For the foreseeable future, in order to capture, inject and sequester (also called “CCS”) carbon dioxide (CO2) from coal-fired electric generating and other industrial plants, permittees must satisfy several prerequisites: the recently signed final EPA Safe Drinking Water Act (SDWA) rule, state cap and trade emission limitations (if applicable), as undetermined Clean Air Act requirements, and any pipeline transportation requirements that may apply.
Because injection and the long-term storage of CO2 underground may interact with chemicals in the underground storage geological formation or contain trace contaminants, that render the groundwater unpotable, on November 22, 2010, EPA’s Administrator signed underground injection regulations under the SDWA that govern geologic sequestration (GS) of CO2. These new requirements include:
• A detailed characterization of the geologic, hydrogeologic, geochemical, and geomechanical properties of the proposed GS site.
• Use of a computational model of groundwater and contaminant flow in the area surrounding the injection well to assess whether the groundwater might be adversely affected by the injection of CO2 (i.e., the area of review or “AoR”).
• Periodic re-evaluation and confirmation of the AoR to incorporate monitoring and operational data and verify that the CO2 plume and the associated area of elevated pressure are moving as predicted within the subsurface.
• Use of best well construction standards and materials.
• Continued “robust” monitoring of the CO2 stream being injected, injection pressures, the integrity of the injection well, ground water quality and geochemistry, and overall monitoring of the CO2 plume and position of the pressure front throughout the period of injection.
• Comprehensive post-injection monitoring and site care following cessation of injection to show the position of the CO2 plume and the associated area of elevated pressure to demonstrate that neither poses an endangerment to United States Drinking Water (“USDW”).
• A demonstration of financial responsibility (e.g., trust funds, surety bonds, a letter of credit, insurance, self insurance, escrow account) to ensure that funds will be available for all corrective action, injection well plugging, post-injection site care (PISC), site closure, and emergency and remedial response.
• The final regulations impose an open-ended period of post-injection site care, well closure liability, post-injection monitoring and site care, and remediation as long as the CCS poses an endangerment to USDW, which, by definition, includes groundwater not currently used as drinking water. EPA estimates that the total incremental annual cost of just these groundwater requirements will be $38.1 million to $31.7 million (using a 3 percent and 7 percent discount rate, respectively). The total cost of sequestration is likely to go still higher.
The proposed EPA rule imposed monitoring and other liability for only 50 years after the end of injection, although the monitoring and liability period could be lengthened if the “potential for endangerment” still exists after 50 years or if the plume and pressure front have not stabilized in this period. Thus, as a practical matter, both the proposed and final rule would protect human health and the environment as long as there is an endangerment. However, because the final rule explicitly provides for monitoring and liability for an indefinite time period (i.e., as long as there is an endangerment), this future contingent liability may be considered by lenders, subsequent potential purchasers (during due diligence), and some regulators (pursuant to federal or financial reporting requirements a) as difficult to quantify and interpret, compared to the formulation in the proposed rule. In contrast, model state legislation authored by the Interstate Oil & Gas Compact Commission’s (“IOGCC,” a multi-state government agency whose goal is to ensure our nation’s oil and natural gas resources are conserved and maximized while protecting health, safety and the environment) holds the permittee liable for only10 years after the plugging of the injection well (i.e., shortly after injection ceases), unless otherwise designated by the state regulatory authority. Thereafter, the IOGCC model statute shifts the liability for ensuring the site remains secure to a trust fund administered by the state. Of course, these regulations cannot affect the potential third-party liability of the companies that inject CO2.
In summary, EPA has adopted the most stringent and expensive method of protecting the environment while storing CO2. As a practical matter, these costs, added to the uncertainties involved in other regulatory components of the CCS process, provide little incentive for industry to proceed with CS at this time.
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