Hydrogen Energy California

Low‐Carbon Solutions for California

November 2012

Discussion Topics

Climate Change Solutions

HECA Project Overview

CO2 Enhanced Oil Recovery and Sequestration

HECA Project Benefits

Public Discussion of CCS

HECA Technology and Operations

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Climate Change Solutions

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Energy SourcesEnergy Sources

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Electricity ConsumptionElectricity Consumption

In 2008, US Electricity came from: Coal: 1,994 Terawatt hours

Natural Gas: 877 Terawatt hours

Nuclear: 806 Terawatt hours

Hydroelectric: 248 Terawatt hours

Other renewables: 123 Terawatt hours

Petroleum: 31 Terawatt hours

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Electricity SourcesElectricity Sources

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Emissions SourcesEmissions Sources

There are three ways to reduce carbon dioxide emissions:

1. Efficiency/ conservation

2. Non-fossil fuel energy (renewables and nuclear)

3. Carbon capture and storage

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Reducing Carbon EmissionsReducing Carbon Emissions

• What about wind and solar?

• Why can’t we simply replace all of the existing power generation facilities with renewable sources?

• Industrial uses of energy that will be very difficult to replace with electricity

• Intermittency of wind and solar

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Reducing Carbon EmissionsReducing Carbon Emissions

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Key Findings and MessagesThe following four key actions can feasibly reduce California greenhouse gas emissions to roughly150 MtCO2e/yr by 2050:

1. Aggressive efficiency measures for buildings, industry and transportation to dramatically reduce per capita energy demand.2. Aggressive electrification to avoid fossil fuel use where technically feasible.3. Decarbonizing electricity supply while doubling electricity production, and developing zero-emissions load balancing approaches to manage load variability and minimize the impact of variable supply for renewables like wind and solar.4. Decarbonizing the remaining required fuel supply where electrification is not feasible.

Leaving any of these off the table will significantly increase the 2050 emissions.

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• Fossil fuel with carbon capture and sequestration (CCS) would modify an existing electricity pathway to provide a transition to the future, but relies on the large-scale development of a system of underground CO2 storage.

• CCS is likely to be an important part of several possible schemes to provide hydrogen, low-carbon fuels or offsets that allow continued fossil fuel use.

For California, the utility of CCS in achieving a low carbon fuel portfolio could be as important as the utility of CCS for electricity production per se.

HECA Project Overview

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Need for HECA in CaliforniaNeed for HECA in CaliforniaNeed for HECA in California

California 2050 GHG Policy Goals

Low-carbon baseload power and low-carbon manufacturing are essential to achieve State’s 2050 GHG Goals

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1990 2000 2010 2020 2030 2040 2050

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TargetBaseline

2020 Target

2050 Target

Implications for California by 2050:

• Need to nearly eliminate all GHG emissions from electricity sector

• Need to transform all transportation fuels to low to zero carbon

• Need to dramatically reduce or eliminate carbon footprint of all manufacturing, including fertilizers

Hydrogen Energy California (HECA) combines commercially demonstrated technologies into an integrated facility that will convert coal and petroleum coke to hydrogen to generate electricity, manufacture fertilizer, and capture carbon dioxide for expanding the recovery of oil that remains in California’s oil reservoirs.

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What is the HECA project?What is the HECA project?

Project Overview

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HECA Project OverviewHECA Project Overview

• A large commercial scale IGCC power plant with an integrated Manufacturing Complex and Carbon Capture and Storage (CCS).

• A 300MW Combined Cycle Power Plant with flexible baseload generation

− An integrated Manufacturing Complex with multiple fertilizer products

• Enhanced Oil Recovery (EOR) resulting in secure storage of 90% of project’s CO2

• Approximately 3 million tons of CO2 will be sequestered through EOR annually; equivalent to taking 650,000 cars off the road

• SCS Energy LLC− Company history

− PurGen One

• Purchase of HECA from BP and Rio Tinto

• Department of Energy− Hydrogen Energy California and the Department of Energy

modified the Clean Coal Power Initiative Round 3 (CCPI 3) cooperative funding agreement to reflect the modified project configuration.

