Amended in Senate February 15, 2013

Senate Bill No. 34

Introduced by Senator Rubio

December 3, 2012

An act to amend Section 659 of the Civil Code, to amend Section 51010.5 of the Government Code, to add Section 38572 to the Health and Safety Code, and to add Section 3239 to the Public Resources Code, relating to greenhouse gas, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 34, as amended, Rubio. Greenhouse gas: carbon capture and storage.

(1) Existing law requires the Division of Oil, Gas, and Geothermal Resources of the Department of Conservation to regulate the construction and operation of oil, gas, and geothermal wells. Pursuant to existing federal law, the federal Underground Injection Control (UIC) program, the United States Environmental Protection Agency delegated responsibility to the division to regulate class II wells, which are wells that use injections for, among other things, enhanced recovery of oil or natural gas. The federal UIC program implements regulations that apply to class VI wells, which include wells used for geologic sequestration of carbon dioxide under specific circumstances.

This bill begin delete would end delete , upon the adoption by the State Air Resources Board of a final methodology for carbon capture and storage projects seeking to demonstrate geologic sequestration of greenhouse gases, specifically begin insert would end insert require the division to regulate carbon dioxide enhanced oil recovery projects that seek to demonstrate carbon sequestration under various laws providing for the reduction of greenhouse gas emissions.

(2) The California Global Warming Solutions Act of 2006 requires the State Air Resources Board to establish regulations to achieve specified greenhouse gas emissions reduction goals. The act authorizes the state board to include market-based compliance mechanisms in achieving those reduction goals.

This bill would require the state board, by January 1, 2016, to adopt a final methodology for carbon capture and storage projects seeking to demonstrate sequestration under various laws providing for the reduction of greenhouse gas emissions.

(3) The Elder California Pipeline Safety Act of 1981 vests the State Fire Marshal with the exclusive safety regulatory and enforcement authority over intrastate hazardous liquid pipelines and, to the extent authorized by an agreement between the State Fire Marshal and the United States Department of Transportation, interstate hazardous liquid pipelines.

This bill would additionally vest the State Fire begin delete Marshall end delete begin insert Marshal end insert with the exclusive safety regulatory and enforcement authority over pipelines transporting a fluid consisting of more than 90% carbon dioxide compressed to a supercritical state.

(4) Existing law defines land as begin delete a end delete begin insert the end insert material of begin insert the end insert earth and includes free or occupied space for an indefinite upward or downward distance for the purpose of prescribing ownership of land.

This bill would specify that free space includes pore space that can be possessed and used for the storage of greenhouse gas.

(5) This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

This measure shall be known and may be cited
as the Carbon Capture and Storage Act of 2013.

SEC. 2.  

(a) The Legislature finds and declares all of the
following:

(1) California has established stringent short-term and long-term
greenhouse gas (GHG) reduction goals that are functionally similar
to the federal and international emission reduction goals. Executive
Order S-3-05 committed California to reduce the GHG emissions
to year 2000 levels by 2010 and to year 1990 levels by 2020, and
to 80 percent below the year 1990 levels by 2050, a level consistent
with the current scientific evidence regarding emission reductions
needed to stabilize the climate. The California Global Warming
Solutions Act of 2006 (Division 25.5 (commencing with Section
38500) of the Health and Safety Code) separately obligates
California to reduce GHG emissions to the year 1990 levels by
2020.

(2) The scoping plan adopted pursuant to the California Global
Warming Solutions Act of 2006 recognizes that carbon capture
and storage (CCS) can play a role in helping the state meet its
long-term GHG reduction goals. Cap-and-trade programs
worldwide, including the Kyoto Protocol to the United Nations
Framework Convention on Climate Change (UN Doc.
FCCC/CP/1997/7/Add.1, 37 ILM 22) and the European Union
Emissions Trading Scheme (Directive 2003/87/EC, as amended),
include CCS as a means for compliance. The 2010 Cancun
Agreements under the Kyoto Protocol (UN Doc.
FCCC/CP/2010/7/Add.1) envision that CCS will be able to
generate certified emissions reductions (CERs) under the clean
development mechanism (CDM). The 2011 Durban Platform under
the Kyoto Protocol (UN Doc. FCCC/CP/2011/L.10) provides
modalities and procedures regarding specifically how CCS projects
may generate CERs under the CDM.

