[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                      THE FUTURE OF FOSSIL FUELS: 
                      GEOLOGICAL AND TERRESTRIAL 
                           SEQUESTRATION OF 
                            CARBON DIOXIDE 

=======================================================================

                        JOINT OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                             joint with the

                    SUBCOMMITTEE ON NATIONAL PARKS,
                        FORESTS AND PUBLIC LANDS

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                          Tuesday, May 1, 2007

                               __________

                           Serial No. 110-23

                               __________

       Printed for the use of the Committee on Natural Resources


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                     COMMITTEE ON NATURAL RESOURCES

               NICK J. RAHALL II, West Virginia, Chairman
              DON YOUNG, Alaska, Ranking Republican Member

Dale E. Kildee, Michigan             Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas              Ken Calvert, California
Frank Pallone, Jr., New Jersey       Chris Cannon, Utah
Donna M. Christensen, Virgin         Thomas G. Tancredo, Colorado
    Islands                          Jeff Flake, Arizona
Grace F. Napolitano, California      Rick Renzi, Arizona
Rush D. Holt, New Jersey             Stevan Pearce, New Mexico
Raul M. Grijalva, Arizona            Henry E. Brown, Jr., South 
Madeleine Z. Bordallo, Guam              Carolina
Jim Costa, California                Luis G. Fortuno, Puerto Rico
Dan Boren, Oklahoma                  Cathy McMorris Rodgers, Washington
John P. Sarbanes, Maryland           Bobby Jindal, Louisiana
George Miller, California            Louie Gohmert, Texas
Edward J. Markey, Massachusetts      Tom Cole, Oklahoma
Peter A. DeFazio, Oregon             Rob Bishop, Utah
Maurice D. Hinchey, New York         Bill Shuster, Pennsylvania
Patrick J. Kennedy, Rhode Island     Dean Heller, Nevada
Ron Kind, Wisconsin                  Bill Sali, Idaho
Lois Capps, California               Doug Lamborn, Colorado
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth Sandlin, South 
    Dakota
Heath Shuler, North Carolina

                     James H. Zoia, Chief of Staff
                   Jeffrey P. Petrich, Chief Counsel
                 Lloyd Jones, Republican Staff Director
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    JIM COSTA, California, Chairman
          STEVAN PEARCE, New Mexico, Ranking Republican Member

Eni F.H. Faleomavaega, American      Bobby Jindal, Louisiana
    Samoa                            Louie Gohmert, Texas
Solomon P. Ortiz, Texas              Bill Shuster, Pennsylvania
Rush D. Holt, New Jersey             Dean Heller, Nevada
Dan Boren, Oklahoma                  Bill Sali, Idaho
Maurice D. Hinchey, New York         Don Young, Alaska ex officio
Patrick J. Kennedy, Rhode Island
Hilda L. Solis, California
Nick J. Rahall II, West Virginia, 
    ex officio
                                 ------                                

        SUBCOMMITTEE ON NATIONAL PARKS, FORESTS AND PUBLIC LANDS

                  RAUL M. GRIJALVA, Arizona, Chairman
              ROB BISHOP, Utah, Ranking Republican Member

Dale E. Kildee, Michigan             John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Chris Cannon, Utah
Donna M. Christensen, Virgin         Thomas G. Tancredo, Colorado
    Islands                          Jeff Flake, Arizona
Rush D. Holt, New Jersey             Rick Renzi, Arizona
Dan Boren, Oklahoma                  Stevan Pearce, New Mexico
John P. Sarbanes, Maryland           Henry E. Brown, Jr., South 
Peter A. DeFazio, Oregon                 Carolina
Maurice D. Hinchey, New York         Louie Gohmert, Texas
Ron Kind, Wisconsin                  Tom Cole, Oklahoma
Lois Capps, California               Dean Heller, Nevada
Jay Inslee, Washington               Bill Sali, Idaho
Mark Udall, Colorado                 Doug Lamborn, Colorado
Stephanie Herseth Sandlin, South     Don Young, Alaska, ex officio
    Dakota
Heath Shuler, North Carolina
Nick J. Rahall II, West Virginia, 
    ex officio
                                 ------                                

























                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Tuesday, May 1, 2007.............................     1

Statement of Members:
    Costa, Hon. Jim, a Representative in Congress from the State 
      of California..............................................     2
    Grijalva, Hon. Raul M., a Representative in Congress from the 
      State of Arizona...........................................     3
        Prepared statement of....................................     4
    Rahall, Hon. Nick J., II, a Representative in Congress from 
      the State of West Virginia.................................     4
    Pearce, Hon. Stevan, a Representative in Congress from the 
      State of New Mexico........................................     6

Statement of Witnesses:
    Bauer, Carl O., Director, National Energy Technology 
      Laboratory.................................................    11
        Prepared statement of....................................    13
        Response to questions submitted for the record...........    16
    Fairburn, Judy, Vice President, Downstream Operations, EnCana 
      Corporation................................................    35
        Prepared statement of....................................    36
        Response to questions submitted for the record...........    40
    Goergen, Michael, Executive Vice President and CEO, Society 
      of American Foresters......................................    64
        Prepared statement of....................................    66
        Response to questions submitted for the record...........    70
        ``Carbon Market May Offer Opportunities for Forest 
          Landowners'' by Matt Smith submitted for the record....    68
    Herzog, Howard, Principal Research Engineer, Laboratory for 
      Energy and the Environment, Massachusetts Institute of 
      Technology.................................................    42
        Prepared statement of....................................    43
    Kelly, George W., Treasurer, National Mitigation Banking 
      Association................................................    59
        Prepared statement of....................................    61
    Kuuskraa, Vello A., President, Advanced Resources 
      International..............................................    46
        Prepared statement of....................................    47
        Response to questions submitted for the record...........    48
    Leahy, P. Patrick, Associate Director, U.S. Geological Survey     8
        Prepared statement of....................................     9
    Schlesinger, William H., Dean of the Nicholas School of the 
      Environment and Earth Sciences, Duke University............    52
        Prepared statement of....................................    54
        Response to questions submitted for the record...........    56


    OVERSIGHT HEARING ON THE FUTURE OF FOSSIL FUELS: GEOLOGICAL AND 
              TERRESTRIAL SEQUESTRATION OF CARBON DIOXIDE.

                              ----------                              


                          Tuesday, May 1, 2007

                     U.S. House of Representatives

      Subcommittee on Energy and Mineral Resources, joint with the

        Subcommittee on National Parks, Forests and Public Lands

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 2:06 p.m. in 
Room 1324, Longworth House Office Building, Hon. Jim Costa 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Costa, Grijalva, Sarbanes, Inslee, 
Rahall, Pearce, Brown, Shuster and Lamborn.
    Mr. Costa. The joint oversight hearing of the Subcommittee 
on Energy and Mineral Resources as well as the Subcommittee on 
National Parks, Forests and Public Lands will now come to 
order. This subcommittee meeting this afternoon is to deal with 
the future of fossil fuels, particularly the geological and 
terrestrial sequestration of carbon dioxide which is an issue 
that I think concerns many.
    Before we get into my opening statement and my colleagues', 
the Subcommittee Chair on National Parks, Forests and Public 
Lands and, of course, we are very honored to have the real 
Chairman of the Natural Resources Committee, Chairman Rahall, 
here this afternoon for his opening statement as well. There 
are a few housekeeping functions which they inform me that I 
must do at each of these subcommittee meetings.
    So without further ado, under Rule 4(g), the Chairman and 
the Ranking Member may make an opening statement. If any of the 
Members have any other statements, they will be included in the 
record under unanimous consent. Of course, that will include 
our other two Chairs who are here this afternoon. Additionally, 
under Committee Rule 4(h), additional material for the record 
should be submitted by Members or witnesses within 10 days 
after the hearing and, as I suggest at each of these 
subcommittee hearings, we ask that the witnesses really be 
helpful with our staff members and not wait until the 9th or 
10th day when you provide that information because it is 
helpful to staff, both Minority and Majority staff. So we 
appreciate that cooperation.

STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM 
                    THE STATE OF CALIFORNIA

    Mr. Costa. Let me now take the opportunity to recognize my 
colleagues here but before I do let me make a brief statement. 
I think we all know that 50 percent of the country's 
electricity--in essence over two trillion kilowatt hours per 
year--is generated by coal. Although often thought of as a fuel 
of the past, obviously the facts do not hold up in that sense 
because there is more coal mining today in this country than 
ever before. The fact is that coal will continue, in my opinion 
and I think many others, to remain an essential part of our 
country's energy future, therefore the importance of this 
afternoon's hearing.
    It has been said--but I think again it deserves repeating--
the Chairman taught me this a number of years ago--that the 
United States is the Saudi Arabia of coal, and no one should 
know better than he who comes from a part of the country that 
is rich in coal resources. Unfortunately, we also know that 
coal produces the most carbon dioxide of any of the fossil 
fuels that we use today--roughly a third more than petroleum, 
double that of natural gas. So we have an issue here.
    We have a challenge. Maintaining our nation's energy 
security as we try to reduce our dependency on foreign sources 
of energy while protecting the impacts of climate and climate 
change means that we need to use the ingenuity of American 
technology to figure out how we can more efficiently and cost 
effectively deal with the carbon dioxide emissions. Because of 
the importance of coal to this country and its plentiful 
supply, I think we need to do this sooner rather than later--
and I think many of my colleagues, on a bipartisan basis, feel 
that way.
    Therefore, that is the purpose of today's hearing, to look 
at how we can keep carbon dioxide out of the atmosphere, 
certainly significantly reduce it, and avert the impacts that 
it has on our climate. I live in an area in California that is 
moving from severe to extreme non-attainment designation status 
by both the Federal Environmental Protection Agency as well as 
the state area. Unfortunately, it is a closed-in air basin with 
the same challenges the south coast air basin has in southern 
California.
    So we are concerned about CO/2/ emissions and 
other issues that deal with both mobile and stationary sources 
of emissions. So one of the particular interesting avenues in 
geological carbon is carbon sequestration, as the scientists 
tell us literally taking the carbon dioxide out of the fuel and 
sticking it underground where it can stay sequestered, we 
believe, for thousands of years. The United States is currently 
surveying a number of areas where we think carbon dioxide could 
be stored underground in saline formations for literally 
hundreds of years in a safe fashion.
    So we will be looking forward to the witnesses today. The 
Department of Energy has been doing a lot of interesting work 
that we will look forward to hearing about. We will also see 
what is happening in the commercial sector by a number of the 
witnesses in the second panel who will testify about the 
commercial efforts. We also will be hearing about terrestrial 
sequestration which is the application of the biological 
efforts of trees, plants and soil to help take additional 
carbon dioxide out of the atmosphere. I think President Reagan 
spoke of that many, many years ago.
    So this hearing is about our future and how we deal with 
the importance of coal as a source of energy as we talk about 
our future energy needs, at the same time trying to protect the 
environment. So we look forward to the witnesses today. I look 
forward to working with my colleagues as I always do, and I 
will now defer to the Subcommittee on National Parks Chair, my 
dear friend from Arizona, Mr. Raul Grijalva.

    STATEMENT OF HON. RAUL M. GRIJALVA, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. Grijalva. Thank you very much, Mr. Chairman, and I am 
pleased to join with you, Mr. Ranking Member, and the Chairman 
of the full committee and our colleagues in welcoming the 
witnesses and the audience to this joint subcommittee oversight 
hearing. Today's hearing covers the topic of carbon 
sequestration, and in doing so we are addressing both 
geological and terrestrial carbon sequestration. Concern about 
climate change has led many to take a closer look at the 
ability of our national forests to sequester carbon, how to 
account for and measure for its carbon, coupled with different 
forest management practices has been a difficult issue.
    Certain forest management practices and land use changes, 
particularly timber harvest and deforestation, can have major 
impacts on carbon storage. Some have argued that in order to 
sequester more carbon in the National Forest System we should 
cut older forests and replace them with young tree plantations. 
To do so would be a grave mistake. A number of studies have 
confirmed that there is a substantial amount of carbon stored 
in old growth forests. Old growth forests store carbon in their 
soil and biomass on the forest floor, and when an old growth 
forest is cut, a net release of carbon dioxide is released into 
the atmosphere.
    Science confirms for us that any effort to reduce carbon 
emissions to the atmosphere should include strong conservation 
measures for our nation's old growth forests. I would like to 
especially welcome one of our witnesses today, Dr. Robert 
Schlesinger, from Duke University. I look forward to hearing 
more from him about the importance of old growth forest 
conservation and carbon sequestration.
    Mr. Chairman, I also note that last Friday, April 27, was 
Arbor Day. J. Sterling Morton founded Arbor Day in 1885 as an 
annual observance dedicated to planting and the conservation of 
trees. Today we will also learn more about the role of 
reforestation in forest carbon sequestration.
    In the context of this debate, I think it is important that 
we address the ecological principles of reforestation. Our 
understanding about the dynamic nature of forest ecosystems has 
evolved since the days of tree plantations. Thank you, Mr. 
Chairman. I look forward to hearing from our witnesses today.
    [The prepared statement of Mr. Grijalva follows:]

          Statement of The Honorable Raul Grijalva, Chairman, 
        Subcommittee on National Parks, Forests and Public Lands

    I'm pleased to join Chairman Costa in welcoming our witnesses and 
audience to this joint oversight hearing of the National Parks, Forests 
and Public Lands Subcommittee and the Energy and Mineral Resources 
Subcommittee.
    Today's hearing covers the topic of carbon sequestration, and in 
doing so we are addressing both geological and terrestrial carbon 
sequestration.
    Concern about climate change has lead many to take a closer look at 
the ability of our National Forests to sequester carbon. How to account 
for and measure forest carbon, coupled with different forest management 
practices, has been a contentious issue. Certain forest management 
practices and land use changes, particularly timber harvest and 
deforestation, can have major impacts on carbon storage.
    Some have argued that in order to sequester more carbon in the 
National Forest System, we should cut older forests and replace them 
with young tree plantations. To do so would be a grave mistake. A 
number of studies have confirmed that there is a substantial amount of 
carbon stored in old growth forests. Old growth forests store carbon in 
their soil and biomass on the forest floor, and when an old growth 
forest is cut, a net release of carbon dioxide is released into the 
atmosphere.
    Science confirms for us that any effort to reduce carbon emissions 
to the atmosphere should include strong conservation measures for our 
nation's old growth forests.
    I would like to especially welcome one of our witnesses today, Dr. 
Robert Schlesinger (Shh-less-inger), from Duke University. I look 
forward to hearing more from him about the importance of old growth 
forest conservation in carbon sequestration.
    Mr. Chairman, I also note that last Friday, April 27th, was Arbor 
Day. J. Sterling Morton founded Arbor Day in 1885 as an annual 
observance dedicated to the planting and conservation of trees. Today 
we will also learn more about the role of reforestation in forest 
carbon sequestration. In the context of this debate, I think it is 
important that we address the ecological principles of reforestation. 
Our understanding about the dynamic nature of forest ecosystems has 
evolved since the days of tree plantations.
    Thank you, Chairman Costa. I look forward to hearing from our 
witnesses today.
                                 ______
                                 
    Mr. Costa. Thank you, Mr. Chairman, for your concise 
statement and your points of fact, and now we will hear the 
gentleman from West Virginia who is the Chairman of the Natural 
Resources Committee, and we are very honored that he would take 
the time this afternoon to sit in on our joint subcommittees 
for this very important hearing. Chairman Rahall.

   STATEMENT OF HON. NICK J. RAHALL, II, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF WEST VIRGINIA

    Mr. Rahall. Thank you, Chairman Costa, for allowing me to 
speak to you as Subcommittee Chair on Energy and Mineral 
Resources, and to Chairman Grijalva the Chairman of the 
Subcommittee on National Parks, Forests and Public Lands, and 
to Ranking Member, Mr. Pearce. I commend all of you for being 
here today and having this very important hearing.
    In my view, it is one of the most important hearings being 
conducted under the auspices of the Natural Resources Committee 
this year. Of all carbon emissions in this country, about one-
third comes from power plants and other large industrial 
sources. If we are really going to get serious about reducing 
emission of greenhouse gases that give rise to climate change, 
then we are going to have to make the same type of commitment 
to carbon sequestration that this nation made decades ago in 
sending a man to the moon.
    And when it comes to carbon emissions, there is another 
consideration here as well and that is of enhancing this 
country's national security interests. The sun does not always 
shine and the wind does not always blow, and even if the 
harvest from every single acre on which corn is grown in this 
country were dedicated strictly to ethanol, only about 12 
percent of current gasoline usage would be displaced. So this 
means that if we are going to reduce our dependence on foreign 
sources of energy, domestic coal must remain a part of the mix 
and in alternative forms such as liquid and gas that can 
replace imported oil.
    With carbon sequestration and the use of biomass feedstocks 
in combination with coal, liquification can provide a major 
source of transportation fuel with lower well-to-wheel 
emissions than conventional motor fuels in use today. Carbon 
sequestration can take place by the capture and storage of 
carbon dioxide in suitable geological formations such as oil 
fields, saline formations and aquifers and unminable coal seams 
or it can be accomplished by enhancing natural sinks through 
forest management practices.
    We have been conducting enhanced oil recovery through 
carbon dioxide injection for years in this country but the 
Bureau of Land Management cannot provide us with any 
information on the amount that has been sequestered in this 
manner on public lands. This is something that I think we need 
to look at more closely, and I am particularly pleased that 
EnCana is with us here today to discuss its Weyburn Field 
project.
    Another area I believe we need to investigate is the 
sequestration capacity of lands throughout this country, and I 
deeply appreciate Carl Bauer with the National Energy 
Technology Laboratory from Morgantown, West Virginia, for being 
with us at this hearing today, as he is at the forefront of the 
Federal government research efforts on carbon sequestration.
    I am also pleased that the Massachusetts Institute of 
Technology is here to discuss part of its widely acclaimed 
report on the future of coal. That report notes that a 
nationwide program is necessary to conduct a geological 
assessment of the capacity for carbon capture in this country. 
The report also recommends that the U.S. Geological Survey play 
a role in that effort which would be comparable in scope to the 
national oil and gas assessments the Survey has conducted.
    In my view, such an endeavor would complement and greatly 
enhance the work the Energy Department is doing so I am pleased 
again that MIT and the Survey are represented here as well 
today, and finally we should not underestimate the role of 
natural carbon sinks play in carbon capture. It is my 
understanding that Professor Schlesinger from my alma mater of 
Duke University is here to discuss this area as well as the 
National Mitigation Bankers.
    In conclusion, I thank all the witnesses for being with us 
this afternoon and sharing their expertise, and again I thank 
the two Subcommittee Chairs for conducting this important 
hearing. Thank you, Mr. Chairman.
    Mr. Costa. Thank you, Chairman Rahall. Every time I hear 
you speak on coal, I learn something new, and it is our 
pleasure--I know I speak on behalf of my colleagues both 
Chairman Grijalva, myself and Mr. Pearce--it is an honor to 
serve with you as members of the Natural Resources Committee. 
So without further ado, the gentleman from New Mexico, 
Congressman Pearce.

