Overview of the IOGCC Phase II Carbon Capture and Geological Storage Regulatory Task Force

The Interstate Oil and Gas Compact Commission

REDUCING ANTHROPOGENIC SOURCES OF GREENHOUSE GASES

• ENERGY CONSERVATION• INCREASING ENERGY EFFICIENCIES• USE OF RENEWABLE ENERGY SOURCES• USE OF NON-FOSSIL FUEL ENERGY

SOURCES,SUCH AS NUCLEAR, HYDROGEN AND OTHER DEVELOPING TECNOLOGIES

• SEQUESTRATION THROUGH NATURAL PROCESSES OR PHYSICAL STORAGE

Overview StatementsFollowing conservation, geologic storage of CO2 is among the most immediate and viable strategies for mitigating the release of CO2 into the atmosphere. Envision that the report will result in a substantially consistent system for the geological storage of CO2 regulated at the state and provincial level in conformance with national and international law. Given the proposed long-term care-taker role of the states, they are likely to be the best positioned to provide the necessary cradle to grave regulatory oversight of CO2 storage.”

Lawrence Bengal, Chairman of the IOGCC Task Force

Brief Summary of Phase I Work and Recommendations

• Industry and states have 30 years experience in the production, transport and injection of CO.

• States have necessary regulatory analogues in place to facilitate development of a comprehensive CCGS regulatory framework.

• CO2 should be regulated as a commodity to allow the application of oil and gas conservation laws which will facilitate development of storage projects.

• Involve all stakeholders including general public in the development of regulatory frameworks.

Phase II Task Force Objectives

1. Creation of a nationwide guidance document, approved by the IOGCC, which is specific enough to enable each state to develop its own statutes and regulations while at the same time helping to lay the essential groundwork for a state- regulated, but nationally consistent, “cradle to grave” system for the capture and geologic storage of CO2.

2. Provide assistance to Regional Partnership Pilot Projects in (a) understanding and complying with regulatory requirements for field testing and injection; and (b) work with member state in implementing draft model laws and regulations and assessing adequacy of those laws and regulations.

Phase II Task Force ParticipantsBengal, Lawrence E., Chairman

DirectorOil and Gas Commission of Arkansas

Anderson, A. ScottSenior Policy AdvisorEnvironmental Defense, Austin

Bachu, Stefan, Ph.D., P.Eng.Senior AdvisorAlberta Energy and Utilities Board

Baza, John R.DirectorUtah Department of Natural ResourcesDivision of Oil, Gas & Mining

Bliss, KevinTask Force CoordinatorIOGCC Washington Representative

Braxton, Lowell ConsultantInterstate Oil and Gas Compact Commission

Carr, Timothy R.Petroleum Research Section Chief, Kansas Geological Survey

Coddington, KippPartner Alston & Bird Law Firm, Washington, DC

Coombs, Mary JaneResearch CoordinatorCalifornia Institute for Energy & EnvironmentUniversity of CaliforniaOffice of the PresidentWest Coast Regional Carbon Sequestration

Partnership (WESTCARB)Cooney, David Jr.

Environmental Affairs Attorney Railroad Commission of Texas

Curtiss, David K.Manager of International Strategy and Development / Senior Advisor to the DirectorEnergy & Geoscience InstituteUniversity of UtahSouthwest Regional Partnership on Carbon

SequestrationDrahovzal, James A, Ph.D.

Geologist and Section HeadKentucky Geological SurveyMidwest Regional Carbon Sequestration

Partnership (MRCSP) Esposito, Dr. Patrick

Chief Executive OfficerAugusta SystemsSoutheast Regional Carbon Sequestration

Partnership (SECARB)

Phase II Task Force ParticipantsFesmire, Mark E., PE

DirectorNew Mexico Oil Conservation DivisionNM Energy, Minerals and Natural Resources Department

Finley, Robert J.DirectorEnergy and Earth Resources CenterIllinois State Geological SurveyMidwest Geological Sequestration Consortium (MGSC)

Harju, JohnAssociate Director for Research Energy & Environmental Research CenterUniversity of North DakotaPlains CO2 Reduction (PCOR) Partnership

Hansen, ChristineExecutive DirectorInterstate Oil & Gas Compact Commission

Helms, LynnDirectorDepartment of Mineral Resource North Dakota Industrial Commission

Lawrence, Rob *Senior Policy Advisor-Energy Issues

U.S. Environmental Protection AgencyRegion 6 Office, Dallas, Texas

Mankin, CharlesDirctor/State GeologistOklahoma Geological Survey

Melzer, StephenConsulting EngineerMelzer Consulting

O’Dowd, WilliamProject ManagerNational Energy Technology Laboratories

Patchen, Douglas G.Chief GeologistWest Virginia Geological Survey

Perkowski, Joseph C.ManagerEnergy Initiatives Idaho National LaboratoryBig Sky Carbon Sequestration Partnership

* Observer

Phase II Task Force ParticipantsRogers, Marvin

Legal CounselState Oil and Gas Board of Alabama

Salzman, Stephen D. *Deputy Division Chief, Fluid MineralsBureau of Land Management Headquarters, Washington, DC

Smith, MikeAttorney at LawDunlap, Codding & Rogers Law FirmOklahoma

Stettner, Michael D.Sr. Oil and Gas EngineerCalifornia Division of Oil & Gas and Geothermal Resources

Taylor, CammyPetroleum Land ManagerDivision of Oil and GasAlaska Department of Natural Resources

Tew, Berry H. (Nick)State Geologist/Oil & Gas SupervisorGeological Survey of AlabamaState Oil and Gas Board of Alabama

Williams, Michael L.ChairmanTexas Railroad Commission

* Observer

The Task Force strongly believes that treatment of geologically stored CO2 as waste using waste disposal frameworks rather than resource management frameworks will diminish significantly the potential to meaningfully mitigate the impact of CO2 emissions on the global climate through geologic storage.

