California's Carbon Capture & Storage (CCS) Review Panel releases its recommendations

In order to better understand the statutory and regulatory barriers to the use of carbon capture and storage technology as a strategy in combating climate change, the California Public Utilities Commission (CPUC), California Energy Commission (Energy Commission), and the Air Resources Board (ARB) created a CCS Review Panel in February 2010. The Panel, composed of members from industry, trade groups, academia, and environmental organizations, was asked to:

  1. Identify, discuss, and frame specific policies addressing the role of CCS technology in meeting the State’s energy needs and greenhouse gas emissions reduction strategies for 2020 and 2050.
  2. Support development of a legal/regulatory framework for permitting proposed CCS projects consistent with the State’s energy and environmental policy objectives.

I had the honor of serving on the Panel, which concluded its work in December of 2010. The final recommendations were released this week. See: news release, recommendations, full list of documents

California is a leader among states in the nation to curb carbon pollution with strong near- and long-term emission reduction goals under its landmark law AB32, and supportive policies to promote energy efficiency, renewable energy, clean cars, low carbon fuels and smart growth, as well as its emissions performance standard for new baseload power. The state’s goals are realistic but ambitious. A number of tools and technologies will be needed for these goals to be met, and the Panel’s job was to examine the potential role of CCS more closely, identify barriers to its development and make recommendations for how to overcome them, if appropriate.

The Panel agreed that CCS is an important tool for reducing greenhouse gas emissions, and that the technology exists to do this safely and effectively today. CCS was identified as one of many options that can reduce emissions, but an important one given its application to fossil fuels, the use of which is still dominant in the state, the nation and the world, and highly problematic from a carbon standpoint. The challenge comes in two forms: ensuring that the main barriers to CCS are addressed so that the technology can contribute in a meaningful way to emission reductions before 2050, and doing so in a way that does not contradict the state’s efforts on energy efficiency, the renewable portfolio standard (RPS) and the established loading order for meeting growing energy needs (which puts efficiency and renewables ahead of other solutions).

Removing barriers is, of course, delicate business. No technology enjoys a barrier-free ride in the marketplace and the policy realm, even though wish lists are often long. It is important that the state use a light-handed approach as much as possible, and only address those barriers that truly stand in the way of technology deployment rather than a long laundry list which some would like to see removed. I am happy to report that my fellow panelists were also appreciative of the balance that needed to be struck here. (One panelist of the ten – Mr. Coddington – submitted a supplement to the Panel’s recommendations. The views contained in that document are entirely his own and do not reflect the beliefs of the Panel as a whole – they should not be viewed as part of the consensus recommendations.)

The Panel’s recommendations cover regulatory, legal, economic and social aspects of CCS.  On the regulatory front, the Panel first of all recommended that the state officially recognize the CO2 reductions from safe and effective CCS. This means nothing more than treating sequestered CO2 as sequestered and not emitted under state laws and policies. In fact, ARB, at its meeting on December 16, 2010 where it adopted California’s cap-and-trade program also adopted a resolution “to initiate a public process to establish a protocol for accounting for sequestration of CO2 through geologic means and recommendations for how such sequestration should be addressed in the cap and trade program”. It therefore looks as if an accounting protocol to that effect will be forthcoming, which was another of the Panel’s recommendations.

Late in 2010, USEPA promulgated two rules concerning CCS. The first deals with how wells are permitted under the Underground Injection Control Program (UIC) and aims to safeguard groundwater when CO2 is being injected, and the second imposes monitoring, reporting and verification requirements under the Greenhouse Gas Reporting Rule. These two rules cover many of the regulatory bases for permitting geologic sequestration wells, and the Panel recommended that the state analyze the extent of those rules, and decide whether to request primary enforcement authority from USEPA and administer the new UIC rule through a designated state agency. However, the promulgation of these two rules does not mean that there is nothing more that California should be doing on the regulatory and permitting front. The Panel further recommended that California “[c]oordinate the development of performance standards for CCS sites that would include design requirements and other operational measurements consistent with the goals of protecting the groundwater and preventing emissions of CO2 to the atmosphere”. These performance standards could be in the form of, say, a goal of x% retention over y years, which would then inform proper site selection, project design and operation, in essence filtering good sites from bad ones. Such standards would potentially go beyond what USEPA has already required.