  STATEMENT OF HON. STEVAN PEARCE, A REPRESENTATIVE FROM THE 
                      STATE OF NEW MEXICO

    Mr. Pearce. Thank you, Mr. Chairman, and Mr. Chairman, and 
Mr. Chairman. All three of you. This is a heavyweight 
conference today. To the Chairman, as Mr. Costa referred, the 
Chairman, he says that the sun does not always shine and the 
wind does not always blow. I would recommend, sir, you come to 
New Mexico. The sun may not shine but about 350 days a year but 
the wind blows every single day. I can guarantee you that.
    I really look forward to hearing from our witnesses. I 
think there are a lot of questions about carbon sequestration 
that we need to have a better understanding of. You know there 
is no bigger threat to our coal industry today than the current 
controversy surrounding climate change. Fifty-two percent of 
our nation's electricity comes from coal, and climate change 
activists want nothing more than to stop that, even if it means 
doubling or tripling constituents' power bills that are already 
very high, sending more jobs to China.
    The title of today's hearing refers to carbon sequestration 
as the future of fossil fuels. Indeed the entire coal 
industry's future, and our American way of life, is being 
staked on the whole subject of carbon sequestration. This 
Congress is being urged to adopt climate change legislation 
with a promise that it will not be the death of the coal 
industry because we are going to sequester the carbon 
emissions.
    I worry about this promise prematurely. I am not opposed to 
the carbon sequestration. However, as indicated in the written 
statement of our witnesses, there remains much to learn before 
carbon sequestration becomes economically practical and 
environmentally sound, and in case you might think that I am 
only coming to this question lately, it was in the 1980s when I 
flew the first airplane--I was flying with the head of one of 
the oil companies--and we were looking for CO/2/. We 
eventually found the field that they wanted to look at in 
northern New Mexico.
    The company laid a pipeline that went all the way from 
northern New Mexico to southern New Mexico, about 500 to 600 
miles, in order to sequester, to inject the carbon dioxide in 
order to have tertiary recovery from the oil fields. I will 
tell you that in the last 24 to 48 months we began pumping 
carbon dioxide into the oil fields underneath my home in Hobbs, 
New Mexico, and I will tell you that the results are very, very 
difficult. It is a hard technology.
    Almost every well head has had to be replaced with 
stainless steel because every time the carbon dioxide touches 
water it forms carbolic acid, and it literally eats away the 
pipelines. So as we are talking about moving carbon dioxide 
from the sources, let us keep in mind the technical 
difficulties that have not yet been solved, and when we say 
that we are going to put a penalty in place or we are going to 
put a legislation in place and the technology will come, I just 
want us to remember the catalytic converters on our cars.
    They are to take elements out of the airstream, and one of 
the charts I would like to refer to is the Wall Street Journal 
that makes this process seem so simple, so easy. They simply 
show a large plant. You are going to capture all the carbon and 
then just pour it into the ground. That is about as far from 
reality, about as simplistic, and yet we are willing to--in our 
major newspapers--declare this is the salvation for coal. If we 
pass legislation that has a technology that is unproven and is 
very, very difficult technology to implement, then I worry 
about what the long-term results are going to be.
    You know California mandated a couple of years ago--in 
1990--that they were going to require that 10 percent of 
vehicles be electric, battery operated. That was to be by 2003. 
What California ended up doing was giving away a free golf cart 
with every SUV sold in order to accomplish their emissions 
objectives. I want us to really remember those elements that 
have been tried in our society but have been complete failures 
because of technology that does not yet exist.
    I think that we must remember that there are three elements 
in carbon sequestration: The capturing of the carbon dioxide; 
the difficulties in transporting it is the second problem; and 
third the technologies involved in injecting and maintaining 
that. As policymakers, we have an obligation to base our 
policies on fact not popular or rhetorical spin. There is too 
much at stake. Too many jobs and the American economy is at 
stake. Too much of our consumers' pocketbooks are at stake.
    You know we have often heard how Brazil has gotten energy 
independence through ethanol. The truth is they have been 
increasing their oil and gas production by 9 percent a year. 
Oil and gas is 85 percent of Brazil's economy, and yet we are 
led to believe by popular story that ethanol has caused them to 
be independent. I think that we owe it to the American people 
to seek every renewable option that we can, to do everything 
that we can to improve the climate, but we also have a 
tremendous responsibility to be concerned about what is 
happening to American jobs in that process.
    I especially appreciate Mr. Bauer's presentations. I 
appreciate the fact that he shows in one of his slide shows 
that the U.S. has 42 times what the Middle East does in energy. 
I appreciate his concepts in that PowerPoint presentation that 
talk about energy interdependence. I think that is a very 
powerful concept and look forward to hearing him. Mr. Chairman, 
I yield back the balance of my time. Thank you.
    Mr. Costa. Thank you very much. The gentleman from New 
Mexico never disappoints me. You always have an illustration or 
some sort of a presentation.
    Mr. Pearce. We have two more if you would like to see them 
too.
    Mr. Costa. I am sure you do, and that always gives us a 
better pictorial outlook on what we are talking about here. Mr. 
Brown, do you have an opening statement?
    Mr. Brown. No, not at this time.
    Mr. Costa. All right. Well now we will proceed with the 
main event which is our witnesses, both with the first panel 
and the second panel. It is my honor to introduce Mr. Pat Leahy 
with the U.S. Geological Survey. Members, I think we owe an 
appropriate acknowledgment. I understand this is Mr. Leahy's 
last day. So he can say anything he wants. I thought it was 33 
years because I know he is a young fellow but I am told 
actually when he counts the years that he was a student when he 
worked for the U.S. Geological Survey, it is actually 40 years. 
So we want to honor and recognize you, Mr. Leahy, for your 
contributions. That is as good as it gets.
    Now we want to hear your opening statement, and we have the 
five-minute rule even though sometimes we do not always follow 
it. We would like to encourage our witnesses to follow it, and 
we do have your written statement.

        STATEMENT OF PATRICK LEAHY, ASSOCIATE DIRECTOR, 
                UNITED STATES GEOLOGICAL SURVEY

    Mr. Leahy. Thank you, and that was very nice. It is sort of 
a nice capstone on a Federal career. I am pleased to get it. 
First of all, Chairman of the full Committee and the Chairmen 
and members of both Subcommittees, thank you for the 
opportunity to appear here today and represent the U.S. 
Geological Survey. I have had the privilege to serve as a 
witness before this subcommittee on numerous occasions 
throughout my career with the USGS, and I have enjoyed working 
with the committee staff over the years on issues of great 
importance to the U.S. Geological Survey, Department of the 
Interior and our nation.
    Today I am pleased to present testimony on terrestrial 
sequestration and geologic capture and storage of carbon 
dioxide, and their role in reducing atmospheric carbon. Let me 
begin by saying that the challenges of addressing carbon 
dioxide accumulation in the atmosphere are significant. Fossil 
fuel usage, a major source of carbon dioxide emissions to the 
atmosphere, will continue in both the industrialized and 
developing nations of the world.
    Therefore, a variety of strategies are being investigated 
to reduce emissions and remove carbon dioxide from the 
atmospheres. Such strategies include the facilitated 
sequestration of carbon from the air to terrestrial biomass, 
and the capture and storage of carbon dioxide in geologic 
formations. The 2005 interagency panel on climate change 
special report on carbon dioxide capture and storage concluded 
that in emission reduction scenarios, striving to stabilize 
global atmospheric carbon dioxide concentration at targets 
ranging from 450 to 750 parts per million the global storage 
capacity of geologic formations may be able to accommodate most 
of the desired captured carbon dioxide.
    However, geologic storage capacity may vary on a regional 
and on a national scale and a more refined understanding of 
geologic storage capacity is needed to help address this 
knowledge gap. The USGS possesses the capability to develop 
geologically based methodologies to assess the national 
capacity for geologic sequestration because of our experience 
with national and international assessments of natural 
resources.
    We envision the national geologic carbon dioxide storage 
assessment methodology would be largely analogous to the peer 
reviewed methodologies that the USGS has used in the assessment 
of oil, gas and coal resources.
    In addition, the USGS' knowledge of regional groundwater 
aquifer systems and groundwater chemistry would allow USGS to 
develop methods to assess potential storage in saline aquifers. 
Previous studies have postulated the existence of very large 
storage capacities and saline aquifers but the extent to which 
these capacities can be utilized remains unknown. The USGS can 
create a scientifically based multidisciplinary methodology for 
geologic carbon dioxide storage assessment that can be 
consistently applied on a national scale.
    Changing gears a little bit and talking about terrestrial 
carbon sequestration, their practices seek to effect the 
transfer of carbon between the atmosphere and the terrestrial 
biosphere to reduce atmospheric concentrations. Land management 
practices in the United States can affect the transfer of 
carbon from terrestrial systems into the atmosphere or good 
land stewardship practices can enhance the biological uptake of 
carbon dioxide from the atmosphere.
    The knowledge gained on the benefits of terrestrial 
sequestration will improve our understanding of the duration 
and extent to which the biological uptake of the atmospheric 
CO/2/ can be enhanced to reduce atmospheric 
concentrations. There are a number of research efforts that are 
ongoing in the USGS, and research that is needed include the 
capabilities of seals to retain carbon dioxide, the role of 
abandoned wells that may mitigate or act as migration pathways 
for CO/2/, defining the potential mobilization of 
trace metals and organic materials that may be affected by 
carbon dioxide reactions with minerals, and also in the 
terrestrial area research on soil carbon dynamics focused on 
soil development and the build up and stabilization of soil 
organic matter which is critically important in explaining the 
process affecting the flow of carbon dioxide.
    Thank you for the opportunity to present this testimony. I 
am pleased to answer questions you and other members of the 
Subcommittee may have.
    [The prepared statement of Mr. Leahy follows:]

  Statement of Dr. P. Patrick Leahy, Associate Director for Geology, 
        U.S. Geological Survey, U.S. Department of the Interior

    Messrs. Chairmen and Members of the Subcommittees, thank you for 
the opportunity to present testimony on terrestrial sequestration and 
geologic capture and storage of carbon dioxide and their role in 
reducing atmospheric carbon. In addition to these topics, I also plan 
to discuss in my statement today the role of science in evaluating the 
potential geologic storage capacity for industrial carbon dioxide and 
in furthering our understanding of the carbon cycle.
Introduction
    Let me begin by saying that the challenges of addressing carbon 
dioxide accumulation in the atmosphere are significant. Fossil fuel 
usage, a major source of carbon dioxide emissions to the atmosphere, 
will continue in both industrialized and developing nations. Therefore, 
a variety of strategies are being investigated to reduce emissions and 
remove carbon dioxide from the atmosphere. Such strategies include the 
facilitated sequestration of carbon from the air to terrestrial 
biomass, including soils and the capture and storage of carbon dioxide 
in geologic formations.
    The current atmospheric carbon dioxide concentration is 
approximately 380 parts per million volume and rising at a rate of 
approximately 2 parts per million volume annually, according to the 
most recent information from the Intergovernmental Panel on Climate 
Change (IPCC). The fraction of carbon emissions from all sources that 
must be eliminated or sequestered to impact the magnitude of climate 
change is large. For example, to stabilize carbon dioxide 
concentrations at about 550 parts per million volume, the extent to 
which carbon dioxide emissions would need to be reduced may be as much 
as 70 percent. Reductions of this magnitude could involve 
implementation of several mechanisms, including geologic storage and 
biological sequestration, fuel shifts from fossil sources to renewable 
biological sources, increased electricity generation from solar and 
wind systems and nuclear power, and increased efficiency of power 
generation, transmission, and end use. Each of these mechanisms has 
distinct geological, hydrological, ecological, economic and social 
implications that should be assessed on a wide range of scales, from 
molecular to basin scales, to allow informed policy discussions and 
decisions on implementation and deployment of technologies.
Geologic Storage of Carbon
    The 2005 IPCC Special Report on Carbon Dioxide Capture and Storage 
concluded that, in emissions reductions scenarios striving to stabilize 
global atmospheric carbon dioxide concentrations at targets ranging 
from 450 to 750 parts per million volume, the global storage capacity 
of geologic formations may be able to accommodate most of the captured 
carbon dioxide. However, geologic storage capacity may vary on a 
regional and national scale, and a more refined understanding of 
geologic storage capacity is needed to address this knowledge gap.
    Geological storage of carbon dioxide in porous and permeable rocks 
involves injection of carbon dioxide into a subsurface rock unit and 
displacement of the fluid or formation water that initially occupied 
the pore space. This principle operates in all types of potential 
geological storage formations such as oil and gas fields, deep saline 
water-bearing formations, or coal beds. Because the density of injected 
carbon dioxide is less than the density of formation water, carbon 
dioxide will be buoyant in pore space filled with water and rise 
vertically until it is retained beneath a nonpermeable barrier (seal). 
A critical issue for evaluation of storage capacity is the integrity 
and effectiveness of these seals.
Terrestrial Carbon Sequestration
    Terrestrial carbon sequestration practices seek to effect the 
transfer of carbon between the atmosphere and terrestrial biosphere 
(the earth and the living organisms that inhabit it) to reduce 
atmospheric carbon dioxide concentrations. Land management practices in 
the United States can affect the transfer of carbon from terrestrial 
systems into the atmosphere. Land conversion, especially deforestation, 
continues to be a significant source of global carbon dioxide 
emissions. Good land stewardship practices can reverse this and enhance 
biological uptake of carbon dioxide from the atmosphere, an approach 
termed terrestrial sequestration. Many of these practices, including 
tree planting and conservation tillage, are widely adopted and well 
understood. The Department of Agriculture is promoting the adoption of 
these practices through conservation programs implemented under the 
Farm Bill. The knowledge gained on the benefits of terrestrial 
sequestration will improve our understanding of the duration and extent 
to which the biological uptake of atmospheric carbon dioxide can be 
enhanced to reduce atmospheric concentration of carbon dioxide.
Role of the U.S. Geological Survey
    While the USGS currently has no experience assessing the national 
geologic storage capacity, USGS-generated data and information were 
included in the Carbon Sequestration Atlas of the United States and 
Canada developed by the Department of Energy. In addition, our 
experience with national and international assessments of natural 
resources could allow USGS to develop geologically based methodologies 
to assess the National capacity for geologic storage of carbon dioxide. 
We envision the national geologic carbon dioxide storage assessment 
methodology would be largely analogous to the peer-reviewed 
methodologies used in USGS oil, gas, and coal resource assessments. In 
addition, the USGS' knowledge of regional groundwater aquifer systems 
and groundwater chemistry would allow USGS to develop methods to assess 
potential carbon storage in saline aquifers. Previous studies have 
postulated the existence of very large carbon dioxide storage 
capacities in saline aquifers, but the extent to which these capacities 
can be utilized remains unknown.
    The USGS could create a scientifically based, multi-disciplinary 
methodology for geologic carbon dioxide storage assessment that can be 
consistently applied on a national scale. Some potential areas for 
further study include understanding the capabilities of seals to retain 
carbon dioxide and the role of abandoned wells that may act as 
migration pathways for carbon dioxide and formation water; defining the 
potential for mobilization of trace metals and organic materials by 
carbon dioxide reactions with minerals or dissolution of organic 
compounds; and understanding the role of bacteria and other 
microorganisms in water-rock-carbon dioxide interactions relevant to 
storage.
    There are also a number of potential issues for further study 
pertaining to terrestrial sequestration, including the natural 
processes that affect carbon cycling. It is now widely recognized that 
the global carbon cycle and climate varied together, before human 
influence, as interactive components in a highly complex system of 
global feedbacks. These feedbacks have profound implications for the 
response of climate to anthropogenic carbon dioxide emissions, and for 
the potential response of the carbon cycle to changes in climate.
    Along with our partners in the Department of Agriculture and other 
agencies, ongoing USGS research addresses these issues. In particular, 
USGS research on soil carbon dynamics focuses on soil development and 
the buildup and stabilization of soil organic matter, a large carbon 
reservoir in the terrestrial biosphere, which play key roles in water 
distribution, and in turn control both sediment transport and carbon 
production and respiration. This research is critically important in 
explaining the processes affecting the flow of carbon dioxide from 
soils. The response of soils to human land use is a significant 
component in the global carbon dioxide budget, and their response to 
climate change may cause significant feedback on a global scale. Land 
use--particularly agriculture--significantly alters patterns of 
terrestrial carbon storage and transport, nutrient cycles, and erosion 
and sedimentation. Current models of the terrestrial carbon cycle do 
not adequately account for the interactions among changes in erosion, 
sedimentation, and soil dynamics. Additional research on variable 
scales (local to global) of carbon flow would provide a more thorough 
understanding of the carbon cycle.
Conclusion
    It is clear that addressing the challenge of reducing atmospheric 
carbon dioxide and understanding the effect of global climate change is 
a complex issue with many interrelated components. A better 
understanding of geologic storage potential for carbon dioxide combined 
with research to understand the implications of terrestrial carbon 
sequestration on the carbon cycle would provide a scientific foundation 
for future decisions regarding carbon management. We believe additional 
study of geologic and terrestrial opportunities will better prepare 
decision makers as they deal with these issues. Thank you for the 
opportunity to present this testimony. I am pleased to answer questions 
you and other Members of the Committee might have.
                                 ______
                                 
    Mr. Grijalva. Thank you, Mr. Leahy. And now let me turn for 
your testimony, sir, Mr. Bauer.