• Fluor and MHI are executing Front End Engineering and Design.

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A Brief Project HistoryA Brief Project History

• Key project features remain unchanged

• Hydrogen-fueled electrical generation from fossil fuels utilizing 90% carbon capture and storage

• Site location

• Preservation of fresh water for agriculture

• Zero liquid discharge

• Economic benefits

• Enhancements brought by SCS Energy

• Utilizing hydrogen to create additional revenue streams to make cost competitive, clean power.

• Dispatchability of power

• Low-carbon fertilizer manufacturing

• Option for rail spur for feedstock/equipment delivery and product off-take 18

HECA Project ImprovementsHECA Project Improvements

Reliable Fertilizer to Match Demand– The HECA Manufacturing Complex offers flexibility in products and production quantities. HECA

will produce low-carbon urea, UAN and ammonia to support the state’s agriculture economy.

A Much Needed Domestic Supply– U.S. fertilizer production costs are high. By 2020, U.S. demand for fertilizer is projected at 27

million tons per year, while U.S. production will reach only 12-13 million tpy.

– Approximately 32 percent of California’s supply came from foreign imports, which typically incur higher transportation costs. HECA fertilizer production will benefit local ag consumers through increased competition and the lowering of transportation costs.

A Green Method of Fertilizer Production– HECA will have significantly lower carbon emissions than traditional fertilizer manufacturing plants

by preventing the release of 1 million tons per year of CO2 emissions as compared to natural gas fertilizer production facilities.

“This is an innovative business model that improves the economic viability of the project. HECA intends to ramp up the facility to produce more electricity during peak hours of need in order to maximize

the energy and capacity value of the plant. This is an example of the kind of creative thinking we will need to solve the climate crisis.” Michael Peevey, President, CA Public Utilities Commission, May 2012

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HECA Fertilizer ProductionHECA Fertilizer Production

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Site LocationSite Location

Site close to:• CO2 injection

point and geologic storage formation

• Adequate non-potable water supply

• Electric transmission system

Smart Land Use: 453 acre project site with 653 acre farmland buffer

CO2 EOR and Sequestration

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HECA CO2 Sink: Elk Hills Field

Proximity to sink was important siting consideration

Elk Hills Field is well characterized– Part of Strategic Petroleum

Reserve 1912-1998; owned/ operated since by Occidental of Elk Hills Inc. (Oxy)

– 7 potential storage horizons, each with shale seals

– Stevens formation alone has 300+MT CO2 storage capacity

• EOR and Sequestration is very well understood– 40 years of industry experience

with CO2 EOR– Oxy is acknowledged leader in

EOR operations– CO2 EOR pilot tests successful

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Elk Hills Oil Field is well documented and characterized for CO2storage

• Part of Strategic Petroleum Reserve 1912-1998

EOR & Sequestration is well understood

• Nearly 40 years of industry experience with CO2 EOR

• Oxy is acknowledged leader in CO2 EOR operations

Elk Hills is an Ideal location for CO2 EOR and Geologic StorageElk Hills is an Ideal location for CO2 EOR and Geologic Storage

2012, OEHI Project Overview Workshop Presentation

CO2 EOR with Sequestration is a Closed Loop System

24Courtesy: OXY

• 30-50% of the CO2 injected is sequestered in any one “pass”

• Virtually all the CO2 is eventually sequestered in the formation

• Unaccounted CO2 does not leave the system

• CO2 recycling and accounting is an economic imperative!

HECA Project Benefits

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• HECA will produce lower overall air emissions than any conventional power plant of its size.

• HECA will help the state achieve its goals of reducing greenhouse gas emissions from power generation while providing a reliable source of energy that will be available 24/7.

• HECA will recycle petroleum coke, a low value by-product of oil refining.

• HECA will protect and conserve California’s valuable fresh water resources by using brackish, non-potable water for its process needs.

• HECA will further protect the local water supply by eliminating all surface water discharge.

