BILL ANALYSIS Ó
SB 34
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2012-2013 Regular Session
BILL NO: SB 34
AUTHOR: Calderon
AMENDED: April 10, 2013
FISCAL: Yes HEARING DATE: April 17, 2013
URGENCY: Yes CONSULTANT: Rebecca Newhouse
SUBJECT : CARBON CAPTURE AND STORAGE
SUMMARY :
Existing law :
1) Specifies that land is the "material of the earth, 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." (Civil Code §659).
2) Under the Elder California Pipeline Safety Act, establishes
the State Fire Marshal 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
SB 34
Page 2
including that carbon dioxide (CO2) captured from 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 :
1) Adds to the definition of "land" to include pore space that
can be possessed and used for the storage of greenhouse
gases.
2) Provides that the State Fire Marshal 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, 2016, to adopt a final
quantification methodology (the methodology) for carbon
capture and storage (CCS) projects seeking to demonstrate
geologic sequestration and requires the methodology to be
used for the quantification of emissions as part of
compliance obligations for the following:
a) Mandatory reporting of GHGs, pursuant to the CGWSA of
2006;
b) Sequestration demonstration under any regulation
implementing a market-based GHG; and
SB 34
Page 3
c) Sequestration demonstration under the EPS.
4) 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
enforcement process.
5) Requires the quantification methodology to include methods
for CO2 enhanced oil recovery (EOR) projects seeking to
demonstrate simultaneous sequestration and address specified
modes of CO2 transportation.
6) Requires the methodology developed by the ARB do the
following:
a) Ensure that GHG reductions achieved pursuant to the
methodology are real, permanent, quantifiable, verifiable
and enforceable by the ARB.
b) Demonstrate that sites are capable of long-term
containment of CO2.
c) Identify and characterize potential leakage pathways
and provide implementation of appropriate risk management
and corrective actions.
d) Provide design, construction and operation parameters
to prevent, mitigate, or remediate the creation of
leakage pathways and migration of CO2 or fluids into
zones not authorized by the methodology.
e) Minimize CO2 emissions from CO2 EOR projects seeking
to demonstrate CO2 sequestration.
f) Provide for post-injection closure and long-term
responsibility for sequestered CO2.
g) Verify, monitor, account for and report CO2 quantities
sequestered, injected, recycled, leaked, and vented, as
well as other categories the ARB deems appropriate.
7) Prohibits the ARB from quantifying CO2 from a CO2 EOR
SB 34
Page 4
project, seeking to demonstrate simultaneous sequestration
of injected CO2, involving a well that is incapable of
transitioning to a Class IV well.
8) Specifies that the methodology may include surface and
subsurface characterization, monitoring, operational,
reporting, accounting and verification requirements to be
administered by ARB or other agencies.
9) Requires that the ARB harmonize the methodology with GHG
storage or sequestration quantification methodologies used
by other state, federal, or international greenhouse gas
emission reduction programs.
10)Provides that the above requirements 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.
11)Requires that the ARB consider the potential for direct,
indirect and cumulative emission impacts that may result
from carbon capture and storage projects seeking to
demonstrate geological sequestration when adopting the
methodology.
12)Requires DOGGR to regulate the injection of CO2 at an EOR
project seeking to demonstrate simultaneous geologic GHG
sequestration and requires that in developing those
regulations, DOGGR consider the standards and method,
potentially exceeding existing EOR and UIC practices, and
geography that may or may not be necessary for long-term
successful geologic sequestration.
13)Requires the ARB and DOGGR to execute an agreement using a
coordinated and comprehensive regulatory approach, including
oversight, monitoring requirements and verification for
geologic sequestration of GHGs during and following EOR
operations.
14)Provides related legislative findings and intent.
COMMENTS :
SB 34
Page 5
1) Purpose of Bill . According to the author "SB 34 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,
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."
