BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1139 (Rubio) - Greenhouse gas: carbon capture and storage.
Amended: May 2, 2012 Policy Vote: EQ 6-0, NR&W 8-1
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Marie Liu
SUSPENSE FILE.
Bill Summary: SB 1139 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 Air
Pollution Control Fund (special fund) in 2012-13 and 2013-14
for the development of a quantification methodology and
incorporation into the Cap and Trade regulations.
Ongoing costs of $1.3 million annually from the Air
Pollution Control Fund (special fund) beginning in 2014-15
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.
This bill also defines ownership of the underground pore space
which may be used for the GHG storage and specifies that
pipelines used for the transportation of carbon dioxide is
within the jurisdiction of the State Fire Marshall.
Related Legislation: SB 711 (Rubio) would change the regulation
of wells used for enhanced oil recovery and is currently in the
Assembly Natural Resources Committee.
Staff Comments: This bill requires the ARB to develop a
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methodology to quantify carbon dioxide that is sequestered into
geologic formations, which would be finalized through
regulation. The ARB estimates that it would require five
positions plus $300,000 in contracted support to develop the
methodology for a total of $1.1 million for 2012-13 and 2013-14.
Beginning in 2014-15, ARB would continue to need five positions
and $500,000 annually 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 in the first year.
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.
Staff notes that the author has made an earlier commitment in
policy committee to require industry funding to pay for the full
cost of this bill's proposed program. Such amendments have not
yet been made. Staff notes that the "industry" involved in this
bill may be difficult to identify since CCS projects may be
undertaken by a range of industries. As such, it may be
difficult to delineate a group who should be responsible for
initial costs such as regulation development. However, a fee on
those conducting CCS projects could potentially cover ongoing
costs.