An Overview of the

Policy Landscape for CCUS

DINA KRUGER
KRUGER ENVIRONMENTAL STRATEGIES LLC
JUNE 13, 2016

The Regulatory Framework

for CCUS
2

Overview
3

EPA Office of Water, Underground Injection Control

(UIC) Program, under the Safe Drinking Water Act:

Role of Class II Wells

Role of Class VI Wells
Potential for transition of Class II Enhanced Recovery (ER) wells to
Class VI

EPA Resource Conservation and Recovery Act (RCRA):

Approach on Class VI wells

EPA Office of Air & Radiation: GHG Reporting Program

(GHGRP)

Accounting Requirements for quantifying CO2 sequestration in Class

II and Class VI wells

California Air Resources Board Quantification

Methodology

EPAs Underground Injection

Control Program
4

Description of Class II and Class VI

5

Class II UIC wells are used by the oil and gas industry.
Where

CO2 enhanced oil recovery (EOR) is practiced,

CO2 can be incidentally stored in the formation.
EPA recognizes that CO2 is often stored in the Class II
setting.
Class VI is a relatively new class of UIC well, designed

for CO2 storage in deep saline formations

The

Class VI rule was promulgated in December 2010.

To date, only a few Class VI wells have been permitted.
The requirements for Class VI well are more stringent
than the Class II program.

Class II to Class VI Transition

6

December 2013: EPA issued guidance on on

transitioning Class II EOR wells to Class VI.

This guidance created significant concern and confusion in the

regulated community (EOR operators and state UIC directors).

April 2015: EPA issued a memo outlining the key

principles in the Class VI rule related to the transition of

Class II ER wells to Class VI.
This memo has clarified the approach and reduced concern.
Link to the memo:
http://water.epa.gov/type/groundwater/uic/class6/upload/
class2eorclass6memo.pdf

EPAs Transition Principles (#1 3)

7

Geologic storage of CO2 can continue to be

permitted under the UIC Class II program.

Use of anthropogenic CO2 in EOR operations does

not necessitate a Class VI permit.

Class VI site closure requirements are not required

for Class II CO2 injection operations.

Transition Principles (#4)

8

The key factor in determining the potential need

to transition a CO2 EOR operation from Class II to

Class VI is the increased risk to [Underground
Sources of Drinking Water] related to the significant
storage of CO2 in the reservoir, where the regulatory
tools of the Class II program cannot successfully
manage the risk.
Transition to Class VI should only be considered if
the Class II tools are insufficient to manage the
increased risk.

Transition Principles (#5 6)

9

The Class II and Class VI directors should work together

to address the potential need for transition of any

individual operation from a Class II to a Class VI permit.

The Class II program director (in most cases a state official) will have
the relevant data on pressure and volume of CO2 injected into Class
II EOR operations, which will influence any transition decision.

The best implementation approach is for states to

administer both the Class II and the Class VI UIC

programs. EPA encourages states to apply for Class VI
primacy.

No states have been granted primacy to date. North Dakota is

awaiting EPAs decision.

The RCRA Conditional

Exemption Rule
10

RCRAs Conditional Exemption

11

The rule allows for a conditional exemption

for CO2 streams that are hazardous, provided

these hazardous CO2 streams are:
1.

2.
3.

Captured from emissions sources (e.g., not

natural domes);
Injected into UIC Class VI wells; and,
Meet certain other conditions.

Issued in January 2014.

Specific Requirements
12

1. Transportation of the CO2 stream must be in

compliance with applicable Dept. of Transportation

requirements.
2. Injection of the CO2 stream must be in compliance
with the applicable requirements for Class VI wells.
3. No other hazardous wastes may be mixed or coinjected with the CO2 stream.
4. Generators of CO2 and UIC Class VI well owners
must sign a certification statement that the
conditions of the exclusion are met.

Why did EPA promulgate this rule?

13

After evaluating the existing regulatory framework

for CO2 generators, CO2 transportation and CO2

injection in Class VI wells, EPA concluded that:
regulations under RCRA would not provide additional
protections for CO2 streams injected for purposes of geologic
sequestration.

