BILL ANALYSIS Ó
-----------------------------------------------------------------
| |
| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2013-2014 Regular Session |
| |
-----------------------------------------------------------------
BILL NO: SB 34 HEARING DATE: April 23, 2013
AUTHOR: Calderon URGENCY: Yes
VERSION: April 10, 2013 CONSULTANT: Katharine Moore
DUAL REFERRAL: No FISCAL: Yes
SUBJECT: Greenhouse gas: carbon capture and storage.
BACKGROUND AND EXISTING LAW
The Division of Oil, Gas, and Geothermal Resources (division) is
the state's oil and gas regulator. The division's Oil and Gas
Supervisor has extensive and broad authority to regulate
activities associated with the production and removal of
hydrocarbons (e.g. oil and gas) from the ground (Public
Resources Code (PRC) §3106). This includes the subsurface
injection of water and other fluids. This authority is granted
in order to prevent damage to life, health, property, natural
resources, and underground and surface water suitable for
irrigation or domestic purposes.
The California Global Warming Solutions Act of 2006 (AB 32,
Pavley, c. 488, Statutes of 2006)(Health and Safety Code §38500
et seq.) requires the California Air Resources Board (board) to
establish regulations to achieve specified greenhouse gas (GHG)
emissions reductions goals and permits the use of market-based
compliance mechanisms, in part, to achieve those goals. In
particular, California aims to reduce GHG emissions to 1990
levels by 2020.
Many experts believe that carbon capture and storage,
particularly the long-term geologic sequestration of carbon
dioxide (CO2), will be an important component of meeting GHG
emission reduction goals in California and world-wide. The
recent December 2010 report by the California Carbon Capture and
Storage Review Panel, (formed by the board, the California
Public Utilities Commission and the California Energy
Commission), identified significant gaps in California's laws
and regulations hindering the development of carbon capture and
1
storage (CCS) projects in the state. These include clarifying
the regulatory responsibility for CCS projects, as well as
establishing clear financial responsibility for the stewardship
of geologic storage sites during the operating, post-injection
and post-closure phases. The report also highlights the
potential use of carbon dioxide for enhanced oil recovery.
Enhanced oil recovery is a well-established technique where
pressure is increased by fluid injection into a hydrocarbon
reservoir in order to promote hydrocarbon production. A common
form in use in California is water flooding. The US Department
of Energy reports there is considerable potential for the use of
carbon dioxide in enhanced oil production to boost US effective
oil reserves and production, and which, at the same time, could
facilitate the adoption of CCS. According to industry,
approximately 30 million tons per year of carbon dioxide are
being injected annually in enhanced oil recovery operations in
the United States already. These operations use Underground
Injection Control (UIC) wells.
UIC wells are regulated by the US Environmental Protection
Agency (EPA) under the authority of the Safe Drinking Water Act
(42 U.S.C. §300f et seq.). Main features of the UIC program
include permitting, inspection, enforcement, mechanical
integrity testing, plugging and abandonment oversight, data
management, and public outreach. A UIC well critically depends
upon confinement of the injection fluid to the intended zone or
zones of injection. UIC wells are separated into six classes -
Class II wells are oil and gas related injection wells and the
new Class VI well designation is for wells used for the
long-term geological sequestration of carbon dioxide. The
division obtained "primacy" or regulatory authority for Class II
wells from the US EPA in 1983. There are thousands of Class II
UIC wells in California and enhanced oil recovery operations in
California use Class II wells. Class VI wells - for which the
US EPA continues to develop guidance and regulations - remain
under the US EPA's control. The US EPA clearly anticipates that
some Class II wells will seek to be re-classified as Class VI
wells once the hydrocarbon reservoir is depleted in order to
provide long-term geologic sequestration.
The US EPA recently reviewed the division's primacy of the UIC
Class II Program. The main report was released in June 2011. A
number of program deficiencies - some requiring immediate
attention - were found. In its recent response to the audit,
the division pledged to continue to strive to address the
deficiencies noted in the report.
2
The Elder California Pipeline Safety Act of 1981 provides the
State Fire Marshall with exclusive safety regulatory and
enforcement authority over intrastate hazardous liquid pipelines
and, to some degree, over interstate hazardous liquid pipelines.
