BILL ANALYSIS Ó
SB 1139
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: SB 1139
AUTHOR: Rubio
AMENDED: April 9, 2012
FISCAL: Yes HEARING DATE: April 16, 2012
URGENCY: No CONSULTANT: Peter Cowan
SUBJECT : CARBON DIOXIDE CAPTURE AND SEQUESTRATION
SUMMARY :
Existing law :
1) Defines land as material of the earth regardless of
composition, and includes free or occupied space for an
indefinite distance upwards and downwards. (Civil Code
§659).
2) Under the Elder California Pipeline Safety Act establishes
the State Fire Marshal (SFM) as the designee for carrying
out the federal Hazardous Liquid Pipeline Safety Act for
intrastate hazardous liquid pipelines. (Government Code
§51010 et seq.).
3) Under the California Global Warming Solutions Act of 2006
(CGWSA) requires the Air Resources Board (ARB) to determine
the 1990 statewide level of greenhouse gas (GHG) emissions
and achieve a limit that is equivalent to that by 2020 and
sets several requirements, including the adoption of
mandatory GHG reporting regulations, to meet that
requirement. ARB may also adopt a market-based compliance
mechanism as part of regulations to meet the GHG limit.
(Health and Safety Code §38000 et seq.).
4) Requires the Public Utilities Commission (PUC) in
consultation with the California Energy Commission (CEC)
and ARB to: a) establish the greenhouse gases emission
performance standard (EPS); b) specify various requirements
and considerations for the establishment of the EPS
including that carbon dioxide (CO2) captured from
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powerplant emissions and permanently disposed is not
counted as emissions; c) prohibit any load-serving entity,
or local publicly owned electric utility, from entering
into a long-term financial commitment, unless baseload
generation complies with the EPS. (Public Utilities Code
§8341).
5) Under the federal Safe Drinking Water Act establishes the
Underground Injection Control (UIC) Program for regulating
the construction, operation, permitting, and closure of
injection wells.
6) Establishes the Division of Oil, Gas, and Geothermal
Resources (DOGGR) within California's Department of
Conservation and grants its Supervisor broad authority over
activities related to the recovery of oil and gas including
the injection of air, gas, water, or other fluids into
productive strata. (Public Resources Code §3106).
This bill enacts the Carbon Capture and Storage Act of 2012
that:
1) Specifies that "land" includes pore space that can be
possessed and used for the storage of greenhouse gases.
2) Provides that the SFM exercises exclusive safety regulatory
and enforcement authority over intrastate carbon dioxide
(CO2) pipelines. Defines "carbon dioxide" for the purpose
of this authority to be a fluid consisting of more than 90
percent CO2.
3) Requires ARB on or before January 1, 2015, to adopt a final
quantification methodology (the methodology) for carbon
capture and storage (CCS) projects and requires the
methodology to:
a) Be used for the quantification of emissions as part
of compliance obligations under the CGWSA for any
regulation for the mandatory reporting of GHGs, any
regulation implementing a market-based compliance
mechanism, or any offset protocol for use in regulations
implementing a market-based mechanism.
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b) Include methods for CO2 enhanced oil recovery (EOR)
projects seeking to demonstrate simultaneous
sequestration and address specified modes of CO2
transportation.
c) Be suitable for use for the demonstration of
sequestration under the EPS and requires ARB to consult
with PUC and CEC on the development of the methodology
and the coordination of its incorporation, to the
maximum extent possible, into the EPS certification
process.
4) Requires ARB, to the maximum extent feasible, to harmonize
the methodology with GHG storage or sequestration
quantification methodologies used by other state, federal,
or international greenhouse gas emission reduction
programs. The methodology may include surface and
subsurface characterization, monitoring, operational,
reporting, accounting and verification requirements to be
administered by ARB or other agencies.
5) Requires DOGGR to regulate the injection of CO2 at an
enhanced oil recovery (EOR) project, including EOR projects
seeking to demonstrate simultaneous geologic GHG
sequestration.
6) Provides that the above requirements #3, 4 and 6 do not
modify, limit, or supersede the operation of other laws
applicable to CO2 capture, transportation, or underground
injection, or their application by CEC, PUC, DOGGR, or the
California Environmental Protection Agency.
7) Provides related legislative findings and intent.
COMMENTS :
1) Purpose of Bill . According to the author "SB 1139 seeks to
accomplish the following: recognize the role that carbon
capture and storage (CCS) can play in enabling California
to meet its greenhouse gas reduction goals; acknowledge
that CCS can enhance California's local oil production with
resulting job creation and economic growth; create a
regulatory framework for the planning, construction,
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operation and decommissioning of a CCS project; ensure that
adequate health and safety requirements are met; and that
the risk of unacceptable leakage from the injection and
storage zone for CCS is minimized." The author further
notes: "Currently, there are gaps in the regulatory process
for the permitting of CCS projects within the state which
has caused great uncertainty regarding the permitting of
these projects. Also, the current regulatory framework for
California's climate change management program creates a
disincentive for capturing and permanently sequestering
carbon emissions."
