BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 34 (Calderon) - Greenhouse gas: carbon capture and storage.
Amended: April 30, 2013 Policy Vote: EQ 8-0, NR&W 8-0
Urgency: Yes Mandate: No
Hearing Date: May 13, 2013 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 34 would require the Air Resources Board (ARB)
to adopt a quantification methodology for carbon capture and
storage (CCS) projects for geologic sequestration. This bill
would also require the Division of Oil, Gas, and Geothermal
Resources (DOGGR) within the Department of Conservation to
regulate the injection of carbon dioxide at an enhanced oil
recovery project.
Fiscal Impact:
Onetime costs of $1.1 million annually from the Cost of
Implementation Account (COI) within the Air Pollution
Control Fund (special fund) for FY 2013-14 and FY 2014-15
for the development of a quantification methodology and
incorporation into the Cap and Trade regulations.
Ongoing costs of $1.3 million annually from the COI
beginning in FY 2015-16 for ARB's technical evaluation,
approval, and monitoring of CCS projects.
Unknown, but at least in the hundreds of thousands of
dollars, from the Oil, Gas, and Geothermal Administrative
Fund (special fund) for DOGGR to provide monitoring and
oversight of CCS projects.
Background: Carbon sequestration is a term used to describe
processes that concentrate carbon dioxide and store it away from
the atmosphere. Geologic sequestration, or CCS, involves
collecting and purifying carbon dioxide from large point sources
and injecting it below ground for storage. There are two main
types of CCS in California: (1) injection of carbon dioxide into
saline formations that do not contain oil, gas, or other
hydrocarbons and (2) injection of carbon dioxide into oil
reservoirs, specifically though the use of enhanced oil
recovery, which are processes used to increase production from
oil and gas reservoirs. Activities related to the recovery of
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oil and gas, including enhanced oil recovery, falls within the
broad authority of DOGGR.
Under the California Global Warming Solutions Act of 2006 (AB
32), the Air Resources Board (ARB) is required to adopt
greenhouse gas (GHG) emission reduction measures to reduce
statewide GHG emissions to 1990 levels. ARB is allowed to use
market-based mechanisms to comply with these regulations (i.e. a
cap and trade program).
Existing law requires the California Public Utilities Commission
(PUC), in consultation with the California Energy Commission
(CEC) and the ARB, to establish the GHG emission performance
standards (EPS) which are the minimum performance requirements
for any long-term contract for baseload electricity generation
supplying power to Californian ratepayers. The EPS is required
to not consider carbon dioxide captured from a power plant if it
is permanently disposed of in a geological formation.
Proposed Law: This bill would require the ARB to develop a
quantification methodology for CCS projects which can be used
for compliance obligations under AB 32 or the cap-and-trade
program by January 1, 2016. The ARB must consult with the PUC
and the CEC on the development of the methodology and its
incorporation into the EPS. The methodology must include methods
for enhanced oil recovery projects seeking to demonstrate
simultaneous sequestration of injected carbon dioxide subject to
specified conditions.
This bill further requires DOGGR to regulate the injection of
carbon dioxide at an enhanced oil recovery project including an
enhanced oil recovery project seeking to demonstrate
simultaneous geologic sequestration of greenhouse gas once the
ARB adopts the quantification methodology.
Related Legislation: SB 1139 (Rubio) 2012 was substantially
similar to this bill. SB 1139 was held on the Assembly
Appropriation Committee's suspense file.
Staff Comments: This bill requires the ARB to develop a
methodology to quantify carbon dioxide that is sequestered into
geologic formations, which would be finalized through
regulation. The ARB estimates that it would require 7.1
positions plus $300,000 in contracted support to develop the
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methodology for a total of $1.2 million for 2013-14 and 2014-15.
Beginning in 2015-16, ARB would continue to need 7.1 positions
and $500,000 annually for a total of $1.7 million to start
implementing the methodology including technical evaluation,
approval, and monitoring of sequestration projects.
DOGGR estimates that the costs of developing regulations
required by this bill to be absorbable. However, the monitoring
and oversight of such regulations are unknown, but at least in
the hundreds of thousands of dollars. While DOGGR is aware that
carbon dioxide is used in enhanced oil recovery operations, the
amount of carbon dioxide that is left in the formation is not
tracked. Also, staff notes that DOGGR will have likely have role
in all CCS projects, not just those involving enhanced oil
recovery, although this role is not fully specified in this
bill. These implementation costs are unknown until ARB develops
the required methodology.
The PUC and the CEC believe that their costs would be minor and
absorbable.