(3) The geologic storage of carbon dioxide is expected to provide
an effective means of storing carbon dioxide over geologic time
periods. The Intergovernmental Panel on Climate Change (IPCC),
in its 2005 Special Report on Carbon Dioxide Capture and Storage,
states that “[o]bservations from engineered and natural analogues
as well as models suggest that the fraction retained in appropriately
selected and managed geological reservoirs is very likely to exceed
begin delete 99% end delete begin insert 99 percent end insert over 100 years and is likely to exceed begin delete 99% end delete begin insert 99
percent end insert over 1,000 years.”

(4) The deployment of CCS can materially help California to
achieve its begin delete long term end delete begin insert long-term end insert GHG emission reduction goals.
The International Energy Agency’s 2011 World Energy Outlook
describes CCS as a “key abatement option” that accounts for 18
percent of emission savings in a key modeled scenario. The
International Energy Agency further reports that CCS investment
must be made “now” if emission reductions are to be achieved
economically. The August 2010 report of the President’s
Interagency Task Force on CCS describes the technology as one
that can “greatly reduce” GHG emissions while playing an
“important role in achieving national and global” GHG reduction
goals. In its December 2010 report, the California Carbon Capture
and Storage Review Panel states that “[t]here is a public benefit
from long-term geologic storage of [carbon dioxide] as a strategy
for reducing GHG emissions to the atmosphere as required by
California laws and policies.”

(5) Despite the existence of comprehensive federal CCS
regulations, impediments to the deployment of CCS technology
in California remain, including specific gaps in California laws
and regulation. Many of these gaps are identified and discussed
by the California Carbon Capture and Storage Review Panel’s
December 2010 report. These gaps include clarifying ownership
of the pore space and clarifying regulatory responsibility for
permitting CCS projects.

(6) By exercising a leadership role in CCS technology,
California will position its economy, technology centers, financial
institutions, and businesses to benefit from efforts to reduce
emissions of GHGs through CCS.

(7) California has ample geologic storage capacity for carbon
dioxide. In a 2005 report, the United States Department of Energy
determined that the state has a “huge potential for geological
sequestration capacity.” The study estimated that the saline
formations have a storage capacity of 146 to 840 gigatons of carbon
dioxide. Moreover, those formations also have large numbers of
oil and gas fields and significant potential for carbon dioxide
enhanced oil recovery (CO2-EOR). The CO2-EOR technology is
a proven mature technology that can be used to sequester carbon
dioxide given adequate regulatory oversight.

(8) In another 2005 study, the United States Department of
Energy documented the potential energy production and GHG
storage potential of CO2-EOR technology for California. That
study reached several conclusions, including California has a large
“stranded oil” resource base that will be left in the ground
following the use of today’s oil recovery practices, much of
California’s large “stranded oil” resource base is amenable to
CO2-EOR, application of miscible and immiscible CO2-EOR
would enable a significant portion of the California’s “stranded
oil” to be recovered, and the successful introduction and wide scale
use of CO2-EOR in California would stimulate the economy,
provide new higher paying jobs, and lead to higher tax revenues
for the state.

(9) Carbon dioxide capture is subject to federal regulations. The
United States Environmental Protection Agency (USEPA) regulates
air emissions of GHGs through several regulatory programs,
including the Prevention of Significant Deterioration (PSD) and
Title V permitting programs under the federal Clean Air Act (42
U.S.C. Sec. 7401 et seq.). The USEPA’s PSD and Title V
Permitting Guidance for Greenhouse Gases states that permit
writers must consider CCS technology to be “available” as part of
the five-step Best Available Control Technology assessment
process. Subpart PP (commencing with Section 98.420) of, subpart
RR (commencing with Section 98.440) of, and subpart UU
(commencing with Section 98.470) of, Part 98 of Title 40 of the
Code of Federal Regulations prescribing GHG reporting rules
separately require companies engaged in the injection of carbon
dioxide, geological sequestration of carbon dioxide, or other
CCS-related operations to report their atmospheric emission of
GHGs. These regulations apply in California.

(10) Carbon dioxide transport is subject to comprehensive
federal regulation by all modes, including pipeline, road, or ground.
These regulations apply in California.

(11)  The pipeline transport of carbon dioxide is a proven mature
technology. In its 2005 special report of CCS, the IPCC states that
the “[p]ipeline transport of [carbon dioxide] operates as a mature
market technology (in the [United States], over 2,500 [kilometers]
of pipelines transport more than 40 [million metric tons of carbon
dioxide] per year).” Federal government data demonstrate that
carbon dioxide pipelines have been operated safely. Meanwhile,
the trucking industry has safely transported significant quantities
of carbon dioxide for decades for a variety of commercial end
users, including the carbonated beverage industry.

