OGJ Washington Editor
WASHINGTON, DC, Feb. 3 -- A private sector model with a state-based regulatory system, instead of one that is federal, will “most likely result in a robust” US carbon dioxide pipeline system, according to a new report funded by the US Department of Energy’s National Energy Technology Laboratory.
The approach oil producers used to develop pipelines to transport CO2 to fields for enhanced recovery is a good starting point, NETL added. But a federal role that includes incentives to encourage private construction of CO2 pipelines would be an important factor in moving the concept forward, it said.
The report, “A Policy, Legal, and Regulatory Evaluation of the Feasibility of a National Pipeline Infrastructure for the Transport and Storage of CO2,” analyzes a potential system which would move CO2 from power plants and other large sources to designated underground storage locations.
The Southwest Regional Carbon Sequestration Partnership (Secarb) contracted with the Interstate Oil & Gas Compact Commission to develop the report, which was undertaken by the DOE-funded Pipeline Transportation Task Force that IOGCC and the Southern States Energy Board lead. PTTF is comprised of regulators, policymakers, and industry representatives and is trying to overcome hurdles associated with CO2 pipeline development, NETL said.
In its executive summary, the report said use of CO2 for EOR remains the primary driver for US carbon capture and storage (CCS) deployment. “However, national carbon control policies on the horizon could lead to expanded deployment of CCS in the near future,” it said. “If CCS continues to evolve, a national CO2 pipeline infrastructure of sufficient scope and capacity will be needed to handle the expected volumes.”
It said the US has developed an effective model for geologic storage of CO2 in the Permian basin while effectively producing more crude with EOR. While CO2-driven EOR is not focused on carbon storage, it has resulted in a large volumetric amount of storage at a regionally significant scale of up to 35 million tons/year, the report said.
“The potential for oil recovery from large reservoirs in the Southwest drove the industry to find a way to connect sources of CO2 with sinks or reservoirs that could benefit from CO2-driven EOR,” it noted. “This was accomplished using a private capital model with relatively small incentives from federal and state governments. Oil revenues provided the cash flow and debt collateral.”
This private sector response has been replicated throughout much of the US with minimal federal oversight, leaving most of the regulatory responsibility to the states, the report indicated. Natural CO2 fields were expensive to develop, but less expensive than the investment required for CO2 captured from coal-fired power plants or industrial sources, it said. “If federal carbon reductions are imposed, the scale of CO2 infrastructure in the southwestern US, although large, will pale in comparison with envisioned US CCS infrastructure,” it said.
A national CO2 pipeline transportation network is necessary because many large carbon-generating plants are not near low-risk, high-volume sinks, and not all capture technologies can be moved to areas with large storage capacities, the report said.
It noted that while the 4,000 miles of CO2 pipelines have already been built through a variety of business models (open access, dedicated access, interstate, and intrastate), each used a private-sector approach with limited government involvement from either a regulatory or financial standpoint.
State, federal roles
States have dominated the regulatory model by providing siting, construction, and operating regulations and some economic regulation on a state-by-state basis, the report said. The federal government regulates safety parameters of CO2 pipelines and right-of-way provisions where the pipelines cross federal land, it said.
“The IOGCC/SSEB Pipeline Transportation Task Force believes the model that will most likely result in a robust CO2 pipeline system in the US is a private sector model, with a state-based regulatory framework, rather than a federally dominated or expanded regulatory role,” the report said. “While the PTTF believes that the current level of federal regulatory oversight is sufficient, members recommend a federal role that includes incentives to encourage the private construction of CO2 pipelines.”
CO2 pipeline economics have been led so far by private sector market demand primarily for EOR, it said. EOR sinks could function as significant anchors for future CO2 pipeline to meet costs of long-distance transportation from sources which otherwise might not have an available link because of distance and costs, it suggested.
“A federal mandate that requires carbon capture will not change CO2 pipeline distances, the costs of transportation, location of sinks, CO2 sources, and the potential adverse reactions from population centers,” the report pointed out. “These factors must be considered when evaluating carbon capture mandates, their efficacy, and the significant challenges of capturing and transporting enormous quantities of CO2 across the US.”
The report’s final section examines the economic aspects of more extensive CO2 pipeline development. It looks at all aspects of physical infrastructure expenses, including capital and material costs, land acquisition costs, and operational and maintenance expenses. Options such as cost recovery for pipeline infrastructure in regulated utility markets and federal economic incentives, such as income and property tax incentives, grants, and loans) to offset pipeline infrastructure expenses are also examined.
“To date, the states have enabled a market-based, robust system to transport CO2 for use in EOR,” the report said. “Build-out of an extensive pipeline system to accommodate CO2 transport from several hundred coal plants most likely will occur over an extended period of time. State solutions and interstate compacts are expected to offer the support necessary for those installations.
“However, there may be scenarios in which federal agencies could play a more significant role in the development of the pipeline infrastructure,” it continued. “An aggressive, short lead-time program that requires CO2 to be disposed of also could require further federal participation. If a large number of power plants and other sources are required to sequester CO2, adequate storage sites might require long distance pipelines that cross state lines, which could necessitate a mix of state and federal activity to address those challenges.”
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NETL: Carbon dioxide for EOR provides model for pipeline system