Environmental BenefitsEnvironmental Benefits

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• More than 2,400 jobs at the peak of construction

• $3.4 billion in economic stimulus to Kern County during construction

• 200 permanent jobs at the Project site during operations

• $291 million of annual economic stimulus in Kern County over Project life

Economic BenefitsEconomic Benefits

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• HECA represents a $5 billion investment in California’s infrastructure and construction industries, including:

• A $3.9 billion HECA facility

• Occidental Petroleum anticipates investing at least $1 billion in the Elk Hills Oil Field

• Millions in new tax revenue to the State and County for the life of the facility

• An annual three million tons of CO2 will be captured and utilized for Enhanced Oil Recovery, generating new revenues for Kern County and the state

Additional Economic BenefitsAdditional Economic Benefits

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What People are saying about HECAWhat People are saying about HECA

“(We) became increasingly convinced of the value of the HECA Project, and its environmental benefits to California … it really is a win-win-win-win-win.” – President Michael Peevey, California PUC, 2009

“This project … is an unusual occurrence when the various components of technology and siting come together to provide a world first opportunity…” – Commissioner Bohn, CPUC, Feb 20, 2009

“This is an innovative business model that improves the economic viability of the project. HECA intends to ramp up the facility to produce more electricity during peak hours of need in order to maximize the energy and capacity value of the plant. This is an example of the kind of creative thinking we will need to solve the climate crisis.” Michael Peevey, May 2012

•Carbon capture and storage (CCS) is an essential part of a low-carbon energy economy, mostly for dispatchable, intermittent power generation, fuel production, fertilizer production, and other industrial processes. Retrofitting most existing coal plants in the US is highly unlikely, as many are too old and inefficient. CCS is not an excuse to keep operation our existing coal plants. Polygeneration with pre-combustion capture is an excellent way to make CCS affordable by allocation capital in a more efficient manner. - Daniel P. Schrag, Sturgis Hooper Professor of Geology at Harvard University, Professor of Environmental Science and Engineering, and Director of the Harvard University Center for the Environment. June 2012

HECA Project Schedule – Permitting, Commercial and Financing

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Milestones Completed− Site control of 1,100 acre site outside Bakersfield, California

− $408mm DOE CCPI-3 grant

− Japanese corporate and government project capital support via MHI, Mitsubishi, Mitsui, and JBIC

− Pre-FEED study completed, final FEED study initiated in Sept. 2011

− Permit modifications begun with a joint CEC/DOE process

− Buena Vista process water supply agreement signed

− Agreement for CO2 sales and enhanced oil recovery being finalized

− Negotiations underway for long term fertilizer product off-take agreement

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Project Status & MilestonesProject Status & Milestones

Overall Project Schedule

− Permitting and Engineering Through 2nd Quarter 2013

− Commence Construction 4th Quarter 2013

− Complete Construction 2nd Quarter 2018

− Commence Commercial Operations 1st Quarter 2019

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Project ScheduleProject Schedule

Permit Application Review - CEQA

5.0 Environmental Considerations5.1 Air Quality5.2 Biological Resources5.3 Cultural Resources5.4 Land Use5.5 Noise5.6 Public Health5.7 Worker Safety and Health5.8 Socioeconomics5.9 Soils5.10 Traffic and Transportation5.11 Visual Resources5.12 Hazardous Materials Handling5.13 Waste Management5.14 Water Resources5.15 Geologic Hazards and Resources5.16 Paleontological Resources 33

Permit Application 12 Month Review California Environmental Quality Act and National Environmental Policy Act

Permit Application 12 Month Review California Environmental Quality Act and National Environmental Policy Act

Joint CEQA/NEPA Filing− May 2012: submitted Amended Application For Certification

− May 2012: submitted Authority to Construct Permit Application and Supplemental Information for the PSD Permit Application to EPA and SJVAPCD