         STATEMENT OF CARL BAUER, EXECUTIVE DIRECTOR, 
             NATIONAL ENERGY TECHNOLOGY LABORATORY

    Mr. Bauer. Mr. Chairman and Chairmen of the Subcommittees, 
I thank you for the opportunity to be here. I represent the 
Department of Energy and the matter of carbon sequestration 
technologies and the program. It is a very important program, 
and as a citizen I applaud and appreciate already the knowledge 
you all have gained and demonstrated. So I am very encouraged 
as a citizen for this country that we have an opportunity to do 
the right thing as quickly as possible but not too fast.
    The economic prosperity of the United States over the past 
century has been built upon our abundance of fossil fuels in 
North America, and the use of fossil fuels results in the 
release of emissions of CO/2/. The economic growth of 
our country and the projected growth of the United States and 
the world energy demands is huge, and therefore the problem is 
huge and greatly challenging, and as a necessity we must 
continue to use fossil fuels to address the energy demands of 
this world and our country.
    By capturing CO/2/ before it is emitted to the 
atmosphere and stored in deep and underground geologic 
formations, fossil fuels can be used with dramatically reduced 
potential for impact on climate change and, depending on cost, 
potentially without over constraining our economic growth. This 
is a challenging issue to address since the technologies to 
capture CO/2/ and fuel projects required to 
demonstrate the efficacy of long-term storage need to be 
developed and demonstrated at very large scales.
    DOE has been working in three technology areas that could 
mitigate greenhouse gas. These areas are reducing the carbon 
intensity or switching to lower carbon fuels and renewables, 
improving efficiencies both at the supply and demand side, and 
developing and deploying carbon sequestration technologies on a 
wide scale.
    Also fossil fuel energy has been supporting R and D and 
demonstration of CCS technologies for the past 10 years, and 
the Office of Science also supports basic research toward 
improving our understanding scientifically. CCS has a technical 
potential to mitigate up to 55 percent of the future U.S. 
CO/2/ emissions as recognized in the report by the 
IPCC that my colleague mentioned. For CCS to have a significant 
impact on reducing the contribution of CO/2/ in the 
atmosphere, however, it requires that several hundred or 
several thousand CCS facilities be constructed around the world 
using different geologic formations. This is a very significant 
understanding.
    Just within our country--to get an understanding of what 
that would mean--it would be equivalent to the whole natural 
gas transmission storage system. It is a huge undertaking, 
great infrastructure required, and obviously something we need 
to do with great scientific care and understanding. DOE has 
taken a leadership role in developing these technologies 
through this program. The Department is developing both the 
core and supporting technologies through which CCS could 
potentially become an effective and economically viable option 
for reducing CO/2/ emissions.
    The carbon sequestration program works in concert with 
other programs that are developing complimentary technologies 
that are integral to fossil fuel power generation with carbon 
capture: Advanced integration, combined gas mutations, advanced 
turbines, fuel cells, gas to liquids and coal to liquids 
programs and advanced research for the materials. Successful R 
and D could enable carbon control technologies to overcome the 
technical and economic barriers in order to achieve cost 
effective CO/2/ capture and sequestration.
    The program leverages applied basic research with field 
verification to assess the technical and economic viability of 
the greenhouse gas mitigation options. Successful carbon 
sequestration technology development and deployment will 
provide the means by which fossil fuels can continue to be used 
into the future carbon constrained world.
    There are two major elements: Coal R and D program develops 
the technologies and the validation deployment assures that 
what is done is done safely, wisely, and in a way that we can 
have responsibility for the future generations that we are 
taking care of the environment as well as the economy.
    Collectively we have set up seven partnerships around the 
country and regions. These regions encompass 97 percent of 
coal-fired CO/2/ emissions, 97 percent of industrial 
CO/2/ emissions, and 97 percent of total land mass and 
essentially all the geologic storage sites in the United States 
potentially available. There were three phases. The first phase 
began with an understanding through the region and looking at 
areas. The second phase began with small evaluations and small 
injections, and the third phase--which is about to begin this 
year--will be looking at larger scale--up to a million ton per 
year--carbon sequestration injections. That will take place 
over the next 5 to 10 years.
    In a recent assessment by our partnerships, we came forth 
with a carbon sequestration atlas of the United States and 
Canada. DOE worked with United States Geological Survey, the 
Office of Surface Mining, United States Forest Service, and a 
number of oil and gas experts as well as state geological 
offices and state academic institutions. The atlas identifies 
hundreds of years of storage of potential deep saline 
formations, depleted oil and gas reservoirs, and unminable coal 
seams, over 35 billion tons of potential storage capacity. I 
have provided a copy on CD for Members to have for their use. 
It will be downloaded at our website.
    [NOTE: The CD has been retained in the Committee's official 
files.]
    DOE has been working with EPA on its permitting structure 
for regional carbon sequestration partnership field tests and 
the regulatory compliance areas are a very important area to 
consider as well as we go forward. With that, you have my 
written testimony, as you have mentioned, Mr. Chairman, and I 
would be available to any questions you would like to ask. 
Thank you for the time.
    [The prepared statement of Mr. Bauer follows:]

   Statement of Carl O. Bauer, Director, National Energy Technology 
                 Laboratory, U.S. Department of Energy

    Mr. Chairman, Members of the Committee, it's a pleasure for me to 
appear before you today to discuss DOE's development of carbon 
sequestration technologies to mitigate climate change.
    The economic prosperity of the United States over the past century 
has been built upon our abundance of fossil fuels in North America. The 
use of fossil fuels results in the release of emissions that can impact 
the environment, including the emission of carbon dioxide 
(CO/2/) from power plants that contribute to global climate 
change.
    Economic growth in the United States and the projected growth of 
United States and world energy demands provide an incentive for the 
development of technologies that permit the use of fossil fuels, such 
as coal, to continue to serve as a strategic resource to meet our 
future energy needs. Carbon capture and storage (CCS) technologies 
promise great opportunities to reduce the potential environmental 
impacts of CO/2/ emissions from fossil fuel power plants. By 
capturing CO/2/ before it is emitted to the atmosphere, and 
then storing it in deep underground geologic formations, fossil fuels 
can be used with dramatically reduced potential for impact on climate 
change and, depending on cost, potentially without constraining 
economic growth. This is a challenging issue to address, since the 
technologies to capture CO/2/, and field projects required to 
demonstrate the efficacy of long-term storage, need to be developed and 
demonstrated at appropriate scales.
CCS and Climate Change Mitigation
    DOE has been working on three technology areas that could mitigate 
greenhouse gas emissions. These areas include (1) reducing carbon 
intensity by switching to renewable or low-carbon fuels, (2) improving 
efficiency both on the supply and demand sides, and (3) developing and 
deploying CCS technologies. Wide-scale adoption of these technological 
solutions could substantially reduce atmospheric CO/2/ 
releases. The Office of Fossil Energy has been supporting research, 
development, and demonstration (RD&D) of CCS technologies for the past 
10 years. The DOE Office of Science also supports basic research 
towards improving our scientific understanding of the behavior of 
CO/2/ at potential geological sites and research towards the 
development of methods for enhanced terrestrial sequestration in plants 
and soils.
    CCS has the technical potential to mitigate up to 55 percent of 
future U.S. CO/2/ emissions, as reported in the special report 
of the International Panel on Climate Change (IPCC) on Carbon Dioxide 
Capture and Storage. For CCS to have a significant impact on reducing 
the contribution of CO/2/ into the atmosphere, however, it 
would require that several hundred to several thousand CCS facilities 
be constructed around the world using different geologic formations. 
This would be a significant undertaking but one that is achievable with 
the appropriate policy and technology developments. As greenhouse gas 
emissions are a global problem, carbon sequestration technology could 
also be very important for China, which also has very substantial coal 
resources, and is projected to overtake the United States to become the 
world's largest emitter of greenhouse gases in 2007 or 2008.
Importance of CCS to the United States
    Fossil fuels will continue to play an important role in the 
Nation's future energy strategy. In a scenario of a carbon-constrained 
world, there is a strong need and also a strong incentive to develop 
technologies to mitigate the release of CO/2/ into the 
atmosphere while still continuing to permit the use of coal--currently 
our Nation's most abundant fuel source.
    CCS is a very promising technology that could allow the continued 
viability of fossil fuels as an energy source. CCS--the capture, 
transportation to an injection site, and long-term storage in a variety 
of suitable geologic formations--is one of the pathways that the 
Department of Energy is pursuing to reduce atmospheric CO/2/ 
emissions.
DOE Carbon Sequestration Program
    DOE is taking a leadership role in the development of CCS 
technologies through its Sequestration Program. The Department is 
developing both the core and supporting technologies through which CCS 
could potentially become an effective and economically viable option 
for reducing CO/2/ emissions. The Carbon Sequestration Program 
works in concert with other programs within the Office of Fossil Energy 
that are developing the complementary technologies that are integral to 
coal-fueled power generation with carbon capture: Advanced Integrated 
Gasification Combined Cycle, Advanced Turbines, Fuels, Fuel Cells, and 
Advanced Research. Successful research and development (R&D) could 
enable carbon control technologies to overcome technical and economic 
barriers in order to achieve cost-effective CO/2/ capture and 
enable widespread deployment of these technologies.
    The DOE Carbon Sequestration Program (Program) leverages applied 
basic research with field verification to assess the technical and 
economic viability of CCS as a greenhouse gas mitigation option. 
Successful carbon sequestration technology development and deployment 
could provide the means by which fossil fuels can continue to be used 
in a future carbon-constrained world.
    The Program encompasses two main elements: Core R&D and Validation 
and Deployment. The Core R&D element focuses on technology solutions 
that can be validated and deployed in the field. Lessons learned from 
field tests are fed back to the Core R&D element to guide future R&D. 
Through its Integrated Gasification Combined Cycle, Fuels, 
Sequestration, and Advanced Research programs, DOE is investigating a 
wide variety of separation techniques, including gas phase separation, 
absorption, and adsorption, as well as hybrid processes, such as 
adsorption/membrane systems. Current efforts cover not only 
improvements to state-of-the-art technologies but also development of 
several revolutionary concepts, such as metal organic frameworks, ionic 
liquids, and enzyme-based systems. The program is also investigating 
the development of alternative combustion technologies such as 
Oxycombustion and chemical looping. The ultimate goal is to drive down 
the energy penalty associated with capture so that coal power plants 
achieve 90 percent carbon capture at a cost of less than a 10 percent 
increase in the cost of electricity compared to a power plant without 
CCS.
    The other key components to DOE's Sequestration Program include 
having the ability to store CO/2/ in underground formations 
with long-term stability (permanence), the ability for monitoring and 
verifying the fate of CO/2/, and public acceptance. These key 
attributes are being pursued by DOE's seven Regional Carbon 
Sequestration Partnerships. The Partnerships are engaged in an effort 
to develop and validate the technology to implement DOE's 
CO/2/ Sequestration Program in different geologies of the 
Nation. Conducting geographically diverse tests provides information on 
how to apply CCS to storage sites with different geologic 
characteristics.
    Collectively, the seven Partnerships represent regions encompassing 
97 percent of coal-fired CO/2/ emissions, 97 percent of 
industrial CO/2/ emissions, 97 percent of the total land mass, 
and essentially all of the geologic storage sites in the United States 
potentially available for CCS. The Partnerships are evaluating numerous 
CCS approaches to assess which approaches are best suited for specific 
geologies of the country, and are developing the framework needed to 
validate and potentially deploy the most promising CCS technologies.
    The Regional Partnership initiative is using a three-phased 
approach. The first phase, the Characterization Phase, was initiated in 
2003 and focused on characterizing regional opportunities for CCS, and 
identifying regional CO/2/ sources and storage formations. The 
Characterization Phase was completed in 2005 and led to the current 
Validation Phase. This second phase focuses on field tests to validate 
the efficacy of CCS technologies in a variety of geologic storage sites 
throughout the United States. Using the extensive data and information 
gathered during the Characterization Phase, the seven Partnerships 
identified the most promising opportunities for CCS in their regions 
and are performing widespread, multiple geologic field tests. In 
addition, the Partnerships are verifying regional CO/2/ 
storage capacities, satisfying project permitting requirements, and 
conducting public outreach and education activities.
    The third phase, or Deployment Phase, involves large-volume 
injection tests. This phase is scheduled to begin in Fiscal Year 2008, 
and will demonstrate CO/2/ capture, transportation, injection, 
and storage at a scale equivalent to potential future commercial 
deployments. Given the opportunities provided by the FY 2007 Operations 
Plan, DOE will initiate these activities in 2007. The geologic 
structures to be tested during these large-volume storage tests will 
serve as potential candidate sites for the future deployment of 
technologies demonstrated in the FutureGen Project as well as the Clean 
Coal Power Initiative, which will complete a solicitation for carbon 
capture technologies at commercial scale in 2008.
Geologic Storage Potential
    In the recent assessment completed by DOE's Regional Carbon 
Sequestration Partnerships, titled the Carbon Sequestration Atlas of 
the United States and Canada, DOE worked with the United States 
Geological Survey (USGS), the Office of Surface Mining, the United 
States Forrest Service, and a number of oil and gas experts. The Atlas 
identifies hundreds of years of storage potential in deep saline 
formations, depleted oil and gas reservoirs, and unmineable coal seams. 
Over 3,500 billion tons of potential storage capacity exists throughout 
these regions and represents a potential significant resource for CCS. 
The geological sequestration experts from the Partnerships, the 
National Carbon Sequestration Database and Geographical Information 
System--or NATCARB--and the National Energy Technology Laboratory 
(NETL) created a methodology to determine the capacity for 
CO/2/ storage in the United States and Canada, and an Atlas 
from data generated by the Partnerships and other databases, including 
the USGS.
    The information collected during the second phase (the Validation 
Phase) will be used to update the capacity estimates throughout the 
United States, and revise and issue an updated version of the Atlas in 
2009. DOE expects to continue the effort to characterize additional 
geologic formations after 2009 during the third phase (the Deployment 
Phase) of the program. In addition, the data collected during the 
Validation phase field tests and Deployment phase large volume CCS 
tests will be used to validate the capacity estimates presented in the 
Atlas. Future work on the Atlas will seek more active involvement with 
expert organizations like the USGS. Their expertise will complement and 
strengthen existing DOE efforts. More active involvement of USGS also 
would improve future versions of the Atlas and allow more detailed 
assessment of Federal lands.
Regulatory Compliance
    DOE has been working with the Environmental Protection Agency (EPA) 
on its permitting structure for the DOE Regional Carbon Sequestration 
Partnerships field tests. DOE worked closely with EPA on the 
development of an Underground Injection Control Class V permitting 
guidance document that will guide the EPA Regions and State regulators 
when issuing permits for the RD&D injection projects. DOE and EPA meet 
regularly to review the status of field projects, to share technical 
information, and to identify areas of future collaboration.
Closing Remarks
    CO/2/ storage can play an important role in reducing 
carbon dioxide emissions. At the same time, it will increase the 
Nation's ability to use its domestic energy resources to meet our 
energy needs and increase economic prosperity throughout the United 
States.
    Mr. Chairman, and members of the Committee, this completes my 
prepared statement. I would be happy to take any questions you may have 
at this time.
                                 ______
                                 