(12) Carbon dioxide injection and storage is subject to extensive
federal regulations. In December 2010, the USEPA finalized its
class VI regulations (76 Fed. Reg. 56982) under the Underground
Injection Control (UIC) program, and since that time the USEPA
has issued several detailed implementation guidance documents.
Those regulations do not apply unless carbon dioxide is being
injected for the primary purpose of long-term storage into an oil
and gas reservoir and there is an increased risk to underground
sources of drinking water compared to class II operations. The
UIC class VI well program regulations apply in California and are
implemented by the USEPA. The UIC class II well program
regulations apply in California and the USEPA has delegated its
implementation responsibilities to the Division of Oil, Gas, and
Geothermal Resources of the Department of Conservation.

(13) The goals of creating a regulatory framework that ensures
the safe deployment of CCS technology in a manner consistent
with the state’s goals for GHG reduction can best be accomplished
by clarifying the ownership of the pore space and the regulatory
responsibility of permitting CCS projects.

(b) It is the intent of the Legislature to create a clear and
comprehensive permitting regime for CCS projects in California.

(c) In enacting this act, the Legislature does not intend to require
the deployment of CCS technology but only to provide a clear and
certain regulatory structure for CCS projects.

(d) In enacting this act, the Legislature intends to clarify the
Division of Oil, Gas, and Geothermal Resources’ authority to
regulate carbon dioxide injection for enhanced oil recovery
projects, the State Fire Marshal’s authority to regulate carbon
dioxide intrastate pipelines, that free space includes pore space
that can be possessed and used for the storage of greenhouse gas,
and that the remaining provision of this measure applies to CCS
projects and carbon dioxide enhanced oil recovery projects seeking
to reduce a compliance obligation pursuant to the California Global
Warming Solutions Act of 2006 (Division 25.5 (commencing with
Section 38500) of the Health and Safety Code) by demonstrating
simultaneous sequestration of injected carbon dioxide. The
Legislature does not intend to limit or supersede the division’s
authority as it relates to existing or future carbon dioxide enhanced
oil recovery projects that do not seek to reduce a compliance
obligation pursuant to the California Global Warming Solutions
Act of 2006.

SEC. 3.  

Section 659 of the Civil Code is amended to read:

659.  

(a) Land is the material of the earth, whatever may be
the ingredients of which it is composed, whether soil, rock, or
other substance, and includes free or occupied space for an
indefinite distance upwards as well as downwards, subject to
limitations upon the use of airspace imposed, and rights in the use
of airspace granted, by law.

(b) (1) The free space specified in subdivision (a) includes pore
space that can be possessed and used for the storage of greenhouse
gas in the state.

(2) This subdivision does not change or alter the law as it relates
to the rights belonging to, and the dominance of, the mineral estate,
and does not change or alter the incidents of ownership or other
rights of the owners of the mineral estate, including the right to
mine, drill, complete, or abandon a well, the right to inject
substances to facilitate production, the right to implement enhanced
recovery for the purposes of recovery of oil, gas, or other minerals,
or the dominance of the mineral estate.

SEC. 4.  

Section 51010.5 of the Government Code is amended
to read:

51010.5.  

As used in this chapter, the following definitions
apply:

(a) “Pipeline” includes every intrastate pipeline used for the
transportation of hazardous liquid substances, carbon dioxide, or
highly volatile liquid substances, including a common carrier
pipeline, and all piping containing those substances located within
a refined products bulk loading facility that is owned by a common
carrier and is served by a pipeline of that common carrier, and the
common carrier owns and serves by pipeline at least five of these
facilities in the state. “Pipeline” does not include the following:

(1) An interstate pipeline subject to Part 195 of Title 49 of the
Code of Federal Regulations.

(2) A pipeline for the transportation of a hazardous liquid
substance in a gaseous state.

(3) A pipeline for the transportation of crude oil that operates
by gravity or at a stress level of 20 percent or less of the specified
minimum yield strength of the pipe.

(4) Transportation of petroleum in onshore gathering lines
located in rural areas.

(5) A pipeline for the transportation of a hazardous liquid
substance offshore located upstream from the outlet flange of each
facility on the Outer Continental Shelf where hydrocarbons are
produced or where produced hydrocarbons are first separated,
dehydrated, or otherwise processed, whichever facility is farther
downstream.

(6) Transportation of a hazardous liquid by a flow line.