Put another way, EPA concluded that the UIC Class

VI framework was sufficiently protective and that

additional regulation under RCRA would be
redundant and unnecessary.

What about UIC Class II Wells?

14

Most CO2 injection today occurs in Class II wells, with

the primary purpose of conducting EOR.

EPA states in the preamble to the the RCRA rule:

[T]his conditional exemption is not intended to affect the regulatory

status of CO2 streams that are injected into wells other than UIC Class
VI wells. [I]n the light of the several public comments on this issue,
EPA does note that (based on the limited information provided in public
comments) should CO2 be used for its intended purpose as it is injected
into UIC Class II wells for the purpose of EOR/EGR, it is EPAs
expectation that such an injection process would not generally be a waste
management activity.

Put simply, where EOR is taking place in Class II wells,

CO2 is treated as a commodity.

In this scenario, the CO2 stream is not considered a
waste, and it is not covered under RCRA.

EPAs Greenhouse Gas

Reporting Program (GHGRP)
15

GHGRP Requirements for Carbon Capture

16

CO2 Suppliers applicability under Subpart PP:

(1) Facilities with production processes that capture CO2 in
order to sequester it or otherwise inject it underground.
(2) Facilities with CO2 production wells.
(3) Importers or exporters of CO2, if the amount exceeds 25,000
tons.
Information reported under Subpart PP:
The mass of CO2 captured and supplied for CO2 storage, either
on-site (at the capture facility) or off-site.

Requirements for Geologic Sequestration of CO2

17

Applicability for CO2 sequestration accounting

requirements under Subpart RR :

All UIC Class VI wells must report under Subpart RR.

R&D

facilities that apply to EPA for an exemption do not have to

report.

Any EOR operator using UIC Class II wells can opt into
Subpart RR.

Subpart RR Requirements:
Development and implementation of an EPA-approved
Monitoring, Reporting, and Verification (MRV) plan.
Annual reporting of the amount of CO2 sequestered, along
with supporting information.

Requirements for Injectors of Carbon Dioxide

18

CO2 Injector Applicability under Subpart UU:

A well or group of wells injecting CO2 for EOR, including Class
II wells and wells with a R&D exemption under Subpart RR.

Information Reported:
Covered facilities must report basic information on the amount
of CO2 injected (including volume and source).
Note: Subpart UU is not designed to serve as an

accounting framework for CO2 storage, because the

amount of CO2 injected does not provide sufficient
information to quantify CO2 sequestration amounts.

Californias Regulatory
Approach
19

Californias Regulatory Framework

20

CCS is covered under the Regulation for the California

Cap on Greenhouse Gas Emissions and Market-Based

Compliance Mechanisms.
The CCS rule applies to CO2 suppliers, which have a
compliance obligation based on the amount of CO2 in
their emissions data report.
The regulation requires use of an [Air Resources Board]approved carbon capture and geologic sequestration
quantification methodology that ensures that the
emissions reductions are real, permanent, quantifiable,
verifiable, and enforceable. See 98.852(g)

The CA Regulatory Process

21

In April 2016, the Air Resources Board (ARB) initiated a

Regulatory Adoption Process to develop a Quantification

Methodology (QM) for CCS, using an informal
development process of:

Public workshops, technical and policy discussions

Stakeholder outreach
Draft proposals
Per ARB: This process can take several years.

Rule-making proceedings include:

45-day public notice and comment on proposed regulations

Public hearings
Responses to relevant comments
Submission of the rulemaking action to the CA Office of
Administrative Law

Key Topics being considered by ARB

22

Accounting and reporting protocols.

Evaluating existing frameworks and data verification requirements.
Site selection and characterization.
Identifying and assessing long- and short-term risks.
Defining the Area of Review.
Requirements for remedial action, monitoring and contingency plans.
Site injection operations.
Injection well design for Class II vs. Class VI wells.
Injection quantity and pressure limits.
Monitoring, reporting and active site management.
Site Closure/Post-Closure.
Decommissioning and timeframe for ongoing monitoring.
Long-Term Stewardship, including responsibility and

financial liability.