2) Background . Studies by a broad range of governmental and
non-governmental organizations on the international, federal
and state level report that carbon capture and storage (CCS)
is a critical component of a cost-effective strategy for
achieving stringent global greenhouse gas (GHG) emission
reductions. CCS refers to technologies that capture CO2
emissions from powerplants and other large industrial
sources and the subsequent compression, transport, and
injection of the carbon into a geological formation that
prevents its release to the atmosphere. In California due
to the fact that fossil fuels, including oil for
transportation and natural gas for electricity production,
will constitute a substantial component of California's
emissions for some time to come, CCS is viewed by some as a
technology with great potential to reduce the carbon
footprint of new and existing powerplants burning natural
gas in order to meet California's GHG goals. In fact,
According to ARB's 2008 Scoping Plan, CCS within California
and the Western region could help achieve the GHG goals for
2050. An ARB resolution in December 2010 directed the
executive officer to initiate a public process to establish
a protocol to account for geologic sequestration and provide
recommendations on how such sequestration should be
addressed in the cap and trade program.
On January 14, 2011, the CEC, CPUC and ARB released findings
and policy recommendations to guide legislation and
regulations regarding CCS in California. The panel offered
a number of recommendations, some of which are included in
SB 34 to address identified policy gaps in current law
SB 34
Page 6
inhibiting widespread CCS adoption in the state. The
recommendations included in SB 34 are that the ARB develop
accounting procedures for stored carbon to quantify CO2 not
emitted into the atmosphere; the State Fire Marshal be
specified as the lead agency for regulating the safety and
operation of intrastate CO2 pipelines; and that ownership of
subsurface "pore space" needed to store CO2 be clarified.
Other recommendations include specifying agencies to be
designated as CEQA lead agencies for various aspects of CCS
projects and the evaluation of current US EPA regulations to
determine which, if any, state agency should seek authority
for permitting injection wells for carbon storage (see
"Class II and Class IV wells" below).
The "storage" aspect of CCS can be accomplished by the
injection of CO2 into large, deep underground porous
reservoir rock saturated with brackish water. These
formations are estimated by a joint CEC and Department of
Conservation report to have a capacity of tens to hundreds
of metric gigaton of CO2. As a reference, statewide GHG
emissions are approximately half a gigaton. Proponents of
CCS also assert that carbon can be "stored" in another way,
specifically during a process known as enhanced oil recovery
(EOR).
EOR is a process that injects a fluid, such as steam or CO2,
into an oil or gas well with declining reserves in order to
pressurize the well and increase oil and gas production (and
mobility, in the case of oil) from those reserves. During
CO2 EOR, some of the CO2 is retrieved with recovered oil,
while the remaining CO2 presumably remains trapped
underground. SB 34 directs the ARB to develop a
quantification methodology for carbon capture and storage
projects seeking to demonstrate geologic sequestration and
requires the inclusion of a methodology for CO2 EOR projects
seeking to demonstrate simultaneous sequestration of
injected CO2.
Class II and Class VI wells . Under the federal Safe
Drinking Water Act, the US EPA's underground injection
control (UIC) program groups injection wells into six groups
or classes that have minimum federal requirements for
injection practices that protect public health by preventing
SB 34
Page 7
injection wells from contaminating underground sources of
drinking water. Class II wells include those used for EOR
and other types of injection wells associated with oil and
gas production. The primary aspects of UIC Class II
regulations deal with permitting, inspection, enforcement,
mechanical integrity testing, plugging and abandonment
oversight and data management. DOGGR has been delegated
authority from the US EPA to regulate and permit Class II
injection wells. Currently, DOGGR has regulations for EOR,
although not specific to CO2 EOR.
Class VI wells were specifically developed by US EPA for the
purpose of CCS. Class VI well requirements are designed to
ensure that wells are sited, constructed, operated, tested,
monitored, and closed in a manner that is protective of
underground sources of drinking water, and were based on the
existing UIC regulatory framework with modifications to
address the unique nature of CO2 injection, for the ultimate
purpose of geologic sequestration, including the relative
buoyancy of CO2; its mobility in the subsurface; its
corrosivity in the presence of water; and the large
injection volumes anticipated for geologic sequestration
projects.