      Response to Questions submitted for the record by Carl Bauer

Ql.  In the Senate hearing on this topic two weeks ago, Secretary Shope 
        said he expected to see wide scale deployment of carbon capture 
        and sequestration on power plants by 2045. Is that timescale 
        based on the absence of a regulatory scheme for carbon dioxide 
        emissions? If so, do you have any estimates of what would 
        happen to that timeline if there was a carbon regulatory scheme 
        that resulted in a price for carbon dioxide emissions?
    Al. Stating a specific time frame for the deployment of carbon 
capture and sequestration (CCS) technology is difficult as there are 
many variables that can influence technological adoption. These 
variables include the pace of technology development, regulatory 
framework, public acceptance, liability, and the ability of power 
generation integrated with CCS to compete against alternative 
technologies in the marketplace. Any carbon regulatory scheme that 
results in a price for carbon dioxide must also consider these other 
variables that can act to either accelerate the deployment of CCS or 
impede its penetration into the market.
    Any timescale assumes a regulatory scheme that is consistent with 
the timing for the commercial availability of affordable carbon capture 
and sequestration (CCS) technology along with the required power plant 
technology to enable the commercial deployment of such CCS equipped 
systems. If required technology is not commercially available at the 
time of enactment of CO/2/ emission regulations, it is 
possible that such regulations will not enable technology deployment 
but could rather lead to unintended consequences, such as fuel 
switching to natural gas--which could be a short-term benefit, but 
would also greatly increase the difficulty of achieving the long-term 
CO/2/ reduction goals.
    To accelerate the development of CCS technologies for clean power 
production, the Department of Energy has been focused primarily on 
addressing two of the greatest challenges: (1) reducing the cost of 
carbon capture, and (2) proving the safety and efficiency of long-term 
geologic storage of CO/2/. DOE supports a robust RD&D program 
specifically designed to address these challenges. The Department's 
core coal technology program includes the development of advanced 
technologies for pre-combustion (or gasification), post combustion, and 
oxy-combustion  multiple pathways to produce power and capture 
CO/2/--as well as a robust program for carbon sequestration to 
prove the viability of long-term geologic storage.
    Our 2012 goal is to show that we can develop advanced technology to 
capture and store 90 percent of the potential CO/2/ emissions 
from coal-fired power plants, with less than a 10 percent increase in 
the cost of electricity. This is an ambitious and significant goal, 
considering that commercially available technology to do this today 
will add from 30 to 70 percent to the cost of electricity.
    EIA predicts that more than 40 gigawatts of new coal-based plant 
capacity will be added in the United States between 2005 and 2020, 
while only about 6 gigawatts is retired from the more than 300 
gigawatts of generating capacity in the existing fleet. We have a fast-
approaching opportunity to introduce a ``new breed'' of power plant--
one that is highly efficient, capable of producing multiple products, 
and is virtually pollution-free (``near-zero'' atmospheric emissions, 
including carbon). In addition to technology for new plants, we may 
also employ technology for capture of carbon dioxide emissions from the 
existing fleet. DOE's research and development program is aimed at 
providing the technological foundation for carbon capture and storage 
for both new and existing coal-fueled power plants.
    DOE's seven Regional Carbon Sequestration Partnerships are engaged 
in an effort to develop and validate CCS technology in different 
geologies across the Nation. The Partnerships are evaluating numerous 
CCS approaches to assess which approaches are best suited for specific 
geologies, and are developing the framework needed to validate and 
potentially deploy the most promising technologies.
    The Regional Partnership initiative is using a three-phased 
approach. The first phase, the Characterization Phase, was initiated in 
2003 and focused on characterizing regional opportunities for CCS, and 
identifying regional CO/2/ sources and storage formations. The 
Characterization Phase was completed in 2005 and led to the current 
Validation Phase. The second phase focuses on field tests to validate 
the efficacy of CCS technologies in a variety of geologic storage sites 
throughout the United States. The third phase, or Deployment Phase, 
involves large-volume injection tests. This phase was initiated this 
fiscal year and will demonstrate CO/2/ injection and storage 
at a scale necessary to demonstrate potential future commercial 
deployment. The geologic structures to be tested during these large-
volume storage tests will serve as potential candidate sites for the 
future deployment of technologies demonstrated in the FutureGen Project 
as well as the Clean Coal Power Initiative (CCPI). The Department 
expects to issue a CCPI solicitation for carbon capture technologies at 
commercial scale in 2007.
    By working in partnership with utilities, coal companies, research 
organizations, and nongovernment organizations, we hope to make coal 
technology with near-zero atmospheric emissions a cost-effective and 
safe option to help meet our future power needs.
    Beyond DOE's efforts in the development of CCS technologies, the 
Environmental Protection Agency is also working on the regulatory 
issues. Permitting CO/2/ injection wells as Class V is a 
short-term solution for regulation of CO/2/ storage projects. 
The Environmental Protection Agency (EPA) has finalized Underground 
Injection Control (UIC) Program Guidance #83 Using the Class V 
Experimental Technology Well Classification for Pilot Carbon Geologic 
Sequestration Projects. This guidance was designed to help UIC and 
state programs in processing permit applications for CCS projects and 
providing regulatory agencies enhanced flexibility in expediting these 
projects.
Q2.  Given that it is estimated that the carbon dioxide for the large-
        scale tests will cost on the order Of $20 million per test per 
        year, has there been any consideration of using that money to 
        partner with an existing carbon dioxide emissions source and 
        retrofitting that plant to provide the carbon dioxide necessary 
        for the tests?
    A2. The Department's Carbon Sequestration Regional Partnerships are 
pursuing anthropogenic sources of CO/2/ for the planned large-
scale field injection tests. Examples of CO/2/ sources include 
retrofit of existing power plants with capture technology, natural gas 
processing, ethanol plants, and refineries. The cost of large-scale 
tests is driven in large part by the cost of the CO/2/, which 
depends significantly on the source.
Q3.  During the hearing, you stated that a 500 MW power plant emits 
        about 4 million tons of carbon dioxide per year, and the large-
        scale tests will only involve injections of 1 million tons of 
        carbon dioxide per year, (a) will these tests give us enough 
        information about our ability to sequester commercial scale 
        volumes of carbon dioxide? Particularly with respect to 
        injectivity and a reservoir's behavior under high carbon 
        dioxide loads, (b) Do we know whether reservoirs can absorb 
        carbon dioxide fast enough to handle a power plant running at 
        full capacity?
    A3. The information gained from these large-scale projects will 
provide the necessary data and field validation required for 
commercial-scale projects. An injection volume of one million tons per 
year is equivalent to several commercial projects already underway at 
Weyburn (Canada), Sleipner (Norway), and In Salah (Algeria). Although 
these injection rates are lower than those expected from a large-scale 
power plant, the proposed injection rates are sufficient to validate 
geologic performance for larger injection applications.
    The Department's Carbon Sequestration Regional Partnerships are 
conducting detailed assessments to determine the capacity and 
injectivity of regional geologic formations. Results to date have shown 
that the injectivity rates and available capacity in formations 
throughout the United States can likely store hundreds of years of 
CO/2/ emissions from existing coal-fired power plants.
Q4.  Will we need to go back and conduct new tests using commercial-
        scale volumes after running the 1 million ton tests? Would it 
        be quicker and cheaper to begin conducting commercial-scale 
        tests now?
    A4. The Department of Energy (DOE) believes that one million tons 
per year injection tests are adequate for technology validation prior 
to commercial deployment. Large-scale injection tests are being 
implemented at a scale adequate to demonstrate the operational issues 
associated with sustained injection of CO/2/, with respect to 
adequate injectivity and capacity for commercial deployment. These 
projects will also determine the fate of the injected CO/2/ 
after injection ceases by applying appropriate monitoring technologies 
and protocols.
    The largest cost component for a large-scale injection test is 
purchasing the carbon dioxide. DOE believes that injecting quantities 
on the order of one million tons per year is the most cost effective 
injection level to validate technology. Injecting larger volumes of 
CO/2/ will substantially increase the cost of the project.
Q5.  Is there anything keeping us from doing larger-scale tests, and 
        doing them more quickly? Would any of the bills that have been 
        introduced in the House or the Senate help accelerate things? 
        Would additional money for the carbon sequestration program 
        help to move things along faster?
    A5. There are several challenges associated with large-scale 
deployment of carbon capture and sequestration (CCS) technologies 
including: cost-effective capture; geographical diversity; storage 
permanence; monitoring, mitigation, and verification processes; 
integration and long-term performance; permitting, liability, NEPA; 
public acceptance; and infrastructure requirements. The Department's 
Carbon Sequestration Program is addressing these challenges through 
applied research, proof-of-concept technology evaluation, pilot-scale 
testing, and stakeholder involvement. The largest cost component for a 
large-scale injection test is purchasing the carbon dioxide. DOE 
believes that injecting quantities on the order of one million tons per 
year is the most cost effective injection level to validate technology. 
Injecting larger volumes of CO/2/ will substantially increase 
the cost of the project without adding commensurate value for the 
American taxpayer.
Q6.  In a number of written testimonies, the importance of public 
        outreach regarding carbon sequestration is stressed. Does DOE 
        have any ideas for how to handle that, or are you doing 
        anything currently in that regard?
    A6. Many of the research and development projects funded by the 
Department of Energy (DOE) have an outreach component. For example, the 
Regional Partnerships engage regulators, policy makers, and interested 
citizens at the state and local level through innovative outreach 
mechanisms. The Regional Partnerships also implement action plans for 
public education in the form of mailing lists, public meetings, media 
advertising, local interviews, and education programs available at 
libraries, schools, and local businesses. DOE's efforts in public 
education and outreach include: Carbon Sequestration webpage on the 
National Energy Technology Laboratory's website; Carbon Sequestration 
Technology Roadmap and Program Plan (revised annually); Carbon 
Sequestration Newsletter (distributed monthly); Middle School and High 
School Educational Curricula on Greenhouse Gas Mitigation Options 
(disseminated through workshops at National Science Teacher Association 
conferences); and the annual National Conference on Carbon Capture and 
Sequestration. In addition, carbon capture and sequestration 
information is distributed at technical conferences through 
presentations, panel discussions, breakout groups, and other formal and 
informal venues.
Q7.  Do you believe that a Class 5 permit under the underground 
        injection control program is a viable long-term approach? Or is 
        this only appropriate for these demo projects?
    A7. Permitting CO/2/ injection wells as Class V is a 
framework to demonstrate the viability of CO/2/ storage 
projects. The Environmental Protection Agency (EPA) has finalized 
Underground Injection Control (UIC) Program Guidance #83 Using the 
Class V Experimental Technology Well Classification for Pilot Carbon 
Geologic Sequestration Projects. This guidance was designed to help UIC 
and state programs in processing permit applications for CCS projects 
and providing regulatory agencies enhanced flexibility in expediting 
these projects. The Department of Energy (DOE) expects that as pilot 
carbon capture and sequestration (CCS) projects move forward, a great 
deal of knowledge about sub-surface CO/2/ behavior, well 
construction, and operational procedures will be gained. To ensure that 
efforts are coordinated and communicated effectively, DOE participates 
in quarterly meetings at a high management level with EPA. In addition, 
both DOE and the Regional Partnerships were involved in providing 
comments for EPA's UIC Guidance.
    DOE considers the UIC Program Guidance #83 to be appropriate for 
any research, development and demonstration sequestration project 
implemented in the United States.
Q8.  Who do you think would be the appropriate federal agency to handle 
        a certification process that would ensure long-term safe 
        storage of carbon dioxide?
    A8. DOE believes the administration of any certification process 
will be dependent on the nature of future regulations, incentives, or 
accounting schemes that would be used for CO/2/ emissions. The 
Department's Energy Information Administration is developing reporting 
requirements and managing the 1605B registry of projects that register 
greenhouse gas offsets for geologic and terrestrial storage projects. 
In addition, the projects in the Carbon Sequestration Program are 
developing accounting protocols for geologic and terrestrial storage 
projects that will be used to register credits with the Chicago Climate 
Exchange. This work could be used as a framework once a Federal agency 
is identified to manage the certification process.
Q9.  A common quote used by oil and gas production opponents is that 
        America consumes 25% of the world's oil supply and only has 3% 
        of the world's oil resource. I was given some presentation 
        materials that appear to have been prepared by you regarding 
        U.S. hydrocarbon resources and how those compare with OPEC 
        hydrocarbon resources. In those materials, U.S. hydrocarbon 
        resources appear to dwarf OPEC hydrocarbon resources. What can 
        you tell us about our country's hydrocarbon endowment compared 
        to OPEC? Do we have more or less hydrocarbon resource than 
        OPEC? Could the U.S. become energy independent if we accessed 
        these resources? What type of investment will be required to 
        access these resources?
    Al. The presentation material entitled U.S. Endowment of Solid, 
Liquid, and Gaseous Fuels Resources, represents the cumulative 
perspective of U.S. hydrocarbon resources, the total of which is 
converted into common barrels of oil equivalent (b.o.e.) units. These 
resource estimates include estimates of large unconventional energy 
resources, such as U.S. methane hydrates and oil shale, which are not 
currently economic. Along with U.S. coal resources, each of these three 
energy resources has the theoretical potential to translate into energy 
reserves that exceed today's estimate of global conventional oil 
reserves (approximately 1,200 billion barrels according to the BP 2006 
Statistical Review of World Energy). This figure includes the 
conventional oil reserves of OPEC (912 billion barrels (76%)) and non-
OPEC countries (289 billion barrels (24%)). The total of this broad 
estimate of U.S. hydrocarbon resources is 51 trillion barrels; however, 
it must be noted that much of these estimated U.S. resources will not 
ultimately be deemed economically recoverable, due to the high cost of 
production. A significant share of the resources is identified as 
``undiscovered,'' indicating that current resource estimates are 
speculative. However, these resources, if producible and economic, 
could have significant implications for U.S. energy security and global 
environmental issues, particularly global climate change and sea floor 
stability.
    Since OPEC countries such as Saudi Arabia do not allow independent 
verification of energy reserves and resources, we do not know the 
extent to which our resources exceed theirs. The energy resources of 
OPEC countries are not noted for similarly large unconventional energy 
resource potential; thus their energy resources are largely constrained 
to their conventional oil and natural gas resources. If methane 
hydrates and oil shale resources were economic, the energy potential 
could theoretically advance the nation's energy independence. Since the 
private sector in America pursues the lowest cost fuel options to stay 
competitive in a global economy, it generally chooses not to develop 
resources such as methane hydrates and oil shale that are more 
expensive than competing sources. However, to the extent that industry 
believes these resources could be economic, industry is investigating 
potential extraction of these resources. The investment required would 
depend strongly on the amount of the resource that was economically 
recoverable, which could vary by orders of magnitude.
Q10.  What are the political and legal obstacles related to waiving the 
        legal liability of companies that sequester carbon dioxide 
        geologically? In your opinion, can we have an effective 
        national carbon sequestration program without a waiver of 
        liability?
    A10. For an effective carbon sequestration program, there are a 
variety of options for addressing risk in the near term. The petroleum 
industry has borne the risk of CO/2/ injection for enhanced 
oil recovery for many years; however, risk differences may exist 
between enhanced oil recovery and permanent sequestration of power 
plant and industrial CO/2/. A series of large-scale permanent 
sequestration projects are needed to better understand the risks and 
how to manage them. DOE is beginning large-scale testing this fiscal 
year, which should help answer these questions.
Q11.  Can you estimate how long you believe it will take to develop the 
        geological data to know where sequestration is feasible?
    A11. The Department's Carbon Sequestration Program and the Regional 
Carbon Sequestration Partnerships have collected data demonstrating 
that storage of carbon dioxide is feasible in geologic basins 
throughout the United States. This is summarized in the ``Carbon 
Sequestration Atlas of the United States and Canada'' issued by the 
Department in March 2007. The data presented in the Atlas shows that 
hundreds of years of future CO/2/ emissions could be 
potentially stored in these geologic formations. These estimates could 
be further refined through enhanced methodology used to assess geologic 
sinks and additional information on geologic formations and data, e.g., 
from DOE's small- and large-scale CO/2/ storage projects. 
Sequestration is certainly feasible at a few well-defined locations 
throughout the United States. However, for sequestration technology to 
play a key role in future climate change mitigation, thousands of 
sequestration sites must be feasible at numerous locations in the 
United States. Through efforts of the Department's Sequestration 
Program and Regional Partnerships, in coordination with other Federal 
agencies, we believe that we will continue to increase the confidence 
and detail of our assessments of where and to what degree sequestration 
on such a large scale is feasible.
                                 ______
                                 
