and Sequestration Elizabeth Wilson Humphrey Institute of Public Affairs University of Minnesota Presentation for Moving Toward Sustainable Energy Systems University of Minnesota October 24, 2006

2. Dialogue on technology embedded • Main points for this talk: • Emerging energy technologies will be deployed within a complex regulatory, legal, and lumpy political world • Technologies have stumbled: GMO’s, nuclear energy, stem cell research, biotechnology • Research must address legal and regulatory system demands • Regional and state differences will matter • Comparative advantage • Local role in technology governance is key for deployment • Specific example for carbon capture and sequestration

3. Larger Climate and Energy Context • Climate • Larger (national and international) accounting and credit system for avoided CO2 – Fungible credits • CO2 injected for CCS must count • Who gets credit? Who bears liability? How does this change over time? • Energy • Rolled out within larger regional energy planning activities • Regional differences within natural resources, experience with underground injection • BAU by 2050, using 2x today’s coal (2+ billion tons), producing ~5 billon tons of CO2 • At the end of the day, the ratepayer (or taxpayer) will pay… 100 $/tC • Political life of Public Utility Commissioners in the U.S.

4. Legal issues • liability • short and long term • property ownership and damages • public assumption of long-term liability • Regulatory environment • energy policy • underground injection • climate/carbon policy • radar and right of ways • Technical Considerations • technology fit within electric sector • siting issues • transmission concerns • overall system stability New Energy Technology • Public Perception • environmental justice • risk perception • risk acceptance • fairness • NIMBY • Policy Considerations • budgets • Congressional/Executive Priorities • agenda setting at state/local government • existing institutional mandates • Economic • cost of electricity • cost of new energy tech. • cost of capital • investment profile

5. How is this important for Carbon Capture and Sequestration? • Technology overview • Regulatory framework • Liability framework • Specific state-level considerations • Final thoughts

6. Geologic carbon sequestration • Carbon Capture and Sequestration may make it possible to use fossil fuels with drastically reduced CO2 emissions • Two parts: Capture and Sequester • Already happening at Sleipner (North Sea), Weyburn (Canada), In Salah (Algeria), with other projects planned • Large volume of CO2 to be sequestered • Approximately 5-10 million tons of CO2/year from a 1-GW coal fired power plant, lifetime areal extent of CO2 ~100km2 (40 mi2), subsurface pressure effects felt over 1,000’s of km2 • Goal of technology: sequester large volumes (millions-billions of tons) of buoyant CO2 for hundreds to thousands of years while protecting pubic and ecologic health

7. Basics of geologic sequestration • CO2 is injected as a supercritical fluid into high permeability zones of sedimentary basins • CO2 is more buoyant than receiving fluids and will be trapped between low-permeability confining layers • Over longer times, dissolution (tens-hundreds of years) and mineralization (thousands to hundreds of thousands of years) • Natural CO2 reservoirs have stored CO2 for hundreds of thousands of years • Regional hydrodynamic flows over long time-frames (tens of thousands to millions ofyears) Source: USGS

8. IPCC Special Report on Carbon Capture and Sequestration, 2005 • Role of CCS in future energy system, 15-50% of CO2 reductions for stabilization • Estimated cost of technology ~100 $ /tC (29 $/tCO2) • Cost ranges from 6-60 $/ton CO2 (Dooley, 2006) • Could reduce cost of emissions stabilization by 30% • 99% of injected CO2 very likely to likely to remain in subsurface

9. Liability

10. Regulation and liability tied to risk CO2 Risks Local Global • CO2in atmosphere or shallow subsurface • Suffocation of humans or animals above ground • Ecosystem impacts below ground (tree roots, burrowing animals) • CO2 dissolved in subsurface • Mobilization of metals or other contaminants • Contamination of potable water • Interference with deep subsurface eco-systems • Quantity-based • Ground heave • Induced seismicity • Contamination of drinking water by displaced brines • Damage to hydrocarbon production Release of CO2 to the atmosphere

11. Project siting Project operation Closure Long term care ~100-1,000 yrs Operator/Public Time frame? Project developer Operator Active CO2 Injection Public? Active MMV Passive MMV? CCS Project Life Cycle and Potential Liability Project Time-line Liability associated with Hydrocarbon Groundwater Leakage to surface EH&S, climate Liability associated with Hydrocarbon Groundwater Leakage to surface EH&S, climate Liability associated with Hydrocarbon Groundwater Leakage to surface EH&S, climate Geophysical liability Large and legal reservoir

12. CCS and liability, the importance of subsurface property rights • Many countries, subsurface and mineral rights are owned by the crown • However, it might be illegal in some… • No institutional experience • In U.S. private ownership of minerals (severed from surface estate) • In many jurisdictions pore space is owned by the surface owner • Potential liability for groundwater or hydrocarbon damage • Texas and California

13. Transition Management towards a sustainable energy economy • Larger policy objectives • Institutional changes • Local policies and enforcement to ensure transition • What are implications for • India? • Europe? • U.S.?