Additionally, the Public Utilities Commission, the California
Energy Commission and the board are required to establish GHG
emission performance standards, among other provisions (Public
Utilities Code §8341).
SB 1139 (Rubio, 2012) was substantially similar to this bill.
SB 1139 bill analyses indicate that the author pledged to find
industry funding for the proposed program, but no amendments to
that effect were made. The bill was held on the Assembly
Appropriations Suspense file.
PROPOSED LAW
This bill would create the Carbon Capture and Storage Act of
2013 and would:
Make extensive legislative findings describing
California's goal to limit GHG emissions; the potential of
and need for the development of long-term geologic storage
of carbon dioxide to meet California's emissions reduction
goal; existing federal and state authority to address
various elements of long-term geologic storage of carbon
dioxide including underground injection wells; and gaps in
existing statutes and regulation that need to be addressed
Assert that subsurface pore space can be possessed and
used to store GHGs and assert the dominance of mineral
rights
Specify that pipelines can carry carbon dioxide and
defines carbon dioxide for the purposes of transportation
by pipeline
Require the board to develop, as specified, a
quantification methodology to address CCS projects seeking
to demonstrate geologic sequestration by January 1, 2016
Require the division and the board 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 enhanced oil recovery operations
ARGUMENTS IN SUPPORT
The California CCS coalition argues that "carbon capture and
storage will play a 'significant' role in reaching the state's
greenhouse gas reduction goals according to the [board]. [?]
That's why environmental organizations and academics strongly
3
support CCS."
"The use and storage of carbon dioxide for CCS and enhanced oil
recovery projects is a proven and safe method. It has been
utilized in more than 100 projects around the country for the
past thirty years. Furthermore, the U.S. Environmental
Protection Agency has developed comprehensive regulations for
CCS that ensure protection of water resources and air quality."
They continue that "there are significant regulatory gaps and
uncertainties that will inhibit the development of CCS projects.
SB 34 is specifically designed to address these problems by
creating a clear and certain regulatory structure for these
projects."
"CCS and the use of carbon dioxide for enhanced oil recovery
will help maintain and increase state and local revenues to help
fund public safety, schools, law enforcement and other vital
services. [?] SB 34 would also decrease our state's dependence
on oil imports. CCS projects and those that use carbon dioxide
for enhanced oil recovery would help extend the life of many
California oil fields that would otherwise decline."
ARGUMENTS IN OPPOSITION
Sierra Club California argues "the carbon sequestered in the
ground in the process of retrieving oil would, under SB 34, 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."
"Sierra Club California opposes SB 34 because it undermines
California's GHG reduction goals by treating carbon dioxide
enhanced oil recovery as an emissions-reducing measure, despite
the fact that it is a means for increasing fossil fuel
production. The carbon sequestration accomplished in the
process of recovering oil would likely be offset by release of
GHGs when the oil is later combusted."
"Furthermore, insufficient research has been done to fully
comprehend potentially negative impacts of injecting large
amounts of carbon dioxide into the ground."
COMMENTS
Committee of second referral . This bill passed the Senate
Environmental Quality Committee on April 17th and during that
hearing, the author agreed to craft an amendment to be taken in
the Senate Natural Resources and Water Committee in order to
4
facilitate meeting legislative deadlines. This amendment is to
have the board account for increased criteria pollutant emission
impacts resulting from CCS projects and provide direction for
the mitigation of those emissions (Amendment 1).
This bill is a work-in-progress . Ownership of pore space is a
complicated issue with potential and wide-ranging ramifications.
The author's office has agreed to strike section 3 (Amendment
2) and the committee may wish to direct committee staff to
continue to work with the author's office on this issue. The
committee may wish to re-hear this bill should it change
substantially in the future.
CCS and earthquakes (induced seismicity) . In mid-2012 the
National Research Council (NRC) published a report titled
"Induced Seismicity Potential in Energy Technologies." In
addition to assessing the risks of induced seismicity associated
with hydraulic fracturing and the deep disposal of waste water
in injection wells, the report states:
"Projects that inject or extract large net volumes of
fluids over long periods of time such as CCS may have
potential for larger induced seismic events, though
insufficient information exists to understand this
potential because no large-scale CCS projects are yet
in operation. Continued research is needed on the
potential for induced seismicity in large-scale CCS
projects."