ARB Concerns with CO2-EOR

23

Potential for overall increased oil production, in

conflict with CAs oil reduction goals.

Uncertainty with site closure, unclear responsibilities
for permanent CO2 sequestration.
Maximizing CO2 storage vs. oil production.
ARB plans to include requirements that are more

strict than Class II or similar.

EPAs First Approved MRV Plan:

An Overview of the
Approach and Process
24

DINA KRUGER
KRUGER ENVIRONMENTAL STRATEGIES LLC
JUNE 14, 2016

Overview of Presentation
25

Requirements of MRV Plans under GHGRP Subpart

RR MRV of the Clean Air Act

Approach taken in Oxys MRV Plan
Process that led to MRV Plan approval

Basic Information
26

EPA approved the first MRV plan under Subpart RR

of the Greenhouse Gas Reporting Program (GHGRP)

on December 22, 2015.

The MRV plan was submitted by Occidental

Petroleum Co.

Oxy opted in to the requirements of Subpart RR.

The MRV plan covers Oxys Denver Unit.

Required MRV Plan Elements

27

Facility Information
Project Description
Monitoring Area and
Timeframes
4. Potential Leakage Pathways to
Surface
5. Considerations for Site-Specific
Variables
6. Baseline Determinations
7. Sequestration Volume
Calculation
8. MRV Plan Implementation
Schedule
9. QA Program
10. Records Retention
1.
2.
3.

The most critical (and challenging)

elements in the MRV plan are:
3.
Monitoring Area and
Timeframes;
4.
Potential Leakage Pathways to
Surface;
5.
Considerations for Site-Specific
Variables; and
6.
Baseline Determinations.
Significant time was spent:
Developing strong approaches;
Responding to EPA questions and
ideas;
Revising, as necessary; and
Ensuring that these elements were
fully and clearly described in the
plan.

Each MRV Plan will be Unique

28

EPA does not require the use of any single approach/

technique all MRV Plans.

The operator must identify appropriate site-specific
monitoring and quantification approaches/
techniques.
The selected approaches/techniques will be
determined based on site conditions, such as:
Geology
Likely leakage pathways
Current site monitoring approaches
Other

The Basis for Occidentals Approach

29

1. Knowledge of the subsurface, gained through CO2

2.
3.
4.
5.

EOR experience.
Oxys standard operating procedures for CO2-EOR.
The operating history at the Denver Unit.
The flexibility to tailor the MRV plan for specific
site characteristics, as provided in Subpart RR.
Feedback from EPA during the process of
developing the MRV plan.

Key Elements Supporting the MRV Plan

30

1. Denver Unit has a strong containment zone with no

faults or fractures.
2. Denver Unit is most updip in the Wasson Field,
which will tend to keep CO2 in the formation over
time.
3. Key focus of Oxys risk assessment is existing
wellbores, implemented via:
Compliance with regulatory requirements.
A rigorous program of subsurface performance and well bore
monitoring.

Key Elements (2)

31

Very Low Risk for Most Theoretical Leakage Pathways

Faults
Natural and Induced

Seismicity

Overfill through

Lateral Spill Points

Dissolution of CO2 into

Formation Fluid and

Subsequent Migration

Previous Operations
Drilling Through the

CO2 Area

Key Elements (3)

32

Monitoring

Information Management

Leakage detection via:

Daily visual inspections at
each facility and using
aerial inspections.
Use of H2S monitors worn
by all personnel and fixed
monitors at the Denver
Unit CO2 Recovery Plant.
Monitoring of injection
and production
performance.

Piggy-backing on CO2-

EOR Control Systems:

Use of automated data
systems for performance
evaluation and incident
tracking.
Developing criteria to
identify those events that
could involve CO2
leakage.

An Iterative MRV Plan Review Process

33

EPA

OXY
Shared draft MRV plan with

EPA in late Spring 2014.

EPA provided feedback on
Revised draft and resubmitted

initial draft.

a few more times.