Currently no California state agency has been authorized by
the Legislature to apply for the authority to permit Class
VI wells, and their use in California would be regulated by
the US EPA.
Class VI well 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 CO2
sequestration. The US EPA has recently released a draft of
a guidance document on how this transition should occur.
3) EPS . SB 34 requires that the ARB's quantification
methodology be used for the demonstration of sequestration
under the emission performance standard, or EPS. Pursuant
to SB 1368 (Perata), Chapter 598 of Statutes of 2006, EPS
regulations were adopted by the PUC for investor-owned
utilities and by the CEC for publicly owned utilities. Both
commissions adopted standards that prohibit state utilities
from entering new contracts of more than five years with
SB 34
Page 8
powerplants that have emissions in excess of a modern,
efficient combined-cycle natural gas baseload powerplant.
SB 1368 specified that CO2 captured from a powerplant and
permanently sequestered in geological formations does not
count toward the powerplant's emissions under EPS. The
CEC's EPS regulations do not count CO2 projected to be
successfully sequestered and considers CO2 successfully
sequestered if the project includes the capture,
transportation, and geologic formation injection of CO2
emissions, complies with all applicable laws and
regulations, and has an economically and technically
feasible plan that will result in the permanent
sequestration of CO2 once the sequestration project is
operational.
4) Why not just require Class VI ? As previously noted, Class II
wells are regulated by the US EPA and DOGGR for the purpose
of oil and gas recovery, whereas Class VI wells are
specifically designated for CO2 sequestration. The
regulatory schemes for Class II and Class VI wells differ
because the regulations are designed for different purposes.
SB 1139 (Rubio) of 2012, and SB 34 (Calderon) require DOGGR
to regulate CO2 EOR projects that seek to simultaneously
demonstrate carbon sequestration, under their authority to
permit Class II injection wells. Because of the fact that
Class II wells are not designed to ensure long-term
sequestration, SB 1139 was amended last year after the
Senate Environmental Quality and Senate Natural Resources
Committee hearings to close some safety, verification and
monitoring gaps between Class II and Class VI requirements
in the quantification methodology adopted by ARB. Since
those added requirements are intended to bridge the gap, why
not simply require Class VI designation for the
demonstration of long-term carbon storage and receipt of
credit for carbon storage under cap and trade or EPS? Class
VI requirements would create a simpler regulatory structure,
where EPA has permitting and enforcement authority, to
better ensure comprehensive safety, monitoring and
verification requirements. Instead, SB 34 uses ARB's
quantification methodology to accomplish various Class
VI-type requirements, possibly creating a more complicated
SB 34
Page 9
hybrid regulatory system somewhere between what is required
for Class II and Class VI.
For those reasons, would it be more appropriate to specify
that Class VI wells be used for CO2 EOR projects seeking to
simultaneously demonstrate carbon sequestration?
5) Criteria Pollutants . 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. Much of the oil and gas drilling in the
state that would presumably be using CO2 EOR is located in
the San Joaquin and South Coast air basins, which are
non-attainment regions with some of the worst air quality in
the nation.
An amendment was added to SB 1139 last year after passage
from the Senate Environmental Quality Committee and the
Senate Natural Resources Committee to address this concern
by requiring that the ARB consider the potential for direct,
indirect and cumulative emission impacts that may result
from carbon capture and storage projects seeking to
demonstrate geologic sequestration and ensure that emissions
of criteria pollutants are not higher than would occur in
the absence of the carbon capture and storage project.
The previous author removed the language requiring that the
ARB "ensure that emissions of criteria pollutants are not
higher than would occur in the absence of the carbon capture
and storage project" in SB 34 because supporters felt that
the language was a de facto ban on CCS projects, since
criteria pollutants would necessarily be greater with a
large-scale CCS project than without.
