Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

The Environmental Protection Agency proposed a rule yesterday that would exempt carbon dioxide injected into underground carbon capture & storage (CCS) wells from regulation as hazardous waste, so long as the CO₂ is held in wells designated for that purpose under the Safe Drinking Water Act.  In its press release announcing the program, EPA noted that the purpose of the regulation -- as well as its prior rulemakings under the Clean Air Act to require emissions reporting by CCS facilities, and the Safe Drinking Water Act to require appropriate siting, construction and monitoring of CCS wells -- was to reduce barriers to the use of CCS and promote the technology, which has yet to be proven at a commercial scale.  If the EPA is behind it, what more could CCS need? 

The interagency task force charged with evaluating barriers to CCS concluded in a report released last year that the chief obstacle for CCS was regulatory uncertainty, since most of our environmental laws do not contemplate such a technology.  The task force recommended that EPA implement regulatory changes such as this hazardous waste clarification. 

But the biggest barrier remains -- without comprehensive climate legislation and a price on carbon, there is no stable framework to encourage investment.  And this barrier is taking its toll.  This uncertainty is why AEP recently shelved plans to build a $668 million CCS retrofit on its Mountaineer coal-fired electric plant in West Virginia.

Although the outlook for CCS projects within the U.S. is thus uncertain, the United Nations' support of the technology could prompt some CCS projects in developing nations.  E&E reports today that a decision to allow CCS projects to be eligible for credits under the Clean Development Mechanism may soon be forthcoming, if technical issues such as monitoring and verifying reductions, and environmental safety and insurance coverage can be resolved.  

Other international organizations are also jumping on the CCS bandwagon.  A recent report by the International Energy Agency's Greenhouse Gas R&D Program touts the potential benefits of combining CCS with biomass facilities, particularly in Asia and Latin America.  The IEA theorizes that because the plant life used to make biomass fuels absorbs CO₂ from the atmosphere, subsequent storage of the CO₂ released from highly efficient biomass processes could actually reduce global atmospheric concentrations of carbon.  It's like how celery has negative calories.

The report asserts that we technically have the potential to annually remove from the atmosphere up to 10 gigatons of CO₂ -- or about 1/3 of annual global emissions -- through the use of biomass integrated gasification combined cycle plants and CCS.  A more economically-feasible implementation of these nascent technologies would still lead to reductions of 3.5 metric gigatons of CO₂ annually.  Notably, even this "feasible" scenario assumes that CO₂ will be priced at 50 euros ($71) per ton, worldwide.  Even in dreams of what could be, the development of CCS still has to face the obstacle of the price on carbon.

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One thing supporters of coal will be thankful for tomorrow is this week's announcement by the Environmental Protection Agency (EPA) that it has finalized two rules governing the underground sequestration of carbon dioxide.  Both rules are designed to support and facilitate the commercial development of safe, large-scale carbon capture and storage (CCS) technologies, perceived by many to be the best hope for the future use of coal.

The first rule creates a new "Class VI" injection well under EPA's Underground Injection Control Program through the the Safe Drinking Water Act.  Elements of the rule are based on the existing regulatory framework, but tailored to address the unique issues carbon dioxide can create, such as the fact that it floats and moves within subsurface formations, and corrodes its surroundings when combined with water.   Although CCS has been used on a smaller scale for years, such as to facilitate enhanced recovery of oil, the large volumes that are anticipated to be injected as part of a full-scale deployment of the technology present different issues entirely.

The rule provides guidance on some, but not all, of the areas highlighted as in need of further support in the August report of the Interagency Task Force on CCS.  For instance, the rule outlines characteristics for siting CCS wells, requirements for construction and operations, automatic shutoff systems.  It also provides a recommended 50-year monitoring program post-injection as well as clarifying financial responsibility requirements for emergencies, site closure and cleanup.  The rule also provides considerations for transitioning Class II permits for existing enhanced recovery wells to Class VI, based primarily on whether the primary purpose is assisting with the recovery of oil or long-term storage of the CO₂ itself.

The second rule finalizes the requirements for CCS ventures under the mandatory greenhouse gas reporting rule (Subparts RR and UU of 40 CFR Part 98).  The rule requires permit holders to create a plan to monitor, report and verify the amount of CO₂ sequestered, using a mass-balance approach, and could lay the groundwork for those captured tons to become valuable offsets under future policies.  The reporting requirement begins in 2011.