    Mr. Grijalva. Thank you very much. Let me remind the 
Members that under Committee Rules each Member is going to have 
a five-minute limit on the questions, and at this point let me 
recognize Chairman Rahall for any questions he might have.
    Mr. Rahall. Thank you, Mr. Chairman. Thank you both for 
your testimony, and Assistant Director Leahy, congratulations 
on your career, and we wish you well wherever your new 
endeavors take you. Carl Bauer, let me ask you where you left 
off there and it may be in your prepared testimony. You were 
talking about the permitting process. I assume this is on 
public lands where carbon sequestration has been identified by 
DOE as doable?
    Mr. Bauer. The permitting process I alluded to was working 
with EPA. Right now presently EPA in March of 2007, of this 
year in other words, they put out a memo from the director of 
both the injection groundwater department as well as the air 
department on the ability to inject CO/2/ into the 
ground wherever, and as guidance to allow the regional 
administrators as well as hopefully Geological Survey and the 
states to use it as guidance in allowing experimental wells.
    Experimental wells could be as much as a million tons of 
CO/2/ per year. It is not specifically to Federal 
lands, and access to Federal lands would be responsible to the 
various agencies that hold authority over those lands, like 
BLM, MMS, and those also need to be worked out. There is also 
the issues around liability. So the EPA regulatory guidance is 
just that. How do you comply with the injection well 
requirements of the law presently?
    Mr. Rahall. That is what I was going to ask about. On 
public lands where as I understand there could be up to 600 
years worth of storage capacity, the permitting process, of 
course, involves the relevant agency that has jurisdiction but 
then there is still the EPA environmental assessments, et 
cetera process that has to be filed as well, is that correct?
    Mr. Bauer. That is correct, sir.
    Mr. Rahall. OK. Let me switch to Mr. Leahy, if I might, and 
ask you if you have reviewed the bill that has been filed by 
Representative Bart Gordon in this body and Senator Salazar in 
the other body that appears to follow the MIT recommendations, 
and if so, do you have any comments on that legislation?
    Mr. Leahy. Yes. I have looked at that legislation. It calls 
for a national assessment much like in line with my testimony. 
We are very supportive of those bills, of course, because we 
feel a national assessment is needed. There are a couple issues 
associated with the timeline. The development and methodology I 
think is called for to be completed in 270 days. One of the 
important things I think is the methodology has to be quite 
open otherwise the results will be controversial or suspect or 
something.
    So what we want to do is to find a methodology much like we 
do with our oil and gas assessments where the methodology is as 
open and transparent as possible, and so 270 days to do that is 
challenging, and we feel that a year is probably more 
appropriate.
    Mr. Rahall. OK. Either gentlemen, and again this question 
or rather this question might be more appropriate for one of 
the future panelists this afternoon, but where enhanced oil 
recovery is occurring today and carbon sequestration is being 
used, is the oil industry buying the CO/2/, and could 
you explain that process of where this would be profitable for 
the oil industry if it does indeed help them enhance the oil 
recovery from their depleted fields?
    Mr. Bauer. Presently the enhanced oil recovery 
CO/2/ is purchased. It depends on the price but the 
average market price, as I understand it presently, is about 
$20 a ton, and obviously it is profitable to the oil industry 
if they pay $20 a ton and make enough oil out of it and, of 
course, it depends on the field. Some fields are not worthy.
    But as the price of oil comes up, of course, economics 
shift on that. So yes, presently it is to their advantage. That 
INF>/INF> would be more largely captured and available 
would probably reduce the value of the commodity because there 
would be people looking for places to get rid of their 
INF>/INF>. So that would change that dynamic but it would 
also produce more oil.
    Mr. Rahall. Thank you. Thank you, Mr. Chairman.
    Mr. Grijalva. [Presiding.] Thank you. Let me ask a couple 
of questions. Mr. Leahy, you mentioned on page 2 of your 
testimony that land conversion, especially deforestation, 
continues to be a significant source of global carbon dioxide 
emissions. Later today we will hear from a panelist who says 
old growth forests retain large stores of carbon, and we should 
make every effort therefore to retain them. Is the U.S. 
Geological Survey taking a closer look at measures to protect 
old growth forests on public lands based on the amount of 
carbon that they store?
    Mr. Leahy. I think the challenge is the fact that land use 
changes can either have a positive effect or a negative effect, 
and certainly deforestation and agricultural use can put more 
INF>/INF> into the atmosphere. One of the things we 
actually have a research study going on with our colleagues 
from Energy is looking at the prairie pothole region out in the 
Dakotas, and some of the results that have come out of that is 
when agricultural lands are let to go back to wetlands that I 
believe the report says over a ton of carbon is sequestered on 
an annual basis per acre.
    Mr. Grijalva. Thank you. Mr. Bauer, what is the financial 
split between terrestrial and geological sequestration in the 
regional partnerships? How much money is being spent on one 
versus the other? Is there a figure or an estimate?
    Mr. Bauer. I would have to give you an estimate. If you 
would like a more exact one I will come back in written 
response, Mr. Chairman.
    Mr. Grijalva. I appreciate that. Thank you.
    Mr. Bauer. But the initial phase one and phase two it would 
be several million dollars was on terrestrial and maybe one and 
a half times that much was on geologic. Initially we had quite 
a few terrestrial projects. Some of them were also involved 
with USGS and also with states on reclaimed mine land and other 
damaged lands to use foresting and overgrowth to both capture 
INF>/INF> but also to restore the lands to viability, and 
those have demonstrated actually quite a great deal of success 
in carbon capture through terrestrial sequestration 
methodology.
    The issue with terrestrial is the magnitude of 
INF>/INF> from power generation and the period in which it 
is generated is overwhelming. We are also doing some algae 
capture of CO/2/ from power plants, and that is 
looking very promising.
    Mr. Grijalva. Yes. Maybe for both. No. Let me stick with 
Mr. Bauer on this. I noticed that we are in the validation 
phase for both the geological and terrestrial sequestration, 
and that the geological sequestration enters the deployment 
phase in the next few years. Is there a deployment phase for 
the terrestrial part of it?
    Mr. Bauer. The deployment phase for terrestrial is already 
seemingly have begun but not in a formal sense that we 
identified a deployment phase for terrestrial. It has begun in 
the sense that people are already doing it. There is carbon 
trading in terrestrial sequestration, and one of the 
technologies that we have funded from DOE and developed at one 
of the laboratories in Los Alamos has actually been able to 
begin to measure the carbon improvement in the soil so that 
they are working with the Department of Agriculture to use that 
to demonstrate and value the carbon that is captured, and 
therefore cap and trade or trading of CO/2/ credits 
would be possible. You would be able to measure the terrestrial 
CO/2/ capture.
    Mr. Grijalva. Thank you, and I do not have any other 
questions. Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman. Mr. Bauer, how long do 
you think it would be before the technology is available to 
dispose of significant amounts of carbon dioxide?
    Mr. Bauer. The economic viability is really the problem. 
The technology, for example capture of CO/2/, exists 
today. The ability to put large volumes into the ground through 
EOR exists today. So in one sense you could do things today but 
the economics, and I was just in a meeting with a power plant 
company who is interested and it is one of the major ones in 
this country, in doing a capture and sequestration, and the 
economics around it are daunting even to get up to 25 percent 
of the CO/2/ they produce reduces the plant efficiency 
or increases the cost, depending on how you want to look at it, 
by almost 30 percent presently.
    And they have through the seven regional partnerships they 
actually have a reservoir under that plant that has already 
been proven at a small scale. So the ability to move there 
rapidly--to get to your question--is probably a decade away at 
the fastest and economically probably more like 15 to 20 years 
in a broader commercial application in my opinion. We need to 
do some of these larger demonstrations to gather data because 
we need the regulatory information and the public acceptance 
that would come only with that.
    Mr. Pearce. You mentioned in your report that it would take 
hundreds or thousands of reinjection facilities. Now I am 
viewing the reinjection facilities in the oil field, and I can 
see these banks of compressors sitting there. I mean we 
reinject tremendous amounts of water, and frankly it is similar 
when they start reinjecting the CO/2/. Is that the 
same sort of technology you are already using?
    Mr. Bauer. I think that is a reasonable analogue. It may 
not be quite as harsh as what you are aware with the water 
reinjection because the CO/2/ may not be as viscous at 
the point of injection as water. It is not a hollow chamber you 
are putting the CO/2/ in. You are putting it into 
permeable rock so it does take a lot of effort.
    Mr. Pearce. Have you considered the liability question? In 
other words, I visualize my wife taking her groceries in the 
other day and the Dr. Pepper fell off, and just a pinhole 
opened up and it spewed around. Now we see the same thing in 
oil wells.
    My company worked on that kind of thing. We did not own any 
oil wells but we worked on them, and constantly you are putting 
the CO/2/ in, and it is just sitting there under 
pressure. Occasionally you will see a picture of a string of 
tubing 6 and 8,000 feet long, two and seven-eighths inch 
diameter tubing that has just been catapulted out of the well 
and has corkscrewed around. Is that kind of volatility 
something that you bump up against in your reinjection 
partnerships?
    Mr. Bauer. I think the challenges you mention are accurate, 
and I think, as is done in greater scale, it will be dealt with 
just like most technologies make things routinely much more 
plausible. But it is not something you rush into.
    Mr. Pearce. Right.
    Mr. Bauer. And the liability issue you asked the question 
on is something that is continuing to be a challenge with the 
industry. In EOR it is a set of rules but when you say that I 
am putting CO/2/ in the ground for longevity, 100 
years or 200 years, there are not many companies that are 
staying in existence that long to really back up the 
commitment.
    Mr. Pearce. Right. Now, Mr. Leahy, and so we are going to 
take these and use these comments as a backdrop for you. You 
mentioned that fossil fuel use is just a major source of carbon 
dioxide. Now when I look at the major uses, fossil fuels falls 
fourth in a list. In other words, ocean out gassing has about 
100 gigatons per year, soil bacteria 60 and then respirations 
from humans about 52. So that is more or less in the range of 
200 gigatons, and then human emissions come up to 7.5.
    In other words, you hear of the technological difficulty 
years and 30 percent decrease in deficiency or increase in cost 
or whatever, so you are hearing a possibility of reducing by 25 
percent. Then you look at the small percentage. You have 200 
gigatons and the amount of potential savings. Can we achieve 
what we want to achieve here given the small amounts that we 
are actually talking about incrementally changing versus the 
large amounts that are being plugged into the atmosphere anyway 
by nature?
    Mr. Leahy. I think the key thing is----
    Mr. Pearce. Can you get on your mic?
    Mr. Leahy. The key thing here is there is a global carbon 
cycle, and we need to understand how the global carbon cycle 
works because there are emitters and there are parts----
    Mr. Pearce. If you would not mind, when it turns to red I 
have to quit talking, but just if you would address the 
question of the percentages. You have some very high emitters 
above fossil fuels, fossil fuels being down the list quite a 
ways.
    Mr. Leahy. We can provide that for the record.
    Mr. Pearce. I would appreciate that. Thank you very much. 
Thank you, Mr. Chairman.
    Mr. Grijalva. Thank you, Mr. Pearce. Mr. Inslee, any 
questions?
    Mr. Inslee. Thank you. Could you discuss what you think are 
the most important changes to the regulatory climate to allow 
sequestration to move forward?
    Mr. Bauer. Well, I think the changes to recognize that the 
rules under EOR would be acceptable--which I do not think will 
be the resolution--or to come forward with regulations and who 
would apply those regulations, whether it is the state level 
which is where EOR is most often managed or at the EPA level, 
and then on public lands is it BLM, how do these play together, 
so that there is some business certainty for decisions by the 
industry to figure how their best path forward is. That will 
help move things along.
    Mr. Inslee. And should we pick one agency as the lead 
agency in development of those regulations?
    Mr. Bauer. I think if we want to accomplish this in a rapid 
manner, I think it winds up being several agencies coming 
together and forming actually an aggressive team to formulate 
the material that is needed.
    Mr. Inslee. What would be the best way to do that? Say EPA 
and Bureau of Land Management and a third yet to be renamed 
player? Instruct them to give a date or what is the best way to 
do it?
    Mr. Bauer. Well, presently EPA has the regulatory authority 
on pollutants, airborne and others, and as we know from the 
Supreme Court finding, they were charged to go back and look at 
what their management of CO/2/ and the regulations 
around it would be. However, I think the land management 
organizations from the Department of the Interior which have 
public lands that would have access required are going to have 
to play, even if it is just to address how access is provided--
and perhaps EPA then on how injection would take place and 
validation and verification. DOE, I think, would have a 
substantial contributing partnership there but they are not a 
regulatory body as a whole.
    Mr. Inslee. Is there any model for the best way to do this 
to centralize a permitting system? Is there any model?
    Mr. Bauer. I would say----
    Mr. Inslee. Here is the reason I ask. We have to move on 
this. You know we do not have a lot of time here to diddle. 
What is the best Federal model for centralizing a permitting 
system to get the job done?
    Mr. Bauer. Congressman, that is a difficult question. I 
agree with you that we do not have time to lose. I would say 
maybe the closest thing we can think about would be the Clean 
Air Act as a starting point but there was not a matter of what 
you did with the emissions you took care of there. That was 
dealt with under separate rules.
    Mr. Inslee. OK. Well that is I guess my job too. So I will 
have to fulfill it. A second question. Could you give us some 
idea what the Federal government is spending on sequestration 
technology broadly speaking now, and the reason I ask is many 
of us believe we need something akin to the original Apollo 
project to skin this cat on global warming and energy security, 
and that was about $18 billion a year we were spending on the 
original pilot project. Give us some idea ballpark what we are 
spending on sequestration technology Federally, either in R and 
D or looking at permitting or exploring what the asset is.
    Mr. Bauer. I would have to get back for the record on that, 
Congressman. I know the area that has the most direct in the 
technology development and the sequestration evaluation is less 
than $100 million a year, and in fact up until this past year 
it has been less than about $70 million a year but there is 
also office of science and Department of Agriculture and other 
departments that are spending money on various aspects. So let 
me take that and get back to you if I may.
    Mr. Inslee. And what level of increase could be profitably 
but usefully spent to really go out and find out what 
sequestration geology we have and to look at compression 
technology? I will give you examples. A little company called 
Ramjan that has developed a sonic way of compressing 
CO/2/ that may reduce compression costs by 30 to 40 
percent because it is just much more efficient.
    Mr. Bauer. I am familiar with that technology.
    Mr. Inslee. You know if you said you wanted to have the 
same level of national commitment as we did when we went to the 
moon, what budget could be usefully spent in the next couple of 
years?
    Mr. Bauer. I would like to get back to you for the record 
on that.
    Mr. Inslee. I would appreciate that actually because I 
think it is a serious question. I think the challenges--our 
country is so great--that we have to look at it in those terms.
    Mr. Bauer. Yes, sir. I understand the question is you need 
a recommendation on what a serious, aggressive program would 
require for sequestration, for capture, and for the work with 
industry that is required to move this forward as well as with 
the other agencies as far as regulatory permitting and other--
--
    Mr. Inslee. You bet. I would like you to tell me if we were 
as serious about solving global warming as we were getting to 
the moon what would we spend in the next couple of years on 
this technology? I would appreciate your thoughts on that.
    Mr. Bauer. Yes, sir.
    Mr. Inslee. You mentioned algae capture. There was some 
promising information about that. Could you talk about that 
because we think that may be a biodiesel source at some point.
    Mr. Bauer. Yes. We are presently working with Arizona Power 
Systems and several other power companies. They are capturing a 
slip stream off of their fossil fuel plant, and passing that 
CO/2/ through bioreactors that have been designed and 
in fact in one of the reactors is an MIT original design. It 
has been modified since then, not by NETO. That looks very 
promising in an area that you have large surface area. It is 
not a pond based system so you get much more production.
    We actually have had the algae formulated into biodiesel 
and run vehicles on biodiesel. So it does look and the company 
thinks that they can possibly get it to the point of paying for 
itself and maybe make a little money.
    Mr. Inslee. Which company?
    Mr. Bauer. Arizona Power Systems.
    Mr. Inslee. Thank you, sir. Thank you.
    Mr. Grijalva. Congressman Shuster.
    Mr. Shuster. Thank you, Mr. Chairman. I thank both of you 
for being here today, and again my regards to Mr. Leahy as you 
move on to something different, bigger, better or slower. 
Whatever it is, good luck to you. I am new to the Resources 
Committee, and I am trying to get my hands around, my brain 
around global warming issue, and the more I see the more I 
read. The facts that come to me are startling to me, and one 
thing I am following along the lines of Mr. Pearce's 
questioning.
    And tell me if I am wrong but 96 percent of the carbon put 
in the atmosphere does not come from cars and plants. It comes 
from the ocean, humans and animals, and soil, bacteria. That is 
accurate?
    Mr. Bauer. That is fairly representative, correct. The 
anthropogenic portion is a very small percentage of the total.
    Mr. Shuster. Right. So as we are trying to find solutions 
to global warming and 4 percent of the carbon is coming from 
our cars and plants, as we work through to try to develop 
sequestration, how much of an impact is that going to have in 
solving the global warming situation?
    Mr. Bauer. I think part of the thing is to recognize that 
the concern is that the anthropogenic which is adding to the 
global CO/2/ inventory is at an increasing level, and 
it is changing the equilibrium. So the theory is that the 
change of equilibrium is exacerbating the problem, making it 
warm up more rapidly and that is the issue. Going to your 
question about dealing with that issue----
    Mr. Shuster. So that 4 percent is throwing everything out 
of kilter?
    Mr. Bauer. Well it is 4 percent of a very large number, and 
it is growing because the CO/2/ goes into the 
atmosphere, and it does not just stay up there for 10 years. It 
stays up there for a long period of time, and so it keeps being 
added to, and so that is the theory that has caused kind of a 
greenhouse effect capturing heat in.
    Mr. Shuster. And the 96 percent is doing what? I am not 
sure.
    Mr. Bauer. Well the theory is that the 96 percent would 
have maintained equilibrium without the additional help of the 
anthropogenic contribution over the last 100 years.
    Mr. Shuster. Again I am not very smart on this. So you are 
saying to me that the 4 percent is what is causing all the 
problem. The 96 is a huge amount of carbon that is really not 
contributing that much to the situation?
    Mr. Bauer. I do not think that is what it is saying. I am 
just saying that the 4 percent may be the tipping point that is 
pushing it to the extreme.
    Mr. Shuster. OK. I am still not quite sure.
    Mr. Bauer. Yes.
    Mr. Shuster. Like I said, I am trying to get my brain 
around it. You know you hear on TV one side, you hear the other 
side. So again I am just trying to understand. Coming from a 
guy that is not a scientist, not a chemistry major, it is very 
difficult. Next question. On the sequestration, are there areas 
of the country that are better suited for it and others that 
are not well suited? Can you talk about why and some of the 
characteristics?
    Mr. Leahy. Well, I will take that one, at least starting, 
but I mentioned three areas--coal seams, unminable coal seams, 
the oil and gas reservoirs, and also saline aquifers. Now there 
are deep saline aquifers, particularly if they have good seals, 
that are vast reservoirs; and the estimates have been about an 
order of a magnitude different in terms of what you read.
    The point is the challenge is I do not think we know much 
about those. During my scientific career, I was a hydrologist. 
Hydrologists do not succeed by finding salt water. They succeed 
by finding fresh water.
    Mr. Shuster. Right.
    Mr. Leahy. So the data we have on the saline systems are 
very, very sparse. So I think again a national assessment would 
look at all three of these potential geologic repositories or 
reservoirs and essentially be able to look at them on a 
regional basis, compare and contrast from coal to oil and gas 
to saline aquifers so that the policymakers can make a 
decision--and the managers and industry--can make a decision in 
terms of what is the best target at a particular location.
    Mr. Shuster. And you talk about coal. Does the topography 
come into it? West Virginia and Pennsylvania are very different 
topography and Wyoming and places. So are there areas of the 
country that are better suited for it or not? I am not a 
geologist either.
    Mr. Leahy. Well the coal has to be there number one, and 
there are maps that show where the coal is in this country. We 
have done a national assessment of coal resources, released a 
few years ago, but the key thing is it is a catch-22. We want 
to mine this coal to make electricity but on the other hand you 
want to use it for carbon sequestration. So you have to look at 
the unminable coal. So there would have to be a separation out 
of that resource.
    Now unminable coal--maybe it is too deep. Maybe it is too 
thin in terms of today's technology. Very hard to put a number 
on it because the technology changes, and what is unminable 
today a decade from now may become minable. There are new 
modern technologies that are coming to play. In situ mining 
where you inject things into deep basins and it changes and you 
get fuel out. So it is very difficult. This will be a very 
challenging issue in terms of----
    Mr. Shuster. Thank you very much.
    Mr. Grijalva. Mr. Sarbanes, do you have questions, sir?
    Mr. Sarbanes. Briefly. Thank you, Mr. Chairman, and I am 
going to compete with Mr. Shuster here in terms of my position 
on the learning curve because I am listening and learning as 
fast as I can on this subject. Just to follow up on the brief 
discussion on saline aquifers, can you imagine a time or use 
that we would be wanting to go to those saline aquifers for 
some other reason or with some other kind of technology for 
something totally unrelated to what we are talking about here 
where the fact that they are being used for sequestration 
purposes would be an obstacle to that?
    Mr. Leahy. I think one would have to define the criteria. 
We are seeing more saline water used in this country. Much like 
energy demands, our water demands are increasing with time, and 
frankly in some parts of the U.S. we will be looking to saline 
aquifers. Shallow ones probably brackish, and again it is a 
matter of setting the criteria and having some foresight to 
basically look at the ones that have the highest potential for 
other uses versus carbon sequestration.
    Mr. Sarbanes. Thank you.
    Mr. Bauer. If I could add to that, Congressman.
    Mr. Sarbanes. Yes.
    Mr. Bauer. The reservoirs we are looking at are very deep, 
below 8,000 feet, and that is a concern that they possibly have 
a future use. These are very, very--not brackish--but very 
salty saline aquifers that do seem to have large capacity to 
deal with this and probably have no substantial future benefit. 
But we are concerned about deep groundwater being used in the 
future, and trying to make sure those are not problems for us.
    Mr. Sarbanes. The other question I had is I am interested 
in this monitoring mitigation verification concept and the 
layperson coming to this subject, the one thing that can make 
them sit up straight is the discussion of leaks--leaks of this 
sequestered CO/2/. So I just thought maybe you could 
spend a minute or two talking about the science around leakage 
and what you do.
    For example, I would imagine that CO/2/ coming 
into the atmosphere in the normal course does not do it with 
the same level of intensity that a leak could produce if it was 
coming out of a place where the CO/2/ was being 
sequestered and stored in a concentrated fashion. I wonder what 
the environmental ramifications of that are.
    Mr. Bauer. When we talk about saline aquifers we are 
talking about a void. We are talking about basically a rock, a 
rock that has some porosity but porosity not in the area of big 
holes but just small. Maybe even molecular only. Just the same 
as oil or gas would be found in.
    So if you cracked it, it would not be a big rush out of it. 
The other thing is it would be below an impermeable layer. 
Having said that, leaks where wells and other things have 
penetrated down would allow it to come up. So the probability 
is not absolutely never but almost never that any kind of a 
huge out-rush would happen.
    Where there have been out-rushings of CO/2/ 
naturally it has been more around volcanic voids where there 
was a pocket of gas that came forward rather than leakage out. 
Having said that, we have technologies already that we can 
trace, and we do this for some of the oil companies--our lab 
does actually--when they want to inject CO/2/ for EOR 
they want to make sure that there is no unintended loss of 
CO/2/ for two reasons. One is they do not want to have 
to worry about a pocket of CO/2/ which is heavier, 
forming a low area where people or animals might want to go to 
or vegetation, and two, CO/2/ was worth something to 
them. They cannot afford to have $20 a ton CO/2/ just 
leaking out. They want to recycle it if it is going to move 
through the system.
    So we go through and we check, and they grout--grout with 
like a cement--to close those holes. Now having said that, it 
still is obviously, as you say, something to be sensitive 
about. That is why it is important for the public to understand 
what the issues are, what the protections are, and the 
methodologies to ensure that there are no leaks or that if any 
leakage were to happen it could be readily dealt with, and that 
is a very important part of the whole process of scientific 
development using the tools of carbon capture and storage.
    Mr. Sarbanes. What is the best analogy to a substance that 
is sequestered naturally below the surface that you would say 
well if that ``leaked'' out it would create harm? So in other 
words when I am talking to someone and they sort of say well 
you know you are putting the CO/2/ down there, and it 
could leak out. You can say well in fact there are these other 
examples of things that are ``sequestered'' underground that 
could be harmful if they come out to give some context to this. 
I guess natural gas would fall into that category. Is that the 
best example? Are there others?
    Mr. Leahy. I will answer the question, Mr. Congressman. 
Artesian water systems are basically water that has a seal over 
it. So when a well taps it, the pressure makes the well flow, 
at least for a period of time until that pressure is reduced. 
Oil and gas are more buoyant than water. So, ideally, it would 
all go to the atmosphere sooner or later. In geologic time it 
would out gas but there are seals, and the integrity of those 
seals is an absolutely critical piece in terms of carbon 
sequestration because you want tight seals over these zones you 
pick.
    The other thing that I think is very important here is the 
fact that gases are highly compressible. Water is not 
compressible. It is very lowly compressible, and the point is 
you can put the gas down into these saline aquifers to displace 
some of the water but you are also deforming the rock matrix, 
and if you do not have knowledge of those seals, you can 
fracture them, and in fact sometimes that is desirable, and it 
is done commercially. But again, knowing the geologic 
properties is absolutely critical in terms of some of the 
technology design so you do not make a mistake and have an 
outcome that is not desired.
    Mr. Sarbanes. Thank you.
    Mr. Grijalva. Thank you. Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman. I thank the panel for 
their informative information, and I am too, like some of the 
other members of the panel, I am a little bit not learned in 
the process. Going back to my friend, Mr. Shuster, but I 
believe the numbers are more like 97 percent, we could have 3 
percent of controllable carbons, and in a country with 300 
million people, in a world that is 6.6 billion, so the fraction 
of what we might be able to do here is relative I guess to the 
whole picture of the world.
    We have less than 5 percent of the people controlling or 
having input on 3 percent of the problem. It looks like to me 
if we do not get all of the other countries involved in the 
process, there is not much we can do. We could basically be put 
out of business and still not make an impact on the process. 
But how do you collect the CO/2/ before you can 
sequester it?
    Mr. Bauer. Well with power generation, as we presently do 
it, whether it is natural gas combined cycle or coal power 
generation, the flue gas or the exhaust gas has got a very 
dilute amount of CO/2/ in it. So it is a very big 
challenge, and the technologies that are available to do it 
presently are awfully expensive at that volume with a very low 
concentration.
    So what we are doing is looking at ways for future power 
generation--to find ways to make a more concentrated 
CO/2/ stream at the end. One of the ways is when we 
use gasification of coal, we have a higher concentration of 
CO/2/. We have a greater ability to separate it. That 
looks with promise at a potential way to both generate the 
power we need and to capture CO/2/. However, having 
said that, the pulverized coal or combustion approaches using 
oxygen also have a higher concentration of CO/2/. So 
then--we are back into that being comparable--how do we 
separate the CO/2/? And that is still a challenge 
because in both cases the cost of separation even at 
concentration are substantial because of the large volumes.
    Mr. Brown. OK. Not to interrupt you, but we feel that coal 
is the major producer of CO/2/ and maybe we ought to 
go to some alternative fuel other than coal? Is that what you 
recommend?
    Mr. Bauer. No. I do not recommend that because the reality 
is that with power generation, the electricity generation 
demand is too great to move over there anything in the next 20 
or 30 years at earliest.
    Mr. Brown. How about like nuclear power?
    Mr. Bauer. I am sorry?
    Mr. Brown. Nuclear power.
    Mr. Bauer. Nuclear power I think has got a lot of promise. 
I, in my early part of my career, was a nuclear power engineer.
    Mr. Brown. OK.
    Mr. Bauer. So I think nuclear power has a tremendous amount 
of promise. Again the quantity of power we need requires all 
sources. We cannot just pick a silver bullet because we need 
too many bullets.
    Mr. Brown. OK. Let me ask either one of you a question. I 
guess the net problem we have with CO/2/ is global 
warming. That is correct?
    Mr. Bauer. Right.
    Mr. Brown. How long have we been in this global warming 
cycle?
    Mr. Bauer. Well the literature indicates it has been since 
the beginning of the industrial revolution it has been adding 
up but it is in the last 100 years that the impact has become 
more substantially noticeable and gone up not in a linear 
manner but in a more exponential manner.
    Mr. Brown. I have this science paper here dated Newsweek 
April 20, 1975, and it addresses the cooling world.
    Mr. Bauer. I remember that.
    Mr. Brown. OK. And I guess what I am saying there has been 
so much hype about this problem, about the global warming and 
the ocean rising and is this not a cyclical thing that is 
happening in the world? The ocean has not always been at the 
shorelines we are seeing today, is that correct?
    Mr. Leahy. I will take it. That is absolutely correct. I 
mean if you look back at some of the ice cores, you will see 
that temperatures have varied for the last 400,000 years.
    Mr. Brown. Sure.
    Mr. Leahy. And you can even go back deeper in geologic 
time. The record gets more suspect because the observations get 
harder but the earth goes through changes in terms of its 
atmosphere and so forth. I think the issue at hand is the 
unprecedented rise that has occurred in the last few hundred 
years.
    Mr. Brown. I think we almost have an obligation to try to 
make a difference. I know for instance I am from South 
Carolina, and I represent about 175 miles of the ocean, and I 
also have a farm that is about 25 miles inland from the ocean, 
and I was digging a pond the other day and this is a seashell 
that we dug up, some 12 feet below the surface of the topsoil. 
We also had some oyster shells and some shark teeth, which 
indicated at some point in time the ocean was not where it is 
down in Charleston or the border. The only reason I am bringing 
this up----
    Mr. Grijalva. Will the gentleman yield?
    Mr. Brown. Mr. Chairman, I am sorry to carry over, but I 
know my time has expired, but I would hope we would not get in 
an emotional position to address a problem and cause a lot of 
industrial exploitations of some other foreign country and 
cause the quality of our life to go down and we probably might 
not be able to solve it. Thank you.
    Mr. Costa. [Presiding.] Thank you. Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman. Mr. Bauer, if I have 
the facts and figures correct as you testified, under current 
technology it would increase overhead by 30 percent to capture 
25 percent of the CO/2/, is that correct?
    Mr. Bauer. That was a company that I was talking to just a 
week ago today. That is why the development and R and D for 
technology is so essential. The present technology is quite 
expensive at this scale.
    Mr. Lamborn. And you also stated that the ultimate goal is 
to drive down the energy penalty associated with capture so 
that coal power plants achieve 90 percent carbon capture at a 
cost of less than 10 percent increase in the cost of 
electricity.
    Mr. Bauer. That is correct. That is the goal.
    Mr. Lamborn. Now that last figure sounds very optimistic. 
Sounds like a very ambitious goal. I think we would all love to 
see that but is that something you just pulled out of thin air? 
Is that wishful thinking or how confident are you that we could 
ever get to that point?
    Mr. Bauer. That is the basis of analysis and also looking 
at kind of the learning of past experience. If you go back to 
the Clean Air Act and the technologies that had to come into 
effect to remove sulfur and reduce nitrous oxide 
(NOx), those technologies were on a path of 
improvement so that the numbers we are using for CO/2/ 
capture seem to be fairly realistic in what is technologically 
plausible and what we see happening. So I think those goals are 
achievable in the timeframe. Of course then from that timeframe 
achievement going into commercial broad utilization takes more 
time too because of the size of the capital investments.
    Mr. Lamborn. Thank you. And I am also going to build on 
something my colleague, Mr. Brown from South Carolina, alluded 
to, and that is there are other countries that are not doing 
anything basically, and I know that when the Kyoto Protocol--
which the last Administration President Clinton, Vice President 
Gore--when they were in the White House we had the Kyoto 
Protocol turned down by our Senate 95 to 0.
    And part of the reason it was turned down 95 to 0 was 
because we would be subjecting ourselves to an economic penalty 
when other countries like China who are in the so-called 
developing category were not having to do anything, and I see 
that China next year is predicted to become the leading emitter 
of carbon dioxide in the whole world.
    So do you not think more attention should be given to a 
country like China that is doing nothing basically? I mean as 
opposed to us putting ourselves with the whole burden on our 
own shoulders?
    Mr. Bauer. I understand your point, and it is a good point 
that the whole challenge of greenhouse gas management is a 
global issue truly. Yet having said that the need for 
technology--wherever it is going to be deployed--exists, and in 
the past, the United States has often developed the technology 
such as with sulfur removal and nitrous oxide (NOx) 
reduction, now mercury reduction, that has wound up providing 
export to other countries other technology as well as other 
countries taking place.
    I know the Chinese have not done much but I do also know 
that over the last two years--and I was part of a Clean Air for 
Asia group that worked with four countries, Japan, China, India 
and the United States--there is an increasing understanding and 
a recognition of their need for attention to these things, and 
they are beginning to rapidly pursue them, and I think we will 
see changes over the next several years. Having said that, the 
United States alone taking action will not solve the world's 
greenhouse gas problem but it will have a substantial impact.
    Mr. Lamborn. Thank you. I am glad to hear that part of your 
question because it would be great to share technology with 
them but if we are the only ones taking action at an economic 
cost and they are not, there is a sense of fairness there that 
I think we have to worry about. Thank you.
    Mr. Costa. Chairman Rahall for a follow-up question, and 
then I will take my time.
    Mr. Rahall. Thank you, Mr. Chairman. Carl, I was asking you 
earlier about the commercial applications of CO/2/ and 
the fact that the oil industry has been purchasing it for EOR 
and how profitable it is for them to do that, and thinking a 
little further, what other commercial applications do you see? 
I am wondering today where do companies like Coca Cola and 
Pepsi and all these soda companies get their CO/2/? 
And is it possible if you capture and clean it that it would 
not have commercial applications in the soda pop industry? I 
mean Appalachian Power selling to Coca Cola. What better 
scenario than that?
    Mr. Bauer. Well actually there is CO/2/ used 
commercially, and you are correct, Congressman, that there are 
applications. The problem is the volume of CO/2/ 
produced is so great that it more than swamps our present use, 
and having said that though, I think rather than looking at it 
as a problem we also need to look at it as an opportunity and 
think about ways to use it. I have been in communication with a 
Berkeley lab about some papers that they have done on 
geothermal heat recovery for power generation. The use of water 
is excessive, and so you lose a lot of water, and it does not 
make sense because most of the geothermal sources are in areas 
that are fairly arid.
    But you could use CO/2/ as a working fluid and 
thereby take a full plants every year of CO/2/ because 
you would leave some of it behind which forms a carbonate, 
stays there, but you could bring the heat up with 
CO/2/ cap, keep the CO/2/ under control, and 
use it as a working fluid, and I think we need to start looking 
at those things--more rapid growth of plants like algae--but 
also I know a grower in Arizona that uses CO/2/ to 
produce tomatoes hydroponically. He can sell all he can make, 
and he makes them all year round because they have sun all year 
round. So there are ways to use it but there are not enough 
ways to use the magnitude we produce so we have to look at both 
ways I think.
    Mr. Rahall. So that could be a part of our R and D efforts 
in the future on it?
    Mr. Bauer. Yes, sir, I believe there are opportunities. 
That is why we are doing the algae one. We are looking for 
alternatives, creative ways to find other ways to use it.
    Mr. Rahall. Thank you. Thank you, Mr. Chairman.
    Mr. Costa. Not a problem, Mr. Rahall. Mr. Bauer, places 
like New Mexico where they have sunshine all the time, that 
sounds like a place to go. Mr. Leahy, I understand that the 
United States Geological Survey has been collaborating with the 
Department of Energy with the production of their national 
atlas. Where are you on that?
    Mr. Leahy. We have done some preliminary work in terms of 
methodology a few years ago that was used to inform the atlas 
production. We feel that the atlas is the first step in terms 
of getting a true national----
    Mr. Costa. Do we have a timeline when we will get that 
atlas with the methodology?
    Mr. Leahy. The methodology for the national assessment?
    Mr. Costa. I assume you are working on that. But when will 
we have the atlas after the methodology is worked out between 
the two?
    Mr. Leahy. I think we are talking past each other a little 
bit here. I was referring to a more quantitative national 
assessment in terms of developing a methodology. The DOE 
assessment we have worked closely with them in terms of them 
coming up with a first cut. I think you called it an overview 
or high level overview of the potential for carbon 
sequestration. So I think a second generation product is needed 
here.
    Mr. Costa. OK. But I have been told that the atlas is done, 
is that correct?
    Mr. Bauer. Congressman, I left a CD copy of the present 
just-released atlas for each Member. That will be updated again 
in about two years and with additional, more detailed work with 
USGS, as well as the projects. The projects bring either 
confirmation of what is prospected there or new information.
    Mr. Costa. OK. My time is going here. Have you been getting 
cooperation from the oil and gas companies that have done I 
understand a lot of work on the data for the potential of the 
carbon dioxide sinks?
    Mr. Bauer. Yes, sir, we have. We have gotten both from oil 
and gas experts and from various companies working through the 
regional partnerships.
    Mr. Costa. Because that would save you time logically.
    Mr. Bauer. That is correct, sir.
    Mr. Costa. OK. Good. I am not sure which, Mr. Bauer or Mr. 
Leahy, which is most appropriate to ask this question. I was 
reading and talked on the material about the geological storage 
of carbon, and if this question has been asked already I 
apologize. Having had some experience in my district with 
problems with permeability of layers of what we call Corcoran 
clay and issues that deal with levels of selenium, I mean we 
used to think that that was an impermeable seal that existed 
some 5,700 feet below the surface but I am told here in looking 
at the water and rise vertically where you look at trying to 
store this carbon dioxide until you reach a nonpermeable 
barrier or seal, and it is critical for an issue and our 
evaluation of the storage capacity for the integrity or the 
effectiveness of those seals.
    And I am told that really given the nature of the ground 
layers there is nothing that is impermeable. What is your take 
on this?
    Mr. Leahy. I agree entirely with you. There is nothing that 
is impermeable. Everything has a permeability. The point is you 
want the lowest possible permeability, and clays tend to be 
those as well as granites or something like that. The key thing 
is you need the geologic information and the data to basically 
understand those confining units and those seals, and you also 
have to know the properties, the physical properties of them so 
that when you go into development of CO/2/ 
sequestration you do not fracture them, and I think the key 
with the Corcoran and I know that unit pretty well----
    Mr. Costa. Yes.
    Mr. Leahy. There are some issues out there with the 
movement of water through the Corcoran that was related to the 
selenium issue, and I think it is not, as I recall, not as 
aerially extensive. There are fractures in it. The 
permeability----
    Mr. Costa. I was just extracting that as an example.
    Mr. Leahy. Right. It is a very good example, Mr. 
Congressman.
    Mr. Costa. Yes. Quickly before my time is out. Mr. Bauer, I 
understand that in the deployment phase the Department is going 
to be looking at conducting field tests of a million tons of 
carbon dioxide per year, is that correct? And if it is, how 
does that compare with a good sized coal power plant that puts 
out a year maybe 500 megawatts?
    Mr. Bauer. It is----
    Mr. Costa. Four million tons per year.
    Mr. Bauer. Yes. It is correct we are looking for projects 
for about a million tons per year of CO/2/, and a 500 
megawatt power plant would produce a little bit over four 
million tons per year of CO/2/. That is why a million 
is about 25 percent.
    Mr. Costa. Well my time is expired, and we do need to get 
to the next panel but I have some additional questions I would 
like to submit to you, Mr. Bauer and to you, Mr. Leahy, but I 
do not want to take up the time of the committee because we do 
have some witnesses who have been patient and are waiting. So 
thank you again. Thank you for your good testimony this 
afternoon, and Mr. Leahy, we want to thank you for a public 
service career that has withstood numerous decades, a lot of 
trials and tribulations, on a job well done. Thank you very 
much.
    Mr. Leahy. Thank you very much.
    Mr. Costa. All right. Moving right along to our next panel. 
We will get the new group up here and hear from our new set of 
witnesses.
    [Pause.]
    Mr. Costa. We are all ready. Good. The first witness that 
we have in the second panel is Judy Fairburn, the Vice 
President of Downstream Operations for EnCana Corporation who 
is going to give us some sense on their efforts on 
sequestration of carbon dioxide. Ms. Fairburn.

