Common Tragedies

Thoughts on Environmental Economics

CCS on the Hill: FutureGen, Regulation, and Public Perception

Posted by Evan Herrnstadt on February 5, 2008

I went to a hearing on the Hill last Thursday pertaining to regulatory aspects of carbon capture, transport, and sequestration. The hearings were for the benefit of two bills (S. 2144 and S. 2323) making their way through the Senate Committee on Energy and Natural Resources, but were also conveniently held the day after the DOE announced it was backing out of the FutureGen project (at least in its current manifestation).

Indeed, the big attraction for many in attendance was the presence of James Slutz, Deputy Assistant Secretary in the DOE Office of Natural Gas and Petroleum. In a bold move, he started off asserting that “DOE has assumed the lead in CCS technology”. When pressed by Sen. Barrasso to explain how eroded confidence in public-private partnerships can be rejuvenated after the DOE FutureGen pullout, Slutz simply replied that “when a project doubles in cost, it’s time to rework the agreement”, that the project was “no longer in the interest of the American people”, and that market-based plants would be more successful. Aside from the fact that a large proportion of the cost overruns are related to inflation and delays, this statement also completely ignores the point of public-private demonstration partnerships. There is an enormous amount of risk involved in this type of project and, as such, it would not be viable as a purely private endeavor. FutureGen was not designed to be profitable, it was designed to demonstrate commercial-scale technology.

During the question period Sen. Menendez went on a spiel about how a mature, highly profitable coal industry should be at the forefront of CCS development and wondered aloud what happened to the “polluter pays principle.” This opened an opportunity for Slutz to counter by pointing out that the DOE is indeed trying to push the costs on to the private sector with its trepidation in the FutureGen situation. This exchange displayed some of the dangers of tossing around rhetoric about windfall profits and constantly demonizing energy companies for past transgressions. Trying to pin blame and cost on them can sometimes undermine the greater effort for a low-carbon future. Better would be the creation of market incentives and the use of government influence in the credit market to help facilitate private R&D and the demonstration/deployment of revolutionary technologies.

FutureGen aside, the main purpose of the afternoon was to address regulation. FERC Chairman Joseph T. Kelliher pointed out that a lot of work has already been done in proving CO2 transport technology (there are already 3,900 miles of CO2 pipeline in the US) and regulating CO2 and other pipelines. He delineated the relevant existing regulatory frameworks:

  1. Existing CO2 pipelines: sited under state law, and rates are arbitrated by the DOT Pipeline and Hazardous Materials Safety Administration (PAHMSA) if they are found questionable.
  2. Oil: also sited under state law, but FERC sets the rates.
  3. Natural gas: FERC sites and sets the rates, while the DOT covers the safety aspects.

Kelliher stressed that state authorities should not be preempted in the siting arena; the failure of state siting has not generally been an issue. He did acknowledge that while we have large existing networks of oil and gas pipelines successfully regulated by the states, this might not be sufficient depending on how big the CO2 infrastructure will have to be and how quickly it will need to be constructed.

C. Stephen Allred of the Department of the Interior concisely carried the regulatory message of the day. First, simple regulation is good regulation — reduced regulatory uncertainty encourages investment. Second, the learning curve is steep so use existing frameworks. He also made one of the surprisingly few references to liability — when you decide who owns the CO2, you’ve already decided a lot about liability under existing law. The only other major comments on long-term liability were made by Benjamin Grumbles of the EPA. He stressed that its delineation is crucial, and noted that existing programs only assign responsibility for 30 years. This is a large issue that must be dealt with, as made evident by Sen. Kerry’s grandiose opening remark that “permanent storage” must be guaranteed. Indeed, Sens. Tester and Corker inquired about potential seepage of CO2 beneath public lands to the spaces below adjacent private lands. Allred replied that this highlights a big advantage of using depleted oil reservoirs — we already have extremely good information about their structures. We just need to note what we might have done to weaken them in the process of drilling or EOR.

Another issue that arose is that of public perception. Krista Edwards, Deputy Administrator of PAHMSA, noted that although we are seeing historic lows for pipeline incidents and there has never been a CO2 pipeline failure, it is important to make communities aware of the risks associated with such siting and land use decisions. We have seen energy technology projects stall almost entirely due to NIMBY-ism. Right after Ms. Edwards’ comments, ranking committee member Sen. Domenici provided us with a well-timed look at misconceptions of CO2 safety, inquiring, “Can CO2 hurt people? Can it blow up?” Whether he was truly ignorant, or trying to float misconceptions to the interested folks watching on C-SPAN, he demonstrated what could be a widespread unfamiliarity with the properties of CO2. This comment also displayed a potential consequence of all the comparisons to piped natural gas that are being bandied about.

Clearly, regulatory certainty plays a large role in helping to shape public opinion regarding pipeline and injection well siting. In the same vein, using state and local authority to site CO2 pipelines builds on existing frameworks and takes advantage of localized knowledge. In order to make CCS a feasible large-scale technology, the transport and storage of CO2 must be properly, reliably, and simply regulated. However, as noted by Mr. Grumbles, CCS envelopes several complex liability and regulatory issues and is best informed by lessons from full-scale demonstration projects. Hmmm, I wonder where could we get one of those

One Response to “CCS on the Hill: FutureGen, Regulation, and Public Perception”

  1. [...] cash injections measured in months, not long-term structural changes. Common Tragedies dives into another debate on the Hill: how to create the physical infrastructure needed to make clean coal a reality. And while dirty [...]

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