EPA provided additional
Submitted final version in late

feedback on subsequent drafts.

Summer 2015.
EPA approved the MRV Plan on

December 22, 2015.

The EPA Process

34

Entire approval process took about 18 months.

First 12 months: Oxy was refining the MRV Plan.
Last 6 months: EPA was developing the approval decision,
and briefing up.
Following an MRV Plan approval, interested

parties have 30 days to appeal to EPAs

Environmental Appeal Board (EAB).
Focus is on the elements of EPAs approval document.
No appeals were filed on the Denver Unit MRV plan

A few tips for those considering an MRV Plan

35

Review the Oxy plan for the Denver Unit, with the

goal of understanding the general requirements and

how to present the necessary information.
Meet with EPA after identifying the site, and an
initial approach for the MRV plan has been
developed.
Expect significant feedback from EPA, and several
revisions of the plan.

EPAs goal is to ensure that no approved MRV Plan will be

overturned by the Environmental Appeals Board.

MRV Plan Links

36

Approved MRV Plan for the Denver Unit

https://www.epa.gov/sites/production/files/2015-12/
documents/denver_unit_mrv_plan.pdf
EPAs Decision on the Denver Unit MRV Plan
https://www.epa.gov/sites/production/files/2015-12/
documents/denver_unit_final_decision.pdf
Note: The decision document is long, as it contains all of the MRV
Plan drafts submitted by Occidental, as well as the revisions
requested by EPA.

CCUS Opportunities
under EPAs Clean Power Plan

Key GHG Rules for Power Plants

Final Rule: Standards of Performance for

Greenhouse Gas Emissions from New, Modified, and

Reconstructed Sources: Electric Utility Generating
Units (EGUs).
Published in the Federal Register on October 23, 2015.
Litigation pending.

Final Rule: Carbon Pollution Emission Guidelines

for Existing Stationary Sources: EGUs.

Published in the Federal Register on October 23, 2015.

Stayed by the Supreme Court on February 9, 2016.
DC Circuit has decided to hear the case en banc, and will
hold oral argument on September 27, 2016.

The NSPS Final Rule

CCS in the Final NSPS

EPA has determined that the Best System of

Emission Reduction (BSER) for new steam units is

a highly efficient supercritical pulverized coal unit
with partial CCS.
The required emission rate for new fossil-fired EGUs under the
NSPS is 1,400 pounds CO2 per MWh-gross.
This is equivalent to the performance of an SCPC unit
capturing about 20% of its carbon pollution.

EPAs final BSER is less stringent than the proposed

standard of 1,100 pounds CO2 per MWh-gross.

CCS Opportunities under the NSPS

NSPS rules set a Standard, not a Market-Based Approach

New Coal Units:

Few (if any) new builds are

expected.
These units would have to
meet the required rate of
1,400 pounds CO2/MWhgross.
Within the NSPS, there is no
incentive to reduce emissions
below the standard, because
NSPS units cannot trade.

New NGCC Units:

Many units are likely to be

built.
These units can comply with
the final standard (1,000 lbsCO2/MWh-gross) without
CCS.
As with new coal units,
within the NSPS, there is no
incentive to reduce emissions
below the required standard.

CCS in the Final NSPS

If an affected power plant captures CO2 to meet

emissions standard:

The power plant must report under Subpart PP (Suppliers of CO2)

regarding whether the CO2 was injected on-site, or transferred for
off-site injection.
In addition, both on-site and off-site injection of captured CO2 must
be reported under Subpart RR (Geologic Sequestration of CO2).

Innovative Technology Waivers are available for CCU

projects, based on a demonstration that the project

would store CO2 as effectively as geologic sequestration
with minimal risk to health and welfare.
See 80 FR 64654-55, 60.5505(f) and (g)

Clean Power Plan Final Rule

CCS in the Final CPP

EPA confirms CCS is an available compliance option.

We are confirming our proposal that CCS is not an element of the

[Best System of Emission Reduction], but it is an available
compliance measure for a State Plan. 80 FR 64884

Affected EGUs may utilize retrofit CCS technology to

reduce reported stack CO2 emissions from the EGU.