The Panel further recommended that the California Energy Commission (CEC) be designated as the CEQA lead agency for CCS projects. This would put CEC in the coordinating role for coming up with mitigation measures for potential environmental impacts from these projects, assigning tasks to the relevant agencies with the most expertise as needed. The idea behind this recommendation is to have one agency with an umbrella task to look at possible environmental impacts, and to ensure a holistic consideration of such impacts rather than an uncoordinated or piecemeal approach through various agencies.

The Panel also made some legal recommendations on CCS-related issues. The first entails codifying in statute what is already strongly established in common law, viz. that the surface land owner also owns the microscopic pore spaces in the subsurface rock where CO2 will be injected. This would unambiguously establish the land owners as the holders of those rights, and aid in their fair compensation for the use of those rights by developers. Projects will almost invariably need the consent of many owners to carry out an injection, of course, since CO2 plumes will likely span many properties. Currently, developers need to negotiate access with all the individual land owners. Some have expressed concern that this familiar scenario might delay projects and needed emission reductions, so the Panel recommended that the legislature consider alternative ways of gathering the needed rights while also compensating owners for the use of those rights. A number of solutions exist here. In my opinion, light-handed approaches that give land owners control, such as an appropriate unitization scheme would be preferable to measures such as eminent domain or condemnation which could also undermine the public reception that the technology would get, and which suffer from equity issues. The same applies more or less to the siting of CO2 pipelines, where the Panel made a similar recommendation. Before deciding on the way forward, California’s policy makers should consult closely and widely with the land owners to ensure that solutions are vetted in advance and are acceptable.

In order to ensure the long-term integrity and safety of storage sites, the Panel recommended the establishment of an industry-funded trust fund, which would be used by an appropriate state agency to monitor and maintain decommissioned sites. This is an important step that would go beyond current federal structures and requirements. California should not accept a situation whereby sites are closed but no entity is tasked with keeping an eye on them. It should also be noted that the Panel did not recommend that California assume the long-term liability for decommissioned storage projects – maintaining the status quo would hold operators responsible for their actions under existing laws and regulations.

On the subject of economic incentives for CCS, the Panel did not have the time to analyze all the possible options. Such incentives need to be studied in the context of other policy priorities and the current fiscal situation. However, we do believe that appropriate incentive mechanisms could be found, and that the state should consider these in the near future. The federal government arguably has a larger role to play here, but with the failure to enact climate legislation in Congress last year, a major chunk of CCS incentives disappeared from the horizon. California might still have a role to play in kick starting early projects in order to enable deeper emission cuts later. The Panel further recommended that any cost allocation mechanisms for CCS project should be spread as broadly as possible across all Californians. To this I would add that low income individuals should be afforded adequate protection from any such costs. Along related lines, the Panel recommended that permitting authorities endeavor to reduce, as much as possible, any disparate impacts to residents of any particular geographic area or any particular socio-economic class.

Finally, the Panel supported a well-thought-out and well-funded public outreach program to ensure that the risks and benefits of CCS technology are effectively communicated to the public. This is an area where NRDC has focused considerable attention over the past few years. CCS technology, its risks and its benefits are still not well understood by the public, and opinions are often formed based on other dimensions of industrial development history in the vicinity of a proposed project, or from news articles of varied accuracy and quality. It would be important to establish an objective repository of information and experts that the public could access if it had queries on CCS technology and its application.

In summary therefore, the Panel agreed pretty much uniformly on the value of CCS as part of a broader mitigation portfolio for the state, and subject to the constraints and sensitivities that should govern its deployment. California has an established track record on energy efficiency, renewable energy and clean cars, and it is expected that these solutions will continue to form the backbone of emission reductions. However, deployment of CCS could complement these solutions effectively under the appropriate policy framework, helping the state to achieve its targets. Enabling those reductions through CCS relies on strategically addressing some key barriers. As a final note, I would like to thank my fellow panelists and our leader, Carl Bauer, for their work, as well as the tireless and proficient technical team for their invaluable support.