2) Carbon Sequestration : The term sequestration is used to
describe multiple processes that concentrate CO2 and store
or sequester it away from the atmosphere. Terrestrial
carbon sequestration is used to refer to management
practices that cause natural ecosystems, such as forests,
to take up and store more CO2 than they otherwise would.
Geologic sequestration, the subject of SB 1139, is also
commonly called carbon capture and storage (CCS) and
involves collecting and purifying CO2 from large point
sources and injecting it below ground for storage.
Proponents and CCS experts identify two main types of CCS
in California. One is the injection of CO2 into saline
formations that do not contain hydrocarbons, such as oil or
gas, and is estimated by a joint CEC and Department of
Conservation report to have a capacity of tens to hundreds
of metric gigatons of CO2 (statewide emissions are
approximately half a gigaton). Another type CCS, and one
specifically identified in SB 1139 is the injection of CO2
into oil reservoirs, specifically through the use of
enhanced oil recovery (EOR). According to DOGGR, common
types of EOR in California include water flooding, steam
flooding and cyclic steam. EOR is used to increase
production from oil and gas reservoirs. Injection of CO2
has successfully been used in other states and countries to
boost production efficiency of oil and gas by
re-pressurizing the reservoir, and in the case of oil, by
also increasing mobility. CO2 injection into saline
formations requires the use of a Class VI well, while the
CO2 EOR requires a Class II well (see comment #5 below).
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3) Pore Space Ownership . The California Carbon Capture and
Storage Review Panel (CCCSRP), consisting of
representatives from industry, trade groups, academia, and
environmental organizations identifies three options for
determining pore space: "1) a traditional private property
approach, 2) a limited private property approach, and 3) a
public resource approach," and describes the traditional
private property approach taken by SB 1139 as "premised on
the long-standing common law rule that the surface owner
owns the subsurface, subject to considerations such as the
dominance of the mineral estate. This approach?recognizes
that the right to use the pore space for the injection and
sequestration of CO2 is a property right that must be
acquired from the property owner in return for payment."
4) Carbon Dioxide Pipelines . Currently there are no CO2
pipelines in the state. According to a CCCSRP report "CO2
pipelines have been operating in the United States for
almost 40 years, and there are approximately 3,600 miles of
CO2 pipelines in operation today." Under the federal
Hazardous Liquid Pipeline Safety Act CO2 pipelines are
regulated by the Pipeline and Hazardous Materials Safety
Administration, part of the Department of Transportation,
which defines for this purpose CO2 as "a fluid consisting
of more than 90 percent CO2 molecules compressed to a
supercritical state." SB 1139 instead defines CO2 as "a
fluid consisting of more than 90 percent CO2 molecules."
5) Class II wells vs. Class VI wells . Under the federal Safe
Drinking Water Act the federal EPA has designated several
classes of underground injection wells, including Class II
and Class VI.
Class II wells include those used for EOR and other types
of injection wells associated with oil and gas production.
According to the U.S. EPA, "Class II CO2 injection wells
designated for enhanced recovery Ýincluding EOR]? Injection
wells used for ÝEOR] are regulated through the UIC Class II
program." Currently DOGGR does not have regulations
specific to CO2 EOR; however, it does fall under their
existing regulatory and permitting authority for all types
of Class II injection wells.
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Class VI wells were specifically developed by U.S. EPA for
the purpose of CCS. According to the U.S. EPA "The relative
buoyancy of CO2, its corrosivity in the presence of water,
the potential presence of impurities in captured CO2, its
mobility within subsurface formations, and large injection
volumes anticipated at full scale deployment warrant
specific requirements tailored to this new practice."
Currently no state agency has been authorized by the
legislature to apply for primacy over class VI wells and
thus their use in California is regulated by the U.S. EPA.
Class VI regulations do allow for Class II wells to
transition to Class VI wells recognizing that the purpose
of a well may shift from primarily oil recovery to
primarily CO2 sequestration The U.S. EPA is currently
preparing specific guidance on how this transition should
occur.
Because Class II well regulations were not developed for
the purpose of CO2 sequestration it may not be appropriate
at this time to require that CO2 sequestration occurring as
a result of CO2 EOR (a Class II use) be used for compliance
under the CGWSA. The U.S. EPA Class VI well rulemaking
notes that CO2 purchases constitute approximately one to
two thirds of an EOR project cost and thus the volume
injected is carefully monitored, and recovered CO2 is
reused; and while significant amounts of CO2 remains
belowground "Class II EOR requirements do not require
tracking and monitoring of the injectate; therefore, the
migration and fate of the unrecovered CO2 is not
documented." According to the sponsor, SB 1139 intends that
these and other gaps between current Class II regulations
and Class VI wells would be addressed in the methodology
adopted by ARB. However, SB 1139 does not require any
specific safeguards be included in the methodology.