Appropriate Regulatory Framework

CO2 CAPTURE TRANSPORTATION AND GEOLOGIC STORAGE PROCESS

Existing State and Federal Regs Existing State and Federal

Pipeline Regs.Existing UIC Regs

Long Term Storage Regs Missing

Task Force Guiding Principles

• MUST BE SEAMLESS – maximize economic and environmental benefits, establish “cradle to grave” framework to provide for fully integrated regulatory oversight and clearly identify risk parameters for industry.

• KEEP IT SIMPLE – do not over-regulate for the exotic, initially address what will most likely occur, amend regulations with experience.

• BE FLEXIBLE AND RESPONSIVE – modify as gain knowledge with easy projects, respond to constantly changing technologies, which is a certainty, “one size” will not fit all projects.

• “DOABLE” - implement regulations which can be fielded now, problems will occur, but most are solvable, can not be focused on resolving every conceivable issue before initiating regulations.

• MAINTAIN POSITIVE PUBLIC PRESENTATION – CGS is part of a solution with economic and environmental benefits and not a waste problem waiting for a regulatory protection solution.

Guidance Document Components:• Analysis of Property Rights Issues Related

to Underground Space Used for Geologic Storage of Carbon Dioxide

• Overview and Explanation of the Model General Rules and Regulations

• Model Statute for Geologic Storage of Carbon Dioxide

• Model General Rules and Regulations

STATE ADMINISTERED “CRADLE TO GRAVE” CGS REGULATORY FRAMEWORK

SITE LICENSING AND CERTIFICATION

STATE MODIFIED GAS STORAGE AND UNITIZATION REGULATIONS

SITE AND WELL OPERATIONS

STATE MODIFIED GAS STORAGE AND UIC REGULATIONS

SITE CLOSURE AND WELL PLUGGING

STATE MODIFIED UIC AND GAS STORAGE REGULATIONS

LONG TERM

STORAGE STATE ADMINISTERED MODIFED ABANDONED WELL PROGRAM

INCORPORATE FEDERAL UIC “LIKE” WELL OPERATIONAL REQUIRMENTS IN A STATE RUN PROGRAM (EXCLUDES FEDERAL OVERSIGHT AUTHORITY)

STATE CERTIFICATION AS QUALIFIED CGS PROJECT (INCLD EOR)

Analysis of Property Rights Issues Related to Underground Storage • Control of the reservoir and associated pore space used

for CO2 storage is necessary to allow for orderly development

• The right to use reservoirs and associated pore space is considered a private property right in the United States, and must be acquired from the owner.

• Control of the necessary storage rights should be required as part of the initial storage site licensing to maximize utilization of the storage reservoir.

• In the U.S., with the exception of federal lands, the acquisition of these storage rights, which are considered property rights, generally are functions of state law.

STATE ADMINISTERED FRAMEWORK “CRADLE TO GRAVE” CGS REGULATORY

SITE LICENSING AND CERTIFICATION

OPERATIONAL BOND

SITE AND WELL OPERATIONS

INDIVIDUAL WELL BONDS

SITE CLOSURE AND WELL PLUGGINGLONG TERM

STORAGE

BONDS RELEASED AS WELLS PLUGGED

BOND RELEASED 10 YEARS AFTER INJECTION CEASES

PAYMENT OF STORAGE FEE

STATE ADMINISTERED TRUST FUND ASSUMES RESPONSIBILITY FOR OVERSIGHT AND LIABILITY

STATES CURRENTLY DEVELOPING REGULATIONS USING DRAFT VERSIONS OF MODEL REGULATIONS

• New Mexico

• California

• North Dakota

• Texas

• At least 5 other states beginning work

MMV Components of Draft Regulations• Task Force has proposed a two-stage Closure Period and Post-

Closure Period to deal with long-term monitoring and liability issues. • Operator of the storage site would be liable for a period of ten years

after the injection site is plugged, unless otherwise designated by the state regulatory agency.

• At the end of the Closure Period, the liability for ensuring that the site remains a secure storage site during the Post-Closure Period would transfer to the state.

• A trust fund that is industry-funded and state administered would provide the necessary oversight during the Post-Closure Period. The trust fund would be funded by an injection fee assessed to the Carbon Storage Project operator and calculated on a per ton basis.

Framework – 4 Analogues1) naturally occurring CO2 contained in geologic reservoirs, including

natural gas reservoirs; 2) the large number of projects where CO2 has been injected into

underground formations for EOR operations; 3) storage of natural gas in geologic reservoirs; and 4) injection of acid gas (a combination of H2S and CO2), into underground

formations, with its long history of safe operations. • Together the EOR, natural gas storage, and acid gas injection models

provide a technical, economic, and regulatory pathway for long-term CO2 storage.

• However, owing to the scarcity of post-injection CO2 EOR projects and abandoned natural gas storage fields, inadequate guidance for a long- term CO2 storage regulatory framework exists.

• Consequently, a regulatory framework needs to be established to determine long-term liability and to address long-term monitoring and verification of the reservoir and mechanical integrity of wellbores penetrating formations in which CO2 has been emplaced.

Draft Regulations

The full report can be found at:http://www.iogcc.state.ok.us/