Karen Frantz
GHG Monitor
3/07/2014
Despite a “robust” regulatory regime surrounding carbon capture and storage in the United States, a regulatory framework that supports the commercialization of CCS is still needed to advance the technology, Kipp Coddington, a partner at the law firm Mowrey Meezan Coddington Cloud LLP, said late last week. Coddington, speaking at a forum held by the Global CCS Institute on moving CCS forward, said that the Environmental Protection Agency has largely put in place a regulatory regime in the U.S., although for the most part it’s not being used. “So I’m not sure the absence of regulations is the right question. I think the more savvy question is, what regulations do you need to ensure commercial activity?” he said. “I emphasize the word ‘commercial’ because if it’s not commercial it will not be done. … You cannot compel a commercial actor to do something they cannot or will not do. So what do you need to enable commercial activity?”
Illustrating his point, Coddington said that although the EPA has longstanding regulations in place for CO2-driven enhanced oil recovery, and the Agency in 2010 finalized a rule establishing the Underground Injection Control Class VI program for geologic sequestration, only a couple of parties have applied for Class VI permits and none have been granted. “A couple of the demonstration projects have been converted into Class VI, and as I understand it, they’ve been unable to exit them because the state is not certain when to say, yes, closure has occurred,” he said. “My own issue with the Class VI rules is that they have what I call is ‘to infinity and beyond’ requirements. … So if it goes down, the injector, and I think even potentially the industrial source, the supplier, is responsible for infinity and beyond. And we might agree that that’s a tremendous risk. … [Geologic sequestration] is safe. But unfortunately the way U.S. law works [is] that things can come out decades later and bite you in unanticipated ways. So I think that the Class VI regime is largely non-commercial for that reason.”
He also said that a recent transition guidance document released by the EPA that deals with converting Class II wells for EOR into Class VI wells creates commercial uncertainty that runs the risk of “crimping” CO2-EOR. “EOR is storage, period, end of story,” he said. “And an EOR operator is never going to convert to non-oil production. They’re under a lease mandate and state law constitutional mandates to maximize the production of mineral resources. I cannot envision a day when the Permian Basin is going to wake up and say, okay, we’re done with oil production and storage. See y’all later. That just is not going to happen. So I think it’s a lack of appreciation of commerciality, what is and is not feasible. That is a hurdle.”
“Mature” Regulatory Framework in Canada
Other panelists also said that what is needed to advance CCS is not necessarily more regulations. Mike Fernandez, Executive Director of Sustainable Energy at Alberta Energy, said that Canada, for instance, has a “very mature regulatory framework” for EOR, which ranges back nearly 80 years. “So if you’re an investor or an operator, I think that certainty is really worth a lot to you because you can understand if I choose to invest in EOR … in Alberta, I know how I’ll be treated, how I’ll be regulated, and what outcome the government’s after,” he said. “In Canada, what’s not missing is more regulation. The provinces are really, really good at regulating our energy sector.”
Floyd Wist, Executive Director of Energy Policy at the Saskatchewan Ministry of the Economy, went further to say that what is missing is “the economics of the situation,” drawing a parallel to drilling for shale gas in the United States. “About five years ago [there] probably was not a particularly robust, complete, comprehensive regulatory regime for shale gas,” he said. “But yet there was an economic opportunity there, and a number of companies started drilling in areas that previously hadn’t been exposed. … And no doubt the legal advice these companies were receiving was that there was regulatory uncertainty and they should be cautious. But the engineers came along and said that there’s an economic opportunity to make some money here and a lot of activity occurred, notwithstanding the regulatory deficiencies that probably existed at that point in time.”