(7) A pipeline for the transportation of a hazardous liquid
substance through an onshore production, refining, or
manufacturing facility, including a storage or inplant piping system
associated with that facility.

(8) Transportation of a hazardous liquid substance by vessel,
aircraft, tank truck, tank car, or other vehicle or terminal facilities
used exclusively to transfer hazardous liquids between those modes
of transportation.

(b) “Flow line” means a pipeline that transports hazardous liquid
substances from the wellhead to a treating facility or production
storage facility.

(c) “Hydrostatic testing” means the application of internal
pressure above the normal or maximum operating pressure to a
segment of pipeline, under no-flow conditions for a fixed period
of time, utilizing a liquid test medium.

(d) “Local agency” means a city, county, or fire protection
district.

(e) “Rural area” means a location that lies outside the limits of
any incorporated or unincorporated city or city and county, or other
residential or commercial area, such as a subdivision, a business,
a shopping center, or a community development.

(f) “Gathering line” means a pipeline eight inches or less in
nominal diameter that transports petroleum from a production
facility.

(g) “Production facility” means piping or equipment used in the
production, extraction, recovery, lifting, stabilization, separation,
or treatment of petroleum or associated storage or measurement.
(To be a production facility under this definition, piping or
equipment must be used in the process of extracting petroleum
from the ground and transporting it by pipeline.)

(h) “Public drinking water well” means a wellhead that provides
drinking water to a public water system as defined in Section
116275 of the Health and Safety Code, that is regulated by the
State Department of begin insert Public end insert Health begin delete Services end delete and that is subject to
Section 116455 of the Health and Safety Code.

(i) “GIS mapping system” means a geographical information
system that will collect, store, retrieve, analyze, and display
environmental geographical data in a database that is accessible
to the public.

(j) “Motor vehicle fuel” includes gasoline, natural gasoline,
blends of gasoline and alcohol, or gasoline and oxygenates, and
any inflammable liquid, by whatever name the liquid may be
known or sold, which is used or is usable for propelling motor
vehicles operated by the explosion type engine. It does not include
kerosene, liquefied petroleum gas, or natural gas in liquid or
gaseous form.

(k) “Oxygenate” means an organic compound containing oxygen
that has been approved by the United States Environmental
Protection Agency as a gasoline additive to meet the requirements
for an “oxygenated fuel” pursuant to Section 7545 of Title 42 of
the United States Code.

(l) “Carbon dioxide” means a fluid consisting of more than 90
percent carbon dioxide molecules.

SEC. 5.  

Section 38572 is added to the Health and Safety Code,
to read:

38572.  

(a) On or before January 1, 2016, the state board shall
adopt a final quantification methodology for carbon capture and
storage projects seeking to demonstrate geologic sequestration.

(b) The methodology adopted pursuant to subdivision (a) shall
be used for the quantification of emissions as part of compliance
obligations under any of the following:

(1) The mandatory reporting requirements adopted pursuant to
Section 38530 begin delete of the Health and Safety Code end delete .

(2) The demonstration of sequestration for the purposes of any
regulation implementing a market-based compliance mechanism
pursuant to this part.

(3) The demonstration of sequestration under the greenhouse
gas emission performance standard established pursuant to Chapter
3 (commencing with Section 8340) of Division 4.1 of the Public
Utilities Code.

(c) The state board shall consult with the Public Utilities
Commission and the State Energy Resources Conservation and
Development Commission on the development of the quantification
methodology, and, to the maximum extent possible, coordinate
the incorporation of the methodology into the emissions
performance standard enforcement processes of those commissions.

(d) The quantification methodology shall include a methodology
for carbon dioxide enhanced oil recovery projects seeking to
demonstrate simultaneous sequestration of injected carbon dioxide.
The methodology shall address multiple modes of carbon dioxide
transportation, including pipeline, rail, and road transportation.
The methodology shall do all of the following:

(1) Ensure that greenhouse gas emission reductions, achieved
pursuant to the methodology, are real, permanent, quantifiable,
verifiable, and enforceable by the state board.

(2) Demonstrate that sites are capable of long-term containment
of carbon dioxide.

(3) Identify and characterize potential natural and manmade
leakage pathways, and provide implementation of appropriate risk
management and corrective actions.

(4) Provide design, construction, and operation parameters to
prevent, mitigate, and remediate the creation or activation of
leakage pathways and the migration of carbon dioxide or fluids
into any zone in a manner not authorized by the methodology.