− June 2012: deemed “data adequate” by CEC

− June 2012: CEC staff workshop with HECA and Oxy

− July 2012: Informational hearing and HECA site visit completed

− Sept. 2012: SJVAPCD issued completion of application

− Sept. 27th: CEC staff workshop

− November 7th CEC staff and Public workshop

− Over 200 data requests have been addressed or are in progress

− Preliminary Staff Assessment/ Draft EIS expected in 1Q 2013

− Final Staff Assessment/Final EIS filed expected in 3Q 201334

Permitting StatusPermitting Status

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Project FinancingProject Financing

• Equity (25% of Capital)− DOE 40%

− MHI Consortium 30%

− New Equity 30%

• Debt (75% of Capital)− JBIC 60%

− Commercial Debt 40%

Public Discussion of CCS

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California Air Resources Board (November 2012)“ARB will continue to pursues additional protocols that can provide high quality offsets. Further, we must pursue cost effective ways to address climate change over the long term, like carbon capture and sequestration. This includes developing the necessary regulatory framework and quantification methodologies to appropriately account for emission reductions.”

MARY NICHOLS, Chair, California Air Resources Board, November 2012“One of the areas that was mentioned briefly that I just want to highlight because I know it's becoming an increasing conversation topic is the issue of carbon sequestration. And I know that the Board is going to be hearing more about this in the year to come. But I just want to flag the fact that we're aware of the fact that we are going to need to play a part in establishing the kind of protocols that are going to be necessary if carbon sequestration is actually going to work in California and become a cost effective technology.”

We’re eventually going to see need to employ CCS on a large scale in California… if we are going to be able to meet the 2050 goals of AB32.” -President Michael Peevey, California PUC, Feb 20, 2009

California Policy MakersCalifornia Public Policy LeadersCalifornia Public Policy Leaders

A geologic model developed by Lawrence Livermore National Laboratory shows subsurface formations in the San Joaquin Valley, California. Initial assessments of depleted oil fields and saline formations in this area indicate significant carbon storage potential.

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WESTCARB – West Coast Regional Carbon Sequestration PartnershipWESTCARB – West Coast Regional Carbon Sequestration Partnership

Created to represent CCS industry to ensure CCS is part of state’s carbon stabilization program.

Bring voices to the table throughout the state to demonstrate that CCS is practical, effective and safe.

Represent CCS interests in the legislative and regulatory arena, and educate key constituencies and organizations about CCS.

Increase awareness of CCS; encourage the deployment of CCS and incentives for CCS development

California CCS coalitionCalifornia CCS coalitionCalifornia CCS coalitionCalifornia CCS coalitionA Voice for California’s CCS Industry SUPPORTING THE DEPLOYMENT OF CCS TECHNOLOGIES THROUGHOUT CALIFORNIA

California Public Policy on CCS

AB 1925 (Blakeslee) – 2006; directs CEC to study and report on CCS; report issued in February 2008

AB 704 (Huffman) – 2007 NRDC sponsored measure to set policy framework; dies in policy committee without being heard

CCS Review Panel – 2010; stakeholder group issues report on CCS findings, gaps and recommendations

SB 669 (Rubio) – Introduced as “Intent Bill” in February 2011 – Coalition chose not to pursue

SB 1139 (Rubio) – Broad policy support; held in fiscal committee - DEAD

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SB 1139 Support for CCS Legislation

Natural Resources Defense Council (NRDC)

Environmental Defense Fund (EDF)

California State Council of Laborers (AFL-CIO)

California State Pipe Trades Council (AFL-CIO)

California CCS Coalition

California Small Business Alliance

National Federation of Independent Business

California California Chamber of Commerce

California Manufacturers & Technology Association

Western States Petroleum Association

California Taxpayers Association

American Council of Engineering Companies

Southwest California Legislative Council

South Bay Latino Chamber of Commerce

California Black Chamber of Commerce

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Natural Resources Defense Council (NRDC) and Environmental Defense Fund (EDF) are the most active E-NGO’s in support of CCS for climate change mitigation.