          STATEMENT OF JUDY FAIRBURN, VICE PRESIDENT, 
           DOWNSTREAM OPERATIONS, ENCANA CORPORATION

    Ms. Fairburn. Good afternoon. Thank you.
    Mr. Costa. You might want to lower the mic so you speak 
right into it. You know the five-minute rule.
    Ms. Fairburn. Terrific.
    Mr. Costa. You are on.
    Ms. Fairburn. Thank you very much, Mr. Chairman and 
Subcommittee members. I am pleased to be here. I am 
representing EnCana. It is a large independent oil and gas 
producer, second largest natural gas producer in North America 
as well as integrated oil sands developer. Through our recently 
announced venture with Conoco Phillips, we also co-own two 
refineries in the states, in Texas and Illinois, and we produce 
1.2 billion cubic feet a day of natural gas in Colorado, 
Wyoming and Texas, headquartered in Denver.
    Previous to my current position of head of our downstream 
refining operations, I was Vice President of the Weyburn 
business unit which is both the largest CO/2/ enhanced 
oil recovery project in Canada as well as the world's largest 
CO/2/ sequestration project. So I speak on that 
capacity today, and prior to that I worked in the Canadian 
Federal government. So it is a pleasure to be here.
    At the invite of the Chairman, I would like to talk about 
the Saskatchewan project that we have. Our project is just 
about 30 miles north of the North Dakota border, to put it in 
perspective. I will provide some brief comments here, and you 
have my written testimony and as well I have a DVD and some 
brochures that can provide more visual aids.
    Mr. Costa. We will submit them for the record. Thank you 
very much.
    Ms. Fairburn. Thank you. The geological storage of 
CO/2/ in oil zones represents in our mind a great win-
win between being able to recover additional oil from mature 
oil fields and successfully store carbon dioxide. We like the 
quote of Julio Friedmann and Thomas Homer-Dixon in a recent 
foreign affairs article. They refer to it as, ``This technology 
may be the only realistic way to satisfy the world's gargantuan 
energy needs while responsively mitigating their side 
effects.''
    In terms of our project, we inject carbon dioxide a mile 
under ground and have been doing so since 2000. So we have 
quite a bit of experience in this. This CO/2/ that we 
are using is coming from North Dakota, about 200 miles to the 
south of our field. It is CO/2/ that otherwise would 
have been emitted to the atmosphere by Dakota Gasification, and 
theirs is a coal gasification facility that produces a good 
quality CO/2/ for us.
    We are able to recover we are forecasting over the projects 
30-year life an additional 155 million barrels of oil as well 
as being able to store 30 million metric tons of 
CO/2/. To put that in perspective, that is about the 
equivalent of approximately 6.7 million cars that we could deal 
with the emissions of for one year. About a quarter of that 
CO/2/ has been injected already, and we are currently 
at production levels of about 30,000 barrels a day.
    I want to reinforce that this project is commercial scale, 
and we have also been the test site for what is referred to as 
the IEA, International Energy Agency, greenhouse gas Weyburn 
and CO/2/ monitoring and storage project since the 
year 2000 as well. This international multiparty study, of 
which the DOE has contributed to it extensively, proved in 2004 
through its phase one results the storage of CO/2/ at 
Weyburn is viable and safe over the long-term. The findings 
indicated that 99.8 percent of this CO/2/ would remain 
well underground with high probability for 5,000 years.
    EnCana is very proud of our Weyburn project. It took a lot 
of effort to get to where we are today in terms of a lot of 
years of technical analysis, substantial capital investment, a 
viable CO/2/ supply which could be economic, as well 
as very lengthy negotiations with partners, with the 
CO/2/ suppliers, and with governments to put it all 
together. We think there are opportunities to do this in other 
sites, and like the panelists said before, you have to be very 
cautious though. The geology must be right, and a lot of study 
must go there, and it is important when one does embark on this 
to have extensive monitoring.
    We are now pleased to be participating in the final phase 
of that IEA project whereby we will look to transfer the 
knowledge gained at Weyburn toward other fields in the future, 
and also set a good foundation for policy, sound regulation and 
good operating practices. I would be very pleased to answer any 
questions that you have at the completion of the talks here.
    [The prepared statement of Ms. Fairburn follows:]