(5) Minimize fugitive carbon dioxide emissions from carbon
dioxide enhanced oil recovery projects seeking to demonstrate
simultaneous sequestration of injected carbon dioxide.

(6) Provide for post injection closure and the long-term
responsibility for carbon dioxide sequestered.

(7) Verify, monitor, account for, and report carbon dioxide
quantities sequestered, injected, recycled, leaked, vented, and in
any other categories as deemed appropriate by the state board.

(e) The state board shall not quantify any carbon dioxide from
an enhanced oil recovery project seeking to demonstrate
simultaneous sequestration of injected carbon dioxide that is
incapable of transitioning to class VI in accordance with applicable
requirements of the federal Safe Drinking Water Act (42 U.S.C.
Sec. 300f et seq.).

(f)  begin delete The methodology may, utilizing, end delete begin insert Utilizing existing
requirements under federal and state law end insert to the extent possible,
begin delete existing requirements under federal and state law, include those end delete
begin insert the methodology may include end insert surface and subsurface
characterization, monitoring, operational begin delete requirements end delete , reporting,
accounting, and verification requirements begin delete , end delete and begin delete conditions. end delete
begin insert conditions to ensure the accurate quantification of emissions. end insert

(g) In adopting the methodology, the state board shall, to the
maximum extent feasible, harmonize the adopted methodology
with greenhouse gas storage or sequestration quantification
methodologies used by other state, federal, or international
greenhouse gas emission reduction programs if it does not
compromise the ability of the methodology to verify sequestration
or accurately quantify emissions.

(h) This section does not modify, limit, or supersede the
operation of other laws applicable to carbon dioxide capture,
transportation, or underground injection, or their application by
the State Energy Resources Conservation and Development
Commission, the Public Utilities Commission, the Division of Oil,
Gas, and Geothermal Resources, or the California Environmental
Protection Agency begin delete , end delete and its boards, offices, and departments.

(i) In adopting the methodology, the state board shall consider
the potential for direct, indirect, and cumulative emission impacts
that may result from carbon capture and storage projects seeking
to demonstrate geologic sequestration.

SEC. 6.  

Section 3239 is added to the Public Resources Code,
to read:

3239.  

(a) Upon the final adoption of a quantification
methodology for carbon capture and storage projects seeking to
demonstrate geologic sequestration of carbon greenhouse gases
by the State Air Resources Board pursuant to Section 38572 of
the Health and Safety Code, the division shall, under its regulatory
authority to permit class II injection wells in the state pursuant to
the authority delegated to the division pursuant to Section 1425
of the federal Safe Drinking Water Act (42 U.S.C. Sec. 300h-4),
and pursuant to Section 38572 of the Health and Safety Code,
regulate the injection of carbon dioxide at an enhanced oil recovery
project seeking to demonstrate simultaneous geologic sequestration
of greenhouse gases pursuant to the greenhouse gas emission
performance standard under Chapter 3 (commencing with Section
8340) of Division 4.1 of the Public Utilities Code, under the
mandatory reporting of greenhouse gas emissions pursuant to
Article 2 (commencing with Section 95100) of Subchapter 10 of
Chapter 1 of Division 3 of Title 7 of the California Code of
Regulations, or for any regulation implementing a cap-and-trade
program or other market-based compliance mechanism that may
be adopted pursuant to the California Global Warming Solutions
Act of 2006 (Division 25.5 (commencing with Section 38500) of
the Health and Safety Code).

(b) Pursuant to subdivision (a), the division and the State Air
Resources Board shall execute an agreement using a coordinated
and comprehensive regulatory approach, including oversight and
short-term and long-term monitoring requirements and verification,
for geologic sequestration of greenhouse gases during and
following enhanced oil recovery operations.

(c) In developing the regulations pursuant to subdivision (a),
the division shall consider, at a minimum, both of the following:

(1) Whether long-term successful geologic sequestration may
require adherence to standards and methods exceeding existing
enhanced oil recovery and underground injection control practices
and regulations.

(2) Whether all hydrocarbon reservoirs, given the diversity of
California’s geology, well treatment, and production practices,
may not be suitable for long-term successful geologic sequestration.

(d) This section does not modify, limit, or supersede any other
law applicable to carbon dioxide capture, transportation, or
underground injection, or its application by the State Energy
Resources Conservation and Development Commission, the Public
Utilities Commission, the division, or the California Environmental
Protection Agency, and its boards, offices, and departments.

SEC. 7.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to facilitate the sequestration of greenhouse gases as
quickly as possible, it is necessary that this act take effect
immediately.