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• Governor’s Office

• CA Public Utilities Commission

• California Energy Commission

• CA Dept Of Conservation/DOGGR

• EPA Region IX

• US Department of Energy / NETL

• US Fish & Wildlife

• Cal EPA & Air Resources Board

• Regional Water Quality Control Board

• CA Department of Fish and Game

• State Legislative Representatives

• CA Congressional Delegation

• San Joaquin Valley Air Pollution Control District

• Local and Kern County Schools

•Kern County Planning and Community Development

• Kern County Board Of Supervisors

•State and Local Labor, Trade Organizations

• Local Community Leaders

• Environmental Organizations

• Local Chambers of Commerce

• Area Neighborhood Groups

• Community Organizations

HECA Continues Extensive Outreach to All StakeholdersHECA Continues Extensive Outreach to All Stakeholders

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HECA is Open to Visitors HECA is Open to Visitors

HECA Technology and Operations

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Coal Unloading

Urea StorageUAN Storage

NH3 Storage

Rail Entrance

ASU Gasification & Power Generation

CO2 Compressor &Sulfur Removal

HECA Facility OverviewHECA Facility Overview

Fertilizer Manufacturing

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The Mitsubishi Heavy Industries (MHI) will supply a single oxygen-blown gasifier. Syngas production has increased by about 50% compared to the previous configuration.

• 1 MHI Gasifier (no spare) versus 3 Gasifiers (2 operating, 1 spare)• MHI Water-Cooled Membrane Wall versus Refractory Lined – Improved Availability• MHI Two-Stage versus Single-Stage - Improved Efficiency

The project will use the MHI 501GAC gas turbine in single-shaft configuration (GT/ST/G).

The project now includes the co-production of fertilizers: solid urea and urea ammonium nitrate solution. Ammonia is produced from the shifted syngas (hydrogen) and then converted to the final fertilizer products.

The power block output will vary daily between 100% load and about 65% load. Intermediate ammonia production will swing inversely from 60% to 100%. The gasifier will operate at 100% capacity continuously.

Some of the captured carbon dioxide is used as feedstock for urea (and the remainder is used for enhanced oil recovery.)

Solid urea and urea ammonium nitrate solution production will operate continuously at 100% capacity at a rate consistent with the average ammonia production rate.

Technical and Operational Improvements by SCSTechnical and Operational Improvements by SCS

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Operational CharacteristicsOperational Characteristics

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On a daily average basis, about 2/3 of the syngas is used to produce power.

MAXIMUM POWER PRODUCTION (16 Hours/Day)• Gasifier through Acid Gas Removal operates at 100%

• About 70% of syngas goes to the power block

• Syngas duct burner is on

• PSA and ammonia plant operate at 60%

• Urea and UAN operate at 100% and draw down from intermediate ammonia storage

MAXIMUM AMMONIA PRODUCTION (8 Hours/Day)• Gasifier through AGR operates at 100%

• About 50% of syngas goes to the power block

• Syngas duct burner is off

• PSA and ammonia plant operate at 100%

• Urea and UAN operate at 100% and inventory builds in intermediate ammonia storage

Daily Operation CyclesDaily Operation Cycles

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MAXIMUM POWER PRODUCTION (16 Hours/Day)

MAXIMUM AMMONIA PRODUCTION (8 Hours/Day)

GASIFIER100%

POWER100%

AMMONIA60%

DRAW DOWNSTORAGE

30%

70%

FERTILIZER100%

GASIFIER100%

POWER65%

AMMONIA100%

BUILDSTORAGE

50%

50%

FERTILIZER100%

Daily Operation ModesDaily Operation Modes

On and Off-peak net output (expected)

Characteristics– Maximum plant utilization corresponds to a 16hr/8hr Max/Min cycle

– 60 minute transition between operating modes

– Annual winter maintenance outage with duration alternating between 17 and 31 days duration.

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Generation ProfilesGeneration Profiles

Season Operating Mode

Max Power(MW)

Min Power(MW)

Summer (97 °F) 288 154Winter (39 °F) 277 129Average Ambient (65 °F) 283 139