   Statement of Judy Fairburn, Vice President Downstream Operations, 
              EnCana Corporation, Calgary, Alberta, Canada

    My name is Judy Fairburn. I am Vice President of Downstream 
Operations for EnCana Corporation. EnCana is a dynamic North American 
industry leader in unconventional natural gas and integrated oilsands 
development. I am currently responsible for EnCana's co-ownership in 
two United States refineries, a result of the recently announced 
Oilsands partnership with ConocoPhillips.
    Previously to my current position I was Vice-President of EnCana's 
Weyburn Business Unit, a technology driven business that is both 
Canada's largest enhanced oil recovery project as well as the world's 
largest CO/2/ geological storage project. In that capacity I 
was responsible for all aspects of the Weyburn business including 
strategy, business development, technology, drilling, operations and 
stakeholder relations. Prior to my Weyburn responsibilities. I was 
Vice-President, Portfolio Management for EnCana Upstream operations.
    I come here today at the invitation of the Chairman to discuss the 
technology that EnCana developed in the storage of carbon dioxide and 
our experiences at our Weyburn Enhanced Oil recovery operation in 
Saskatchewan, Canada.
Introduction
    The Weyburn oilfield, operated by EnCana, is demonstrating that oil 
production can be increased in an environmentally responsible manner 
through underground injection of carbon dioxide (CO/2/). 
CO/2/ has been injected into this oilfield since 2000, making 
valuable use of a by-product that would have otherwise been emitted 
from Dakota Gasification Company's coal gasification facility located 
in the northern United States. The field is projected to store 30 
million tonnes of CO/2/ over the EOR life, equal to taking 
about 6.7 million cars off the road for one year. I will discuss in 
more depth how EOR is prolonging the life of the Weyburn oilfield, 
while at the same time contributing to reducing CO/2/ 
emissions.
    The Weyburn oilfield has also served as the highly coveted, 
commercial-scale laboratory for the International Energy Agency (IEA) 
Green House Gas Weyburn CO/2/ Monitoring and Storage Project. 
This multi-party, international research project, run under the 
auspices of the International Energy Agency, recently concluded that 
storage of CO/2/ in an oil reservoir is viable and safe over 
the long term, thus providing a good foundation for the development of 
solid policy, regulations and operating practices for future 
CO/2/ storage/EOR. The results of the first phase of the IEA 
project will be covered as well as the key elements of the final phase, 
which has recently been launched.
EnCana Corporation--An Overview
    EnCana was formed in 2002 from the merger of two highly respected 
Canadian companies, PanCanadian Energy and Alberta Energy Company. 
Headquartered in Calgary, Canada, EnCana is one of North America's 
largest natural gas producers. It is uniquely positioned as an industry 
leader in unconventional natural gas and integrated oilsands 
development, focused on creating long-term value. EnCana's portfolio of 
long-life resource plays includes 12 key plays in Canada and the United 
States, with nine producing natural gas and three focused on oil. In 
2006, total sales volumes were 4.4 Billion cubic feet equivalent per 
day (about 725 Million barrels oil equivalent per day). EnCana has 
extensive operations in the United States (approximately one third of 
total production) with EnCana USA headquarters in Denver, Colorado.
    EnCana strives to increase the net asset value of the company for 
shareholders, make efficient use of resources and minimize its 
environmental footprint. The company's success is determined not only 
through its bottom line but also through its behaviour. Weyburn is an 
example of that commitment
Weyburn Oilfield--Enhanced Oil Recovery
    Located in the southeast corner of the province of Saskatchewan in 
Western Canada, Weyburn is a 180-square-kilometer (70-square-mile) oil 
field discovered in 1954. It is part of the large Williston sedimentary 
basin, which straddles Canada and the U.S. Production is 25- to 34-
degree API medium gravity sour crude. The reservoir is a Mississippian-
aged Midale Marly zone, a low permeability chalky dolomite overlying 
the Midale Vuggy zone, a highly fractured and permeable limestone.
    Water-flooding to increase oil recovery was initiated in 1964 and 
significant field development, including the extensive use of 
horizontal wells, was begun in 1991. In September 2000, the first phase 
of a CO/2/ enhanced oil recovery scheme was initiated. The EOR 
project is to be expanded in phases to a total of 75 patterns over the 
next 15 years. The CO/2/ is a purchased byproduct from the 
Dakota Gasification Company's (DGC) synthetic fuel plant in Beulah, 
North Dakota. If this CO/2/ had not been used for EOR and 
stored, it would have otherwise been emitted into the atmosphere. It is 
transported through a 200 mile pipeline to Weyburn then injected into 
the reservoir, one mile underground. The CO/2/ is 95% pure and 
Weyburn's current take is 6600 tonnes/day (equivalent to 125 mmscfd).
    EOR has given the Weyburn field a new life. It currently produces 
over 30,000 bbls/d of light crude oil, the highest production level in 
30 years, with 155 million gross barrels of incremental oil slated to 
be recovered over the project life. Without EOR, only 13,000 bbls/d 
would have been produced leaving a huge resource untapped. The 
environmental benefits are also significant. CO/2/ storage 
contributes to mitigating emissions. The Weyburn project has stored 
approximately 7 million tonnes of CO/2/ to date and over the 
lifetime of the EOR project, it is projected that an additional 23 
million tonnes of CO/2/ will be sequestered.
IEA Green House Gas Weyburn CO/2/ Storage & Monitoring 
        Project--
        Phase I
Project description
    The IEA Green House Gas Weyburn CO/2/ Storage and 
Monitoring Project is a significant CO/2/ monitoring and 
storage R&D effort that has run in parallel with the commercial Weyburn 
EOR project. Phase 1 of this project was designed to contribute 
significantly to the understanding of greenhouse gas management, 
specifically the technical feasibility and long term fate/security of 
CO/2/ storage in geological formations.
    Initiated in 2000 by the Saskatchewan Ministry of Energy and Mines 
(now Saskatchewan Industry and Resources), the federal Department of 
Natural Resources, and PanCanadian (now EnCana), this $40 million 
multi-disciplinary project has been endorsed by the International 
Energy Agency GHG Research and Development Programme. It has been 
managed by the Petroleum Technology Research Centre (PTRC) of 
Saskatchewan.
    This project constitutes the largest, full-scale, in-the-field 
scientific study ever conducted in the world involving carbon dioxide 
storage. Weyburn has become the international flagship project on GHG 
geological storage research, routinely receiving senior level business 
and government personnel, as well as media, from around the globe.
    This collaborative research was funded by 15 public and private 
sector institutions. In addition to the two previously mentioned 
government departments, other government partners included the United 
States Department of Energy (US DOE), the European Union, and the 
province of Alberta through the Alberta Energy Research Institute. 
Industry sponsors included EnCana, BP plc, ChevronTexaco Corp., Dakota 
Gasification Company, Engineering Advancement Association of Japan, 
Nexen Inc., SaskPower, TransAlta Corporation and Total SA of France. 
The project also involved 24 research and consulting organizations in 
Canada, Europe and the United States.
    The overall objective of Phase 1 of the project was to predict and 
verify the ability of an oil reservoir to securely store and 
economically contain CO/2/. The scope of work focused on 
understanding the mechanisms of CO/2/ distribution and 
containment within the reservoir into which the CO/2/ is 
injected and the degree to which the CO/2/ can be permanently 
sequestered.
Phase 1 results \1\
    Completed in 2004, Phase 1 successfully concluded that 
CO/2/ can be securely stored underground in an oil reservoir 
such as Weyburn. Through extensive geological, geophysical and 
hydrogeological work, as well as deterministic and stochastic 
(probabilistic) modeling, the work concluded that after 5000 years, 
99.8% of the CO/2/ injected into the Weyburn field would 
remain trapped underground.
    A key feature of the project was the pre-injection baseline 
monitoring that was done prior to CO/2/ injection at the 
field. While there are already commercial applications of 
CO/2/ EOR in the United States, the Weyburn oilfield and the 
IEA project are unique, due to the comprehensive knowledge of pre-
injection reservoir conditions as a result of an extensive historical 
database of geological and engineering information. This has proven 
critical to following the movement of CO/2/ in the Weyburn 
reservoir over the four years of the Phase 1 project.
    Excellent monitoring techniques were progressed through the 
project; the movement of the CO/2/ was predicted, monitored 
and verified by different methods. The greatest success was encountered 
with four-dimensional time lapse seismic surveys, which can reliably 
detect relatively small volumes of CO/2/ underground. 
Geochemical fluid sampling also gave good insights into the movement of 
CO/2/ within the reservoir and can detect any CO/2/ 
breakthrough at wells.
IEA Green House Gas Weyburn CO/2/ Storage & Monitoring 
        Project--
        Final Phase
    Phase 1 of the IEA project has provided a good foundation for the 
development of solid policy, regulations and operating practices for 
future CO/2/ storage/EOR projects; however, there is more work 
to be done. The September 2004 final report identified a number of 
important gaps and recommended a follow-up ``Final Phase'' to enable 
transfer of knowledge and technology gained in Weyburn to a more 
widespread industrial implementation of this technology and to ensure 
public confidence in geological long-term storage of CO/2/. We 
foresee a future where Weyburn has paved the way and future projects 
will not need to expend nearly as much research and monitoring 
resources to be assured of safe geological storage.
Next steps: Technical
    Extensive investment and effort have been expended to get to the 
current level of understanding of geological storage at Weyburn but 
additional work is still necessary to develop cost-effective protocols 
to enable efficient site selection, design, operation, risk assessment 
and monitoring of future projects.
    The key gaps identified in Phase I and the measures being taken in 
the Final Phase to address them and achieve win-win solutions include:
     (I)  Drafting of firm protocols for storage site selection.
     (ii)  Final selection of the most effective underground monitoring 
methods for CO/2/ movements.
    (iii)  Identifying the most effective reservoir methods for 
maximizing storage capacity and oil recovery.
     (iv)  Finalizing the development of the most cost-effective and 
credible risk assessment methods and risk mitigation techniques to 
ensure the integrity of the storage medium.
Next steps: Non-technical
    Advancement of the technical aspects of CO/2/ storage is a 
necessary but insufficient requirement for the management of geological 
storage of CO/2/ on a large scale. A successful CO/2/ 
geologic storage ``industry'' must encompass a suite of technologies 
linked by a network of institutions, financial systems and regulations, 
along with public outreach activities, that are able to achieve broad 
public understanding and acceptance. Additional work is necessary in 
the following areas.
Regulatory Issues
    For CO/2/ storage to flourish, a predictable, science-
based regulatory regime needs to be in place. Fortunately, regulations 
governing the injection of acid gases with a CO/2/ component 
and other industrial applications are already in place. A complementary 
regulatory framework for long term storage applications with respect to 
safety and reliability may be required.
    The experience from current provincial regulations on issues such 
as emergency planning and protection, health and safety, and drilling 
and well completion standards, as well as the fact the oil has been 
kept in the geological structure for many years should prove very 
helpful to future CO/2/ storage regulatory efforts.
    Finally, a transparent registry system should be created, with 
well-defined measurement protocols and verification requirements, to 
ensure proper accounting for greenhouse gas reductions created by 
geological storage and recognition of offset credits.
Public outreach
    Geological Storage of CO/2/ is increasingly recognized as 
a pragmatic way to address CO/2/ emissions. As Julio Friedmann 
and Thomas Homer-Dixon wrote in Foreign Affairs, ``the technology may 
be the only realistic way to satisfy the world's gargantuan energy 
needs while responsibly mitigating their side effects.''\2\ An 
effective public outreach and consultation process could be helpful to 
ensure public understanding and acceptance of geological storage as a 
viable means of CO/2/ sequestration. The technology needs to 
be communicated to the public in the context of GHG mitigation options, 
with clear explanations regarding why it is safe and viable over the 
long-term.
Current Status--Final Phase
    The initial technical research package was approved by the sponsors 
in November 2006 along with a first year budget of $2.9 million 
(Canadian). Research agreements are currently being reviewed, and the 
research providers will launch research as soon as the agreements are 
finalized.
Conclusion
    It is EnCana's hope that the experience at Weyburn will enable the 
start-up of a significant number of commercial-scale EOR-based 
CO/2/ geological storage projects, a win-win scenario for the 
economy and the environment. These projects would provide substantial 
environmental benefits by enabling the geological storage of 
significant quantities of CO/2/ that would otherwise be 
emitted to the atmosphere. Ramping up development of CO/2/-
based EOR projects would also increase oil recovery and hence improve 
energy security. Conventional methods in North America only recover 
approximately 30% of oil in place, leaving a tremendous resource in the 
ground for EOR.
    Although EnCana's activities have focused on EOR-based operations 
and not on other storage alternatives such as deep saline aquifers or 
coal bed methane, many of the operating practices so developed would be 
applicable to these other storage alternatives. Furthermore, the 
operating practices developed for Weyburn's geological environment 
would also be transferable to other sites with different geological 
characteristics. EOR projects currently represent the storage 
alternative that is the closest to being economic and with the right 
policy and regulatory framework, market signals and economic 
conditions, a number of projects could realistically be initiated.
    Finally, Weyburn, particularly the IEA Project, demonstrates the 
power of collaboration and partnerships between governments, 
researchers and industry to unlock value through technology. The 
research was valuable to EnCana as it helped the company to better 
understand its oil field and to innovate (e.g. CO/2/ 
monitoring by four-dimensional seismic survey). It provided the 
opportunity for a Canadian research centre to develop expertise and 
potentially become the world leader in CO/2/ geological 
storage monitoring and assessment. Finally, it has enabled government 
to advance their innovation, technology and sustainability agendas.
References
    1.  Wilson M. and Monea M., IEA GHG Weyburn CO/2/ 
monitoring & storage project--Summary report 2000-2004, 7th 
International Conference on Greenhouse Gas Control Technologies, 
Vancouver, Canada, Sept. 5-9, 2004.
    2.  Friedmann S. J. and Homer-Dixon T., Out of the Energy Box, 
Foreign Affairs, November/December 2004, pp 72-83.
                                 ______
                                 

