Geologic carbon capture and storage (CCS) technology holds the potential for compliance with developing climate change legislation. Despite that potential, legal issues surrounding CCS, most notably liability for long-term storage and property/land rights, will need to be resolved. This article provides a brief overview of: what CCS is; how CCS may contribute to climate change compliance; where CCS has been (and could be) implemented; and some of the legal issues surrounding its implementation.

What is CCS?

CCS captures carbon dioxide emissions from industrial processes and stores (or “sequesters”) them underground. Carbon emissions can be stored in a variety of “media”; usually, it is stored in depleted oil and/or gas reservoirs (i.e., porous rock) and saline aquifers.

Why Implement CCS?

Climate change legislation contemplates emissions being reduced below present levels, regardless of whether intensity or absolute emission control regimes are adopted. Emissions reduction can take place either as a result of actual reductions at a facility or via the acquisition of offsets or emissions credits from other facilities. CCS technology is attractive where installation in new projects, or retrofitting existing facilities is more economical than other compliance mechanisms (e.g., reductions in carbon dioxide equivalents generated, carbon market trading or payment into technology funds). However, the separation of carbon dioxide from process streams and the injection of it into the subsurface is an expensive and energy-intensive process. Worldwide, CCS has only been implemented in a handful of locations.

Where Has CCS Been Used?

CCS has been used in conjunction with several energy projects. The Statoil Sleipner offshore platform in the North Sea near Norway, for example, produces a natural gas stream that is rich in carbon dioxide. To reduce exposure to Norway’s carbon dioxide tax (Statoil also operates a number of smaller CCS projects), the carbon dioxide from the production stream is stripped using an amine process (amine solvent is also used to, for example, capture sour gas) and injected into a saline aquifer. A similar process commenced operations on September 11, 2009 at the Mountaineer coal-fired electricity generation plant in West Virginia. Approximately 1.5% of the plant’s considerable carbon dioxide emissions will be captured via a similar chemical process and injected into a saline aquifer on a test basis, with the potential to increase capture up to 90% of carbon dioxide emitted in response to anticipated American climate change legislation.

The EnCana Weyburn project in Saskatchewan (said to be the world’s largest carbon sequestration site) uses carbon dioxide removed from the process stream of a coal gasification plant in North Dakota to enhance oil recovery. The carbon dioxide from the North Dakota plant is piped to Weyburn, where it is injected for enhanced oil recovery. While some carbon dioxide results from the oil removal, it is captured and reinjected. In addition to increasing the rate of oil extraction, the Weyburn project also permanently stores the injected carbon dioxide.

Despite these successes, CCS has been criticized as being too expensive to be viable without either government subsidies or a significantly increased “price of carbon” (i.e., the cost of complying with climate change emission reduction requirements). CCS operation at power plants, for example, has been estimated to consume between 10 to 40% of total energy produced at such plants, resulting in a corresponding increase to the cost of the electricity produced. The cost of compliance must be sufficiently high to make such steps economic, otherwise significant government subsidies will be needed. The Sleipner facility was conceived in response to an aggressive state-imposed carbon price, and the carbon dioxide source for the Weyburn field, the Great Plains Synfuels Plant, was developed with the assistance of U.S. government funding.

Where Might CCS be Used?

Although CCS has been criticized as not being broadly available to reduce emissions due to geological restrictions, it has been specifically proposed as a potentially useful technology for coal-fired electricity generation and oil sands processes. Both processes are point sources for large emissions and, in the case of oil sands processes, reasonably close to depleted petroleum reservoirs.

Province of Alberta

CCS may suit the Province of Alberta in particular because, in general, Alberta has large point source emissions proximate to ideal geological storage locations.

The government of Alberta dedicated $2 billion to CCS technology in its 2008 budget. The Alberta Carbon Capture and Storage Funding Act was passed thereafter. Following a multi-round competition among approximately 50 applicants, on June 20, 2009, the government announced that the following three projects were eligible for funding:

  • As proposed by Enhance Energy and North West Upgrading Inc., the capture of carbon dioxide from an oil sands bitumen upgrader and a fertilizer plant (both located near Edmonton, Alberta) for storage and use in enhanced oil recovery. The project would also include the “Alberta Carbon Trunk Line” pipeline;
  • An integrated coal gasification combined-cycle carbon capture power generation facility, also located near Edmonton, as proposed by EPCOR and Enbridge; and
  • The capture and storage of carbon dioxide from the Edmonton area Scotford Upgrader, as proposed by Shell Canada Energy, Chevron Canada Ltd. and Marathon Oil Sands L.P. (Quest project).

On October 8, 2009, the Alberta government announced that a Letter of Intent (LOI) between it and the Quest project proponents for $745 million had been finalized. The Government of Canada also administers a $650 million CCS fund, and indicated in the LOI that it would contribute an additional $120 million. However, the proponents have not yet decided whether to proceed with the proposal. On November 24, 2009, the Alberta government signed a LOI with Enhance Energy that anticipates $495 million to be spent over 15 years along with a $63 million federal contribution. LOI discussions with Epcor/Enbridge are reported to be ongoing.