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In February, President Obama tasked the Interagency Task Force on Carbon Capture and Storage with the ambitious goal of overcoming the barriers to widespread, cost-effective deployment of carbon capture and storage (CCS) within the next 10 years.  As the first bold step, the 14-agency and executive department group released its findings in a report on August 12. 

The report concludes that widespread cost-effective deployment of CCS will only occur if the technology is commercially available (i.e. scale-able and cost-effective) and a supportive national policy framework is in place to both fund and regulate it.  The task force believes that,  in the long run, there are no insurmountable technological, legal, institutional or regulatory barriers that will prevent CCS from playing a role in reducing greenhouse gas emissions.  But that does not mean the early years will be easy.  

CCS is a three-step process that includes the capture and compression of CO2 from power plants and industrial sources (usually coal-fired, since their carbon emissions are the most plentiful); transport of the captured CO2 , usually in pipelines; and storage of that CO2 in geologic formations, such as oil and gas reservoirs and unmineable coal seams.   The report points out that technologies for all three components of CCS already exist, and there are four existing commercial CCS facilities in other parts of the world.

The US government has bought in to CCS in a big way, committing $3.4 billion in stimulus funds,  including $1 billion for FutureGen, and just this week, DOE announced 15 projects receiving $21.3 million over the next three years.  

So what is stopping the technology?  The key barrier identified by the task force is the lack of comprehensive climate change legislation.  Without a price on carbon (and a relatively high one, at that), there is no stable framework for investment in the technology.  Even with significant federal funds pouring in, projects of this scale still need private investment.  But legal and regulatory uncertainty, unsurprisingly, make funding the projects a shaky prospect. 

The report concludes that early CCS projects -- like the 5 to 10 DOE-supported CCS demonstration projects slated to begin operations by 2016 -- can proceed under existing laws, but that the experience gained from those initial projects must be incorporated into a new regulatory framework before we embark on more widespread deployment.  

The report lays out a plan for a federal agency roundtable, championed by DOE and EPA, to oversee and continually review the adequacy of technology, incentives, and safety during this initial period.  The plan includes a lot of work for EPA, such as formulating new regulations under the Safe Drinking Water Act and Resource Conservation and Recovery Act that deal with the novel problems posed by storing commercial-scale amounts of pressurized carbon. 

Of course, one of those problems is that the stored gas might escape.  The Task Force also made recommendations on procedures for long-term liability and stewardship, including creation of an industry-financed trust fund to support long-term stewardship activities and compensate parties for damages after site closure.  The report cautions against having open-ended federal indemnification to address the long-term liabilities.

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 As we have already noted, Representatives Waxman and Markey released a 648-page discussion draft energy bill last week that provides the first comprehensive look at how Congress may approach the nexus of energy, job creation, and the environment. Although this bill is only being released in discussion draft form, as the first major energy volley by Congressional Democrats, it will undoubtedly have a major influence on the debate in Washington. 

In addition to the global warming provisions that we posted about last week, clean and renewable energy occupies a significant place in the draft bill.  The first 157 pages are dedicated to energy, with additional provisions scattered throughout. 

Title I, the clean energy section, addresses four broad policy areas: (1) creation of a national renewable energy standard, (2) carbon capture and geologic sequestration (“CCS”), (3) low-carbon vehicles and transportation fuels, and (4) electricity transmission including smart grid technologies. In addition, the draft creates a State Energy and Environment Development Fund ("SEED Fund") to act as a repository for monies received through federal energy programs.  Each of these provisions is an example of how policy leaders are beginning to see synergies between job creation and environmental stewardship. 

We take a deeper dive into the energy provisions after the jump.

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Sometimes it seems as though the days for coal are short. With a new administration that seems truly committed to addressing climate change, it can be difficult to envision a long-run future. 

Other days, coal, like Citigroup, seems too big to fail. Today, I’m in the latter camp. Yesterday, Zurich Financial Group announced that it would provide insurance to cover risks associated with carbon capture and sequestration (CCS) projects. It’s one thing for Congress, where climate change advocates may need votes from coal-state legislators, to support CCS projects, but when the market starts suggesting that CCS projects are viable, it’s time to sit up and take notice.

Time will tell whether CCS really has a future as part of a climate change strategy, but certainly Zurich’s announcement is a positive one for coal.

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