To address the concern of increased criteria pollutant
emissions due to large scale CCS projects, the committee may
wish to suggest an amendment to require the ARB, in adopting
the methodology, account for direct, indirect and cumulative
emission impacts of criteria pollutants that may result from
CCS projects, and provide direction for the mitigation of
those emissions.
SB 34
Page 10
6) HECA Project . The HECA project, currently under review by
the CEC, is a proposed integrated gasification combined
cycle powerplant that plans to manufacture hydrogen from
coal and petroleum coke (3:1 ratio) to generate 300
megawatts of electricity, produce nitrogen-based fertilizers
and capture 90% of CO2 produced from the gasification
process. The project would be located on a 453-acre site in
Kern County currently used for agricultural purposes about
seven miles west of Bakersfield. The HECA project plans to
transport the CO2 by pipeline to Occidental of Elk Hills,
Inc. (OEHI) for use at the adjacent Elk Hills Oil Field for
enhanced oil recovery. The provisions in SB 34, if enacted,
may serve to reduce OEHI's GHG compliance obligation under
cap and trade.
To demonstrate the feasibility of clean coal, HECA is the
recipient of a $408 million Clean Coal Power Initiative
grant from the U.S. Department of Energy and $103 million in
tax credits. To be eligible for that funding, the project
must use, at a minimum, 55-75% coal for the gasification
process. Numerous environmental concerns with the project
have been raised, including the large quantities of water
used, the production of up to 277,000 tons of gasification
waste per year, exempt from federal and state hazardous
waste laws, and the significant amount of indirect emissions
associated with the project from the rail transport of coal,
transportation of petroleum coke and gasification wastes as
well as truck traffic from the production and distribution
of about one million tons of fertilizer per year.
7) Support concerns . According to supporters, SB 34 will help
to remove the gaps in the permitting process for CCS
projects and will help create jobs, protect the environment,
and reduce CO2 emissions necessary to meet California's AB
32 goals. The California CCS coalition also notes that CO2
EOR has been utilized in more than 100 projects around the
country for 30 years. They assert that the US EPA has
developed comprehensive regulations for CCS that ensure the
protection of water resources and air quality.
8) Opposition concerns . Sierra Club California asserts that SB
SB 34
Page 11
34 undermines California's GHG reduction goals by treating
CO2 EOR as an emission-reducing measure, despite the fact
that it will increase fossil fuel production. They note that
the carbon sequestration accomplished in the process of
recovering oil would likely be offset by release of GHGs
when the oil is later combusted, and classifying carbon
sequestered in the process of oil recovery as an emission
reduction would give an inaccurate account of California's
actual GHG emissions.
9) Related Legislation .
a) AB 1925 (Blakeslee), Chapter 471, Statutes of 2006,
required the California Energy Commission, in
coordination with other agencies, to prepare a report
recommending how the state could facilitate the adoption
of geologic carbon sequestration.
b) SB 669 (Rubio) of 2010 would have established the CEC
as the lead agency for CCS projects under the California
Environmental Quality Act, and was withdrawn from an
April 28, 2011 Senate Energy, Utilities, and
Communications Committee hearing by the author.
c) SB 1139 (Rubio) of 2012 included very similar
provisions to SB 34. SB 1139 was held on the Suspense
File in the Assembly Appropriations Committee.
10)Double Referral to Senate Natural Resources and Water
Committee . If this measure is approved by this committee,
the do pass motion must include the action to re-refer the
bill to the Senate Natural Resources and Water Committee.
SOURCE : California CCS Coalition (includes: Aera Energy,
Chevron, Clean Energy Systems, Hydrogen Energy
California, Sempra Energy Utilities, Southern
California Edison, Occidental, Shell and Western
States Petroleum Association)
SUPPORT : Black Business Association
California Association of Black Pastors
California Conference of Carpenters
California State Council of Laborers
SB 34
Page 12
Con10u, Inc.
Linde Group, North America
National Center for Atmospheric Research
Natural Resources Defense Council
San Diego Urban Economic Corporation
Yadari
1 Individual
OPPOSITION : Sierra Club California