14. Conclusion for New Energy System Deployment • If CCS (or any other New Energy Technology) is to play a major role what types of policy incentives/structure are necessary? • Regulatory and legal • Public acceptance • Company incentive, financial security • Climate policy and carbon market

16. This is not true of carbon dioxide or most other greenhouse gases. As CO2 lasts ~100 years in the atmosphere, stabilizing atmospheric concentrations of CO2 will require reductions in current emissions by at least and order of magnitude (~90%). GHGs are not like conventional pollutants Conventional pollutants (SO2 or NOx) have an atmospheric residence time of just a few hours or days. Stabilizing emissions of these pollutants results in stabilizing their concentration. Source: Morgan, 2006

17. Interactions between regulatory, legal, and public perception Public Perception Congressional priorities Ownership, interests, past Regulatory Legal Liability, insurance, causality

18. Conclusion for CCS: Easy, basic bounding research questions for reducing uncertainty affecting regulatory and liability concerns • How far CO2 pool (pressure influence) will spread • How CO2 can affect drinking water • In different formations • Directly and indirectly • Mobilizing other organic constituents • Within old plumbing systems • DOES THIS EVER COMPROMISE DRINKING WATER STANDARDS or WATER TASTE? • How much CO2 can leak • From abandoned wells • From range of faulting zones • How leakage can be remediated and how much it will cost • To groundwater • To surface

19. Legal Considerations: FutureGen RFP CO2 Title and Indemnification The offeror should discuss the extent to which it can or is willing to take title to the injected CO2 and/or indemnify or otherwise protect the FutureGen Industrial Alliance and its members from any potential liability associated with the CO2. Offerors may discuss other alternatives such as a state-law mandated cap on liability, use of a state-instituted insurance program, or use of a state-mediated bonding program similar to that used for the installation of an underground gas storage field or well storage subject to the UIC program or mine reclamation. FutureGen RFP (emphasis added)

20. SB 1151: McCain-Lieberman • (4) address non-permanence and risk of release of sequestered greenhouse gas by-- • (A) establishing guidelines for risk assessment of inadvertent greenhouse gas release, both long-term and short-term, associated with geological sequestration sites; and • (B) developing insurance instruments to address greenhouse gas release liability in geological sequestration. • McCain-Lieberman (SB 1151)

22. Decision driven risk characterization • Basic premise: risk characterization (and research) needs to be geared towards deployment needs • Driven by regulatory, legal and public perception demands • Leakage, water quality (direct and displacement), remediation • Development of basic “sniff test” metrics (too much information = NO) • Iterative nature of activity for new technology • Role of pilot and large scale basin characterization helpful to bound risks and begin to integrate knowledge within institutions • Scientific foundation as input to support public decisions • DO research that is relevant for developing regulatory, and legal, social and political parameters with goal of appropriate deployment

23. Regulation and liability tied to risk Source: Benson and Hepple, 2004

24. Public perception studies on CCS • Most people don’t know about this technology yet • Opportunity and risk (ocean sequestration cautionary tale) • Public perception of risk not based upon rational and objective measures • Concerns: leakage, property values, water • NUMBY– “Not Under My Backyard” • Location: key in siting • especially important for first few projects • Perceived fairness • Public involvement in siting/permitting? • Characteristics of opposition: Local or national • Moral considerations: Future generations

25. Public perception • Global benefit with potential local risks • Media coverage of technology • Accidents, past experience with similar technologies • Perception of risks • Expert v. public assessment of risks • Prominence of risk • Rule of thumb assessments • Ethics diminishing over distance • Expert trust (coal and oil industry) • Probabilit-ish • Acceptability of technology within larger energy policy context

26. (Palmgren et al. 2004)

27. (Palmgren et al. 2004)

28. Regulatory considerations • Additional information is needed for current framework to meet future regulatory demands • Siting • In situ CO2 behavior • Long term performance • Long term leakage • What types of *simple* tests or metrics could be developed to help regulators evaluate projects? • Sensitivity and uncertainty methods to bound risk • Too much information = NO

29. Key Legal Considerations • Liability regimes • Long term and in situ damage • Climate liability and accounting system • Public assumption of liability • Compensation fund– similar to abandoned wells program adequate? • Large and legal • Oil and gas production -- Unitization – making injection efficient, protection from liability • Natural gas storage – power of eminent domain • GS in saline aquifers…federal lands potentially more attractive • Implications/affordability of remediation options on liability regime

30. Regulatory Considerations for GS • Protecting public and environmental health and larger climate regime • Current underground injection managed by EPA’s Underground Injection Control Program, authorized by Safe Drinking Water Act • Focus of regulation • Groundwater protection underlies current regulatory framework • Operational strategy: Keep harmful substances away from public supplies of drinking water

31. One policy consideration for CCS • CCS, electricity planning and the map… • Political plays important • Other technologies • State resources • View of industry within states Source: IPCC SR CCS, 2005