On October 14, 2009, one of the unsuccessful projects, “Project Pioneer,” was also selected by the Province of Alberta to receive $436 million in funding. Similarly, the Government of Canada will contribute $342.8 million to that project. Project Pioneer consists of adding a chilled ammonia carbon capture process to TransAlta’s Keephills 3 super-critical coal-fired generation unit presently under construction.

Legislative Efforts

These government funding initiatives complement legislative efforts. Alberta’s Climate Change Emissions Management Act required a 12% improvement in “emissions intensity” for large emitters as of July 1, 2007. The Government of Canada shortly thereafter released the “Turning the Corner” framework which contemplated a similar national emissions intensity reduction of 18%. In a 2008 update to the framework, the Government of Canada indicated that CCS would effectively be mandatory for new coal-fired generation and oil sands upgraders. While the release of regulations under the framework has been delayed, the emissions requirements are not expected to be weakened.

U.S. Initiatives

The U.S. government has similarly contributed more than $3 billion to a number of CCS projects since 2001. In its economic stimulus package introduced in 2008, the U.S. government included $8 billion in loan guarantees for new coal-fired power plants making use of CCS. The American Clean Energy and Security Act (Waxman-Markey Bill) passed by the U.S. House of Representatives effectively mandates CCS for new coal-fired electricity generation plants in addition to a “cap-and-trade” overall greenhouse gas emissions reduction regime. Likewise, the similar Clean Energy Jobs and American Power Act (Kerry-Boxer Bill) introduced in the Senate on September 30, 2009 provides support for CCS through a ten-year funding program and provisions in the allocation of “allowances” in the cap-and-trade regime that is the focus of the Kerry-Boxer bill. Although it is uncertain whether the U.S. Senate will pass either bill into law, the CCS standard is likely to be proposed in any ultimate U.S. legislative framework.

What Are the Outstanding Legal Issues Surrounding CCS?

The legal implications of the sub-surface injection and storage of carbon dioxide may be the most obvious CCS-related legal issue. Alberta’s Energy Resources and Conservation Board has proposed to deal with CCS projects using the same legal framework that it has had in place for many years for the disposal of “acid gas” (hydrogen sulfide and/or carbon dioxide bearing gas), on the basis that the owner of the right to produce natural gas from a formation has the right to store gas in that same formation

Complications associated with using this framework in the CCS context include:

  • migration of the injected carbon dioxide into neighbouring mineral tracts or under properties owned by other parties, creating the risk of court action seeking either damages or injunctions (absent obtaining consent from the potentially affected owners); and
  • the need for clarification on where and whether liability will transfer from the proponent to the state or other entity given the long-term storage of carbon dioxide.

Similar issues exist in other jurisdictions. British Columbia and a number of U.S. states have passed CCS legislation designed to deal with these issues, and model legislation has been drafted by the U.S. “Interstate Oil and Gas Compact Commission.”

Risks Post-Sequestration

In addition, the sudden release of captured carbon dioxide after sequestration could result in serious injury or death. There have been several historical incidents where, by displacing oxygen, naturally occurring carbon dioxide clouds or pockets have suffocated people (in at least one case, in significant numbers). Environmental concerns have also been raised about the potential for carbon dioxide to form carbonic acid post-injection and further react with other injected gases or mineral deposits to contaminate groundwater. That said, environmental assessments are likely required for any new major CCS projects, whether under Alberta, federal or other jurisdictions. The predicted environmental effects of carbon dioxide injection, and appropriate mitigation, will have to be evaluated.

The risk of a CCS leak is exacerbated by the long period of time over which CCS projects must successfully contain the carbon dioxide before the sequestered carbon dioxide sufficiently bonds with the rock: as little as 100 years in the case of saline aquifers and up to 1,000 years where the carbon dioxide remains in a gaseous state. The length of monitoring raises the issue of what entity will assume liability for a CCS project. While the proponent will obviously be the primary risk-bearer during injection operations, as the storage operations are closed down (and the revenue stream ended) and a monitoring phase is entered into (during which no revenues will be generated), it is likely not realistic to rely on private proponents to be capable of conducting such monitoring. Accordingly, the state has been frequently suggested as the appropriate party to bear post-injection responsibilities, although other concepts such as an industry-wide insurance fund have been proposed. In Alberta, there is currently no mechanism to transfer post-injection responsibilities to the Crown; these responsibilities remain with the project operator.

Conclusion

CCS has the potential to allow new carbon-intensive projects, notably oil sands and coal-fired electricity generation, to achieve compliance with developing climate change legislation. However, this technology faces challenges from both a capital cost and carbon cost perspective. There are also significant legal issues that arise from the implementation of CCS technology that will need to be addressed before it can become an acceptable alternative for most proponents.