The US EPA's Class VI well guidelines address seismicity in
siting requirements particularly with respect to ensuring the
integrity of carbon dioxide sequestration. However, the
committee may wish to supplement these nationwide requirements
with direction to the division to specifically address this
risk, given California's geology, to incorporate additional
monitoring and assessment (Amendment 3).
Is CCS a mature technology ? There are numerous demonstration
CCS projects in the US and around the world. Demonstration
projects are used to show the potential commercial viability of
a technique or process, and the project may not be designed or
operated for the long-term. At least in the US, there are
relatively few commercial CCS projects in development, as noted
by the NRC above. Enhanced oil recovery using carbon dioxide is
mature.
Is Class II carbon dioxide-enhanced oil recovery necessarily
5
permanent sequestration? No. During enhanced oil recovery,
injected carbon dioxide is used to help produce oil. A
significant amount of the carbon dioxide may be recovered with
the produced oil. While the recovered carbon dioxide is
recycled and re-injected into the formation, this is not
permanent sequestration. In long-term geologic sequestration,
the carbon dioxide would not be intended to return to the
surface or leave the formation once injected.
Planned CCS projects in California. The Hydrogen Energy
California (HECA) plant, near the Elk Hills oil field, is a 400
MW power plant utilizing a gasification unit and carbon capture
facility that produces hydrogen and carbon dioxide from a blend
of California-produced petroleum coke (25%) and western coals
(75%). HECA applied for certification from the California
Energy Commission in 2008 as an integrated gasification combined
cycle power generating facility and remains under review.
Approximately 90% of the CO2 from the power plant will be
transported by pipeline for use in enhanced oil recovery in Elk
Hills by Oxy. The project also has the capability to make
fertilizer using the produced carbon dioxide. (Fertilizer is
not permanent sequestration.)
The West Coast Regional Carbon Sequestration research consortium
(WESTCARB) in collaboration with Clean Energy Systems and others
is planning a demonstration project of a 50 MW coal and
biomass-fueled power plant where the produced exhaust is
sequestered in fluvial sandstone in Kimberlina (Kern County).
The planned injection of 250,000 tons per year will be for four
years.
Class II vs Class VI wells
The final Class VI regulations were released by the US EPA in
December 2010, and important elements of the guidance materials
are still in draft form. While selected requirements for both
Class II and Class VI wells are the same, permit applications
for Class VI wells appear to require more comprehensive geologic
data and higher construction and siting standards. This is
consistent with long-term geologic sequestration as opposed to
hydrocarbon production. According to the US EPA, no
applications under Class VI have yet been filed.
SUGGESTED AMENDMENTS
AMENDMENT 1
(taken in the Senate Environmental Quality Committee and
from that Committee's analysis)
6
The author agreed "to address the concern of increased
criteria pollutant emissions due to large scale CCS
projects" and the Environmental Quality Committee suggested
an amendment "to require the board, in adopting the
methodology, to account for direct, indirect and cumulative
emission impacts of criteria pollutant that may result from
CCS projects, and provide direction for the mitigation of
those emissions."
AMENDMENT 2
Delete page 6, lines 37 - 40, inclusive and page 7, lines
1-14, inclusive
AMENDMENT 3
On page 12, line 8, replace "both" with "all"
Insert on page 12, between lines 12 and 13:
"(2) Whether long-term successful geologic sequestration in
California may require enhanced seismic monitoring in order
to understand and assess the risk of induced seismicity."
Insert on page 12, line 13, replace "(2)" with "(3)"
SUPPORT
California CCS Coalition
Natural Resources Defense Council
Environmental Defense Fund
Silicon Valley Leadership Group
California Conference of Carpenters
International Union of Operating Engineers
California State Council of Laborers
National Federation of Independent Business
San Francisco Chamber of Commerce
California Association of Black Pastors
Con10u, Inc.
California Chamber of Commerce
California Manufacturers and Technology Association
Western States Petroleum Association
San Diego Urban Economic Corporation
The Linde Group
YADARI Enterprises
3 Individual Research Scientists
OPPOSITION
Sierra Club
7
8