Given Class II wells are regulated by the U.S. EPA and
DOGGR for the purpose of oil and gas recovery and not CO2
sequestration while Class VI wells are specifically
designated for CO2 sequestration it may be appropriate to
strike the requirement that ARB, when developing the
methodology, include methods for quantifying EOR as
sequestration and to strike the requirement that DOGGR
regulate EOR for sequestration (Section 6 of SB 1139). If
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these provisions are retained, amendments are needed to:
a) Require DOGGR to develop regulations for CO2
injection in Class II wells.
b) Ensure that Class II wells used for CCS meet
standards for verification, permanence, monitoring, and
safety similar to those required for Class VI wells.
c) Ensure that Class II wells used for CCS are
constructed and monitored in a way that clearly allows
them to transition to Class VI wells when oil production
ceases.
d) Clarify the liability for CO2 injected during
operation, transition to Class VI wells and
post-closure.
6) Cap-and-trade offsets . Under ARB cap-and-trade regulations,
offsets (a compliance instrument generated by reducing
emissions under specified protocols) can only be generated
from uncapped sectors. This requirement prevents the
double-counting of compliance instruments under the
regulation. Current CCS technology is only effective when
associated with very large point sources, such as power
plants or refineries, all of which would be capped entities
in California. Certain biomass derived fuel stocks are
uncapped and GHG sequestration of those sources may be able
to produce offset without causing double-counting; however,
the smaller scale of these sources do not make them strong
candidates for CCS. Given the limited opportunities for
offset development within California it may be appropriate
to strike the requirement that the methodology be used for
compliance with any offset protocol adopted pursuant to the
CGWSA.
7) Support concerns . According to supporters, SB 1139 by
establishing regulations for CCS "will enable several
projects to move forward that have been stalled due Ýto]
existing regulatory uncertainties that were identified by
the ÝCEC] and ÝPUC]. Removing the gaps in the permitting
process sends the confidence signal necessary to spur
investment in CCS."
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The California CCS Coalition notes that CO2 EOR have been
utilized in more than 100 projects around the country for
30 years and contends that U.S. EPA "has developed
comprehensive regulation for CCS that ensure the protection
of water resources and air quality."
8) Opposition concerns . According to Sierra Club California,
CO2 EOR "injects carbon dioxide into the ground as a means
of retrieving oil. The carbon sequestered in the ground in
the process of retrieving oil would, under this bill, be
counted toward California's established goals for reducing
GHG emissions. However, the GHGs released by the oil
recovered in this process are not taken into account. There
are, according to this bill, significant oil reserves in
California that would be suitable for such a method, and
the amount of fossil fuels made available for consumption
could be a significant source of GHG emissions."
9) Amendments needed . In addition to amendments noted in
comments #5 and #6, amendments are needed to:
a) Require ARB, when developing the methodology, to
consider the potential for direct, indirect, and
cumulative emission impacts. While CCS can greatly
reduce the amount of GHG emissions from a point source,
those reductions do not necessarily translate to
reductions in criteria pollutants. In fact, this may be
exacerbated as additional energy is required to
compress, transport, and store the CO2.
b) Make technical changes so that references refer to
the enacting statute rather than the California Code of
Regulations.
c) Amend findings and declarations to improve accuracy
and fix typographical errors.
10)Related Legislation . SB 669 (Rubio) establishes the CEC as
the lead agency for CCS projects under the California
Environmental Quality Act. An April 28, 2011 hearing by
Senate Energy, Utilities, and Communications Committee was
canceled at the author's request. Other bills amending the
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CGWSA, include: a) SB 1572 (Pavely), establishes the
Greenhouse Gas Reduction Account within the Air Pollution
Control Fund, which is set for hearing April 23, 2012, in
the Senate Environmental Quality Committee; b) SB 143
(Rubio), requires ARB to adopt methodologies for
determining the quantity of greenhouse gas emissions
reduced through specified greenhouse gas emission reduction
programs, which is with the Assembly Natural Resources
Committee; and c) AB 1532 (Perez), establishes the
Greenhouse Gas Reduction Account within the Air Pollution
Control Fund, which is set for hearing April 23, 2012, in
the Assembly Natural Resources Committee.
SOURCE : The California CCS Coalition
SUPPORT : American Council of Engineering Companies,
California Chamber of Commerce, California
Manufacturers and Technology Association,
Western States Petroleum Association
OPPOSITION : Sierra Club California