Retrofitting CCS on an existing unit should not be
considered a modification, which would bring the unit
into the NSPS.

Footnote 898: Addition of retrofit CCS technology should not

trigger CAA section 111(b) applicability for modified or reconstructed
sources. 80 FR 64883

CCS in the CPP (continued)

Following the requirements of the NSPS and CPP will not

lead to a change in the UIC well class.

Footnote 901: Under final requirements , any well receiving CO2

captured from an affected EGU, be it a Class VI or a Class II well,
must report under Subpart RR. A UIC Class II wells regulatory
status does not change because it received such CO2, nor does it
change by virtue of reporting under Subpart RR. 80 FR 64883

Affected EGUs that apply CCS under a State Plan must

meet the same requirements as new units that implement

CCS under the Final NSPS.

Specifically, Subparts PP and RR of the GHGRP, as described on

slide 7.

CCS Opportunities: Rate-Based Trading

New sources cannot participate in the CPPs rate-based

trading approach, per 60.5800(c)(1), 80 FR 64950.

CCS retrofits are allowed at existing coal- and gas-fired
units.

The Emission Rate Credits (ERCs) generated by such projects could

be used by the EGU, or sold to other EGUs.

The monitoring requirements for ERCs generated by

existing power plants are much less complicated than the

requirements for renewable energy and energy efficiency.
ERC prices alone are unlikely to be high enough to
incentivize CCS retrofits in a rate-based system.

CCS Opportunities: Mass-Based Trading

Incentivize CCS retrofits of existing power plants via:
Targeted allowance allocation;
Establishing allowances set-asides;
Using allowance auction revenues.
Bring new sources into the existing source program.
States that implement this approach would have a larger
emissions cap to cover the additional sources.
This approach would enable both new and existing power
plants to consider developing CCS projects.

The best way to drive CCS under the CPP

Create state-level mass-based trading markets that

include both new and existing sources.

This approach is the most likely to incentivize CCS
because it:

Establishes a clear price signal on CO2 that will apply to both

new and existing power plants.
Ensures that all fossil generation new and existing, gas and
coal will have incentives to consider CCS.
Including new sources will probably lead to higher allowance
prices, which would be helpful for CCS.

Additional Federal and/or state financial incentives

may be needed.

A Brief Discussion
on Financial Incentives
49

Currently, few incentives for CCS

50

Tax Credits for Renewables and CCS not comparable.

From 2010 2014:

Renewable Federal Revenue Cost : $37.3 billion

CCS Federal Revenue Cost: $1 billion

DOE Budget Outlays from 2012 2016:

Renewables: $2.5 billion

CCS: $1 billion

Information for this section taken from the National Coal

Council report Leveling the Playing Field: Policy Parity
for Carbon Capture and Storage Technologies.

IRC Section 45Q Tax Credit

51

Promulgated in 2009.
Provides a financial incentive to the capturer of the CO2

of $20/ton for Class VI injection and $10/ton for Class II

EOR injection.
Modifications for the 45Q tax credit are needed:

Lower the limit on CO2 capture to enable smaller sources to

participate. (Currently set at 500,000 tons/year.)
Provide transferability of the credit between parties in the capture
and injection chain of custody.
Increase the credit for both Class VI and EOR injection.

This incentive appears to have the best prospects

currently.

Other Financial Incentives

52

Contracts for Differences (CFD)

DOE could create an approach under which a limited number of

projects could receive financial support from a menu of incentives.
First step would likely be for DOE to lay out how a CFD program
would work.

Production and Investment Tax Credits

Available for renewables, but not for CCS.

Tax-preferred bonds

Funded by local governments.

Available for renewables, but not for CCS.

Master Limited Partnerships

Allows for taxation at the individual level, as opposed to both the

individual and corporate level.
Currently neither renewables nor CCS are eligible.

Contact:
KRUGER ENVIRONMENTAL STRATEGIES LLC
DINA@KRUGERSTRATEGIES.COM
(301) 801-9676