    Response to questions submitted for the record by Judy Fairburn

 Question 1: In your testimony, you report that you inject 6,600 tons 
        of carbon dioxide per day, allowing you to produce over 30,000 
        bbls/day as opposed to the 13,000 bbls/day that would be 
        produced in the absence of the injection. That works out to 
        17,000 bbls/day due to the injection, or about 2.5 barrels for 
        every ton of carbon dioxide. Given that a barrel of oil 
        produces roughly 20 gallons of gasoline, and each gallon of 
        gasoline produces roughly 20 pounds of carbon dioxide, it 
        appears that just from the gasoline component of the newly 
        recovered oil, approximately 1.000 pounds of carbon dioxide are 
        being generated. This doesn't include jet fuel, diesel, 
        kerosene, or other fractions from the barrel. So, it is fair to 
        say that the sequestration of one ton of carbon dioxide for EOR 
        generates at least a half-ton of additional carbon dioxide that 
        would otherwise not be generated?
Answer:
    The carbon dioxide (CO/2/) being used for EOR in Weyburn 
will ultimately be stored, but would otherwise have been emitted to the 
atmosphere. Regardless of the product's end use, CO/2/
sequestration is an important means to help address the GHG challenge. 
Oil production is driven by consumer demand and at Weyburn we are able 
to meet a portion of this demand by producing oil in a less carbon 
intensive manner. Another consideration is that, through the coal 
gasification process, Dakota Gasification Company is converting coal to 
synthetic natural gas. When used as fuel, natural gas produces a little 
over Vi the CO/2/ emissions versus burning coal to produce the 
same amount of energy. In effect, DGC de-carbonizes coal and Weyburn 
closes the loop by disposing of the CO/2/ that is a by-product 
of this process.
 Question 2: How applicable is your Weyburn experience to other 
        potential sequestration sites? Is it only good for oil fields, 
        or are we learning things that will be important for any 
        potential reservoir?
Answer:
    Weyburn experience applies most directly to mature oil fields 
undergoing enhanced oil recovery using CO/2/ but the 
technology we have developed is easily extended to other geological 
storage applications. However, each potential site will be unique and 
so must be rigorously screened to ensure suitability. Research at 
Weyburn has created a foundation of understanding for potential future 
projects.
 Question 3: Do the monitoring technologies that you're working on work 
        equally well in different reservoir types?
Answer:
    Experience to date indicates that many of the techniques applied 
for oil recovery management are equally applicable to geological 
storage of CO/2/,. Examples would include geophysical methods 
such as: repeated three-dimensional seismic that allow for analysis of 
changes in CO/2/ migration pathways over time; and 
petrophysical measurements from well logging tools. Such monitoring can 
be very expensive, so a simpler method such as soil gas sampling is 
very useful. This method can detect C02 that may have escaped from the 
reservoir and migrated to surface. Overall, each potential storage site 
will be unique, and the monitoring techniques applicable wilt thus vary 
according.
 Question 4: In your testimony, you mention that carbon dioxide 
        movement in the reservoir was predicted, monitored and 
        verified. How good were the predictions? Do we need to do more 
        work in improving these predictions?
Answer:
    In a general sense, results have agreed with our predictions in 
terms of oil production response to COi injection. However, as is 
typical with any oil recovery scheme, these predictions were not 
perfect and we revise our forecasts periodically to account for 
observed data and an ever-improving understanding of the underground 
geology. This is common industry practice and the complexity of 
underground oil and gas reservoirs suggests that it is very unlikely 
that we will ever have perfect predictive capability. In terms of the 
efficacy of CO/2/ storage, Phase 1 of the IEA Weyburn GHG 
Storage and Monitoring Project determined that 99.8% of the 
CO/2/ would be safely stored underground in Weyburn for at 
least 5000 years, with a 95% confidence interval range of 0.005% to 
1.3% of initial COS in place. This is an extremely high retention rate; 
nevertheless, we are continuously looking for opportunities to improve. 
IEA Project first phase results suggested there were no insurmountable 
technical barriers to Carbon Storage, but identified some areas for 
refinement which are to be addressed in the Final Phase.
 Question 5: How much money and time do you believe is still needed to 
        develop the cost-effective protocols that you're working on?
Answer:
    The final phase of the IEA Weyburn GHG Storage and Monitoring 
Project will help to inform and influence the development of:
      Best practices manual for CO/2/ storage 
associated with EOR:
        firm protocols for site selection
        most effective underground monitoring methods
        most effective reservoir techniques for maximizing storage 
capacity & oil recovery,
        most cost effective & credible risk assessment methods & 
risk mitigation techniques to ensure integrity of the storage medium
      Clear workable regulations for COZ storage--building from 
existing regulations.
      An effective public policy and consultation process.
    Current estimates are that this final phase will cost $18-20 
million ($, Canadian) and take three years from commencement of the 
research.
 Question 6: Does the Canadian government attempt to answer the 
        ``pollutant versus commodity'' question for carbon dioxide 
        sequestration?
Answer:
    EnCana's understanding is that the Canadian government have not 
addressed this issue.
 Question 7: Will your ``final phase'' include any work on the non-
        technical next steps--the regulatory and public outreach areas?
Answer:
    As indicated in the answer to question 5, there wilt be work on the 
regulatory and public outreach areas. It is important to have clear 
workable regulations for CO/2/ storage--building from existing 
regulations, and an effective public policy and consultation process.
 Question 8: Of the $40 million that has been spent on the 
        International Energy Agency project, how much was paid for by 
        private entities and how much from the public sector? Do you 
        know what the Department of Energy's contribution to that was?
Answer:
    Of the $40 million that was spent during Phase 1 of the IEA 
project, approximately $26 million (65%) came from private industry, 
including EnCana, and $14 million (35%) was provided by the government 
sector.
    Of this $14 million, the U.S. Department of Energy contributed $5.4 
million, with the remaining balance of government funding, 
approximately $8.6 mm, coming from Canadian institutions.
    All figures are in Canadian Dollars.
                                 ______
                                 
    Mr. Costa. Thank you very much, Ms. Fairburn. I am sure 
there will be questions, and thank you for staying within the 
five-minute time allotted. Our next witness is Mr. Howard 
Herzog, Principal Research Engineer for the Laboratory for 
Energy and Environment from the Massachusetts Institute of 
Technology, a well respected institution.

   STATEMENT OF HOWARD HERZOG, PRINCIPAL RESEARCH ENGINEER, 
   LABORATORY FOR ENERGY AND THE ENVIRONMENT, MASSACHUSETTS 
                    INSTITUTE OF TECHNOLOGY

    Mr. Herzog. Thank you. Thank you, Mr. Chairman and members 
of the committee. Thank you for the opportunity to appear here 
before you today to speak about carbon dioxide geological 
sequestration. I have been involved with carbon dioxide capture 
and sequestration for over 18 years. I was coordinating lead 
author on the intergovernmental panel on climate change special 
report on carbon dioxide capture and storage and a coauthor of 
the just released MIT study on the future of coal. I am also a 
U.S. delegate to the Carbon Sequestration Leadership Forum.
    Just two weeks ago in the April 16 edition of Newsweek, 
there was a quote on climate change that caught my attention. 
It went like this. ``If we cannot get a handle on the coal 
problem, nothing else matters.'' Similar sentiments motivated 
my colleagues and I to undertake our ``Future of Coal Study.'' 
In that study, we conclude that CO/2/ capture and 
sequestration is the critical enabling technology that will 
reduce CO/2/ emissions significantly while also 
allowing coal to meet the world's pressing energy needs.
    We conclude that carbon sequestration is a critical 
component of the portfolio of climate change mitigation options 
but we also recognize that carbon sequestration is not a silver 
bullet. All components of a carbon sequestration are in 
commercial operation today. There are several power plants in 
the U.S. that have a slip stream process to produce carbon 
dioxide to sell to the commercial markets. For instance, 
carbonation of beverages.
    There exists over 2,000 miles of CO/2/ pipeline 
primarily in the western U.S. We inject tens of millions of 
tons of CO/2/ into the ground each year for enhanced 
oil recoveries at over 80 sites in the United States, and 
finally the monitoring tools used in the oil and gas 
exploration are directly applicable to geologic sequestration 
operations.
    The challenge ahead is to integrate these components and 
operate them at scale. This challenge should not be 
underestimated. It will take considerable effort and 
investment. The MIT coal study concludes that it is 
scientifically feasible to store large quantities of 
CO/2/ into geologic formations. However, it is urgent 
to undertake a number of large scale experimental projects in 
reservoirs that are instrumented, monitored and analyzed to 
verify the large scale implementation of sequestration.
    None of the current sequestration projects worldwide meet 
all of these criteria. These projects are offshoots of 
commercial projects with the science coming as an afterthought. 
We need sequestration demonstrations designed with scientific 
data collection as the primary goal to enable us to move to the 
large scale deployment phase.
    The MIT coal study makes five recommendations for 
geological sequestration. First, the DOE should launch a 
program to develop and deploy large scale sequestration 
demonstration projects. The program should consist of a minimum 
of three projects that will represent the range of U.S. 
geology. Second, the U.S. Geological Survey and the Department 
of Energy should embark on a three-year bottom up analysis of 
U.S. geological storage capacity assessments.
    Three, the DOE should accelerate its research program for 
carbon sequestration, science and technology. Four, a 
regulatory capacity needs to be built. And five, the government 
needs to assume the liability for the sequestered 
CO/2/ once injection operations cease and the site is 
closed.
    Because of the long lead times associated with developing 
energy technologies, there is some urgency to start moving the 
sequestrations demonstrations forward as quickly as possible. 
If we start on a well funded and well constructed demonstration 
phase today, within 10 years we could then start commercial 
deployment. In other words, we need to start planting seeds 
immediately because of the long lead time required to bear the 
first fruit.
    Unfortunately, the situation today regarding proposed 
sequestration demonstration projects in the U.S. are that they 
are underfunded; they do not meet all the criteria I outlined 
above. Instead the proposed projects are being driven to inject 
CO/2/ into the ground as soon as possible. We do not 
need to demonstrate that we can inject CO/2/ into the 
ground. We are already doing that. Instead we need 
demonstrations with full monitoring, integrated where possible, 
to lay the groundwork for large scale deployment.
    In summary, I would like to end with the central message of 
the MIT coal study. The demonstration of technical, economic 
and institutional features of carbon capture and sequestration 
at commercial scale coal combustion and conversion plants will: 
One, give policymakers and the public confidence that a 
practical carbon mitigation control option exists; two, shorten 
the deployment time and reduce the costs for carbon capture and 
sequestration should a carbon emission policy be adopted; and 
three, maintain opportunities for the lowest cost and most 
widely available energy forum to be used to meet the world's 
pressing energy needs in an environmentally acceptable manner. 
Thank you, and I look forward to your questions during the 
question period.
    [The prepared statement of Mr. Herzog follows:]

Statement of Howard Herzog, Principal Research Engineer, Massachusetts 
   Institute of Technology Laboratory for Energy and the Environment

    Mr. Chairman and members of the committee, thank you for the 
opportunity to appear before you today to discuss Carbon Dioxide 
(CO/2/) geological sequestration. I have been involved with 
CO/2/ capture and sequestration (CCS) for over 18 years. I 
started my first research project in CCS in 1989. In 1992-93, under 
Department of Energy (DOE) funding, I led a 2-year effort that produced 
the first comprehensive research needs assessment in the field (see 
DOE/ER-30194). More recently, I was a coordinating lead author on the 
Intergovernmental Panel on Climate Change (IPCC) Special Report on 
Carbon Dioxide Capture and Storage (see www.ipcc.ch), as well as one of 
13 co-authors on the just released MIT report on The Future of Coal 
(see www.mit.edu/coal). I am also a U.S. delegate to the Technical 
Group of the Carbon Sequestration Leadership Forum (see 
www.cslforum.org).
    Just two weeks ago in the April 16 issue of Newsweek, this quote 
referring to climate change caught my attention: ``If we cannot get a 
handle on the coal problem, nothing else matters.'' Similar sentiments 
motivated me and my colleagues at MIT to undertake our ``Future of Coal 
Study''. In that study, ``we conclude that CO/2/ capture and 
sequestration (CCS) is the critical enabling technology that would 
reduce CO/2/ emissions significantly while also allowing coal 
to meet the world's pressing energy needs.'' While we conclude that CCS 
is a critical component of a portfolio of climate change mitigation 
options, we also recognize that CCS is not a silver bullet.
    CCS has four major technical components in its life-cycle. First 
there is the capture of CO/2/ at a large industrial source, 
such as a coal-fired power plant. By capture, it is meant isolating the 
CO/2/ in relatively pure form (>90% by vol and typically >99%) 
and at high pressure (typically in the 1500-2500 psia range). Secondly, 
the CO/2/ is transported from the capture site to the 
sequestration site, primarily by pipeline. Note that in many cases, the 
CO/2/ capture site may be sitting on top of a sequestration 
site, so transport could be very minimal. Thirdly, the CO/2/ 
is injected into the geological reservoir (usually at depths greater 
than 800 m). Finally, the injected CO/2/ is monitored in the 
subsurface via a variety of techniques.
    The cost of a CCS system has been estimated to add about 25% to the 
delivered price of electricity to the consumer. This price assumes that 
CCS systems are mature and operating at scale. Costs to first movers 
will be more. The majority of the costs are associated with the capture 
of CO/2/. Over time, it is expected that costs will decrease 
as technological advances occur.
    All components of a CCS system are in commercial operation today. 
There are several power plants in the U.S. that capture CO/2/ 
from a slip stream to sell into the commercial markets, such as 
carbonation of beverages. There exists over 2000 miles of 
CO/2/ pipelines in the western US. We inject tens of millions 
of tons of CO/2/ each year for Enhanced Oil Recovery at over 
80 sites in the US. Finally, the monitoring tools used in oil and gas 
exploration are directly applicable to CCS operations.
    What are lacking today are the demonstration of CCS as an 
integrated system and the demonstration of sequestration at scale in a 
variety of relevant geologies. The issue of scale is a critical point 
and the task ahead should not be underestimated. It will take 
considerable effort and investment. It should be noted that the world's 
current large sequestration projects operating today are all offshoots 
of commercial projects, with the science coming as an afterthought. We 
need sequestration demonstrations designed with scientific data 
collection as a primary goal to enable us to move on to the large-scale 
deployment phase.
    For geological sequestration, the MIT Coal Study finds:
    Current evidence indicates that it is scientifically feasible to 
store large quantities of CO/2/ in saline aquifers. In order 
to address outstanding technical issues that need to be resolved to 
confirm CCS as a major mitigation option, and to establish public 
confidence that large scale sequestration is practical and safe, it is 
urgent to undertake a number of large scale (on the order of 1 million 
tonnes/year injection) experimental projects in reservoirs that are 
instrumented, monitored, and analyzed to verify the practical 
reliability and implementation of sequestration. None of the current 
sequestration projects worldwide meets all of these criteria.
    The MIT Coal study makes five specific recommendations for 
sequestration:
    1.  The DOE should launch a program to develop and deploy large-
scale sequestration demonstration projects. The program should consist 
of a minimum of three projects that would represent the range of U.S. 
geology.
    2.  The U.S. Geological Survey and the DOE should embark on a 3 
year ``bottom-up'' analysis of U.S. geological storage capacity 
assessments.
    3.  The DOE should accelerate its research program for CCS Science 
& Technology.
    4.  A regulatory capacity covering the injection of CO/2/, 
accounting and crediting as part of a climate regime, and site closure 
and monitoring needs to be built.
    5.  The government needs to assume liability for the sequestered 
CO/2/ once injection operations cease and the site is closed.
    There is some urgency to start moving the sequestration 
demonstrations forward as quickly as possible. The urgency is related 
to the long lead times associated with developing energy technology. If 
we started on a well-funded and well-constructed demonstration phase 
today, within ten years we could then start deployment with commercial 
CCS plants going on-line. In other words, we need to start planting 
seeds immediately because of the long lead time required to bear the 
first fruit.
    Unfortunately, the situation today regarding sequestration 
demonstration projects are that they are underfunded and do not meet 
the criteria I outlined above. Instead, the proposed projects are being 
driven to inject CO/2/ into the ground as soon as possible. We 
do not need to demonstrate we can inject CO/2/ into the 
ground--we are already doing that. Instead, we need demonstrations with 
full monitoring, integrated where possible, to lay the groundwork for 
large-scale deployment.
    In summary, I would like to end with the central message of the MIT 
Coal Study:
    The demonstration of technical, economic, and institutional 
features of carbon capture and sequestration at commercial scale coal 
combustion and conversion plants, will (1) give policymakers and the 
public confidence that a practical carbon mitigation control option 
exists, (2) shorten the deployment time and reduce the cost for carbon 
capture and sequestration should a carbon emission control policy be 
adopted, and (3) maintain opportunities for the lowest cost and most 
widely available energy form to be used to meet the world's pressing 
energy needs in an environmentally acceptable manner.
    For more details on these topics, please see the MIT Coal Study at 
www.mit.edu/coal. Chapter 4 deals with the topic of geological 
sequestration. Below are the introduction and recommendations of that 
chapter.
Introduction:
    Carbon sequestration is the long term isolation of carbon dioxide 
from the atmosphere through physical, chemical, biological, or 
engineered processes. The largest potential reservoirs for storing 
carbon are the deep oceans and geological reservoirs in the earth's 
upper crust. This chapter focuses on geological sequestration because 
it appears to be the most promising large-scale approach for the 2050 
timeframe. It does not discuss ocean or terrestrial sequestration.
    In order to achieve substantial GHG reductions, geological storage 
needs to be deployed at a large scale. For example, 1 Gt C/yr (3.6 Gt 
CO/2/yr) abatement, requires carbon capture and storage (CCS) 
from 600 large pulverized coal plants (1000 MW each) or 3600 injection 
projects at the scale of Statoil's Sleipner project. At present, global 
carbon emissions from coal approximate 2.5 Gt C. However, given 
reasonable economic and demand growth projections in a business-as-
usual context, global coal emissions could account for 9 Gt C by 2050. 
These volumes highlight the need to develop rapidly an understanding of 
typical crustal response to such large projects, and the magnitude of 
the effort prompts certain concerns regarding implementation, 
efficiency, and risk of the enterprise.
    The key questions of subsurface engineering and surface safety 
associated with carbon sequestration are:
Subsurface issues:
      Is there enough capacity to store CO/2/ where 
needed?
      Do we understand storage mechanisms well enough?
      Could we establish a process to certify injection sites 
with our current level of understanding?
      Once injected, can we monitor and verify the movement of 
subsurface CO/2/?
Near surface issues:
      How might the siting of new coal plants be influenced by 
the distribution of storage sites?
      What is the probability of CO/2/ escaping from 
injection sites? What are the attendant risks? Can we detect leakage if 
it occurs?
      Will surface leakage negate or reduce the benefits of 
CCS?
    Importantly, there do not appear to be unresolvable open technical 
issues underlying these questions. Of equal importance, the hurdles to 
answering these technical questions well appear manageable and 
surmountable. As such, it appears that geological carbon sequestration 
is likely to be safe, effective, and competitive with many other 
options on an economic basis. This chapter explains the technical basis 
for these statements, and makes recommendations about ways of achieving 
early resolution of these broad concerns.
Recommendations:
    Our overall judgment is that the prospect for geological 
CO/2/ sequestration is excellent. We base this judgment on 30 
years of injection experience and the ability of the earth's crust to 
trap CO/2/. That said, there remain substantial open issues 
about large-scale deployment of carbon sequestration. Our 
recommendations aim to address the largest and most important of these 
issues. Our recommendations call for action by the U.S. government; 
however, many of these recommendations are appropriate for OECD and 
developing nations who anticipate the use CCS.
    1.  The U.S. Geological Survey and the DOE, and should embark of a 
3 year ``bottom-up'' analysis of U.S. geological storage capacity 
assessments. This effort might be modeled after the GEODISC effort in 
Australia.
    2.  The DOE should launch a program to develop and deploy large-
scale sequestration demonstration projects. The program should consist 
of a minimum of three projects that would represent the range of U.S. 
geology and industrial emissions with the following characteristics:
           Injection of the order of 1 million tons 
        CO/2/year for a minimum of 5 years.
           Intensive site characterization with forward 
        simulation, and baseline monitoring
           Monitoring MMV arrays to measure the full complement 
        of relevant parameters. The data from this monitoring should be 
        fully integrated and analyzed.
    3.  The DOE should accelerate its research program for CCS S&T. The 
program should begin by developing simulation platforms capable of 
rendering coupled models for hydrodynamic, geological, geochemical, and 
geomechanical processes. The geomechanical response to CO/2/ 
injection and determination or risk probability-density functions 
should also be addressed.
    4.  A regulatory capacity covering the injection of CO/2/, 
accounting and crediting as part of a climate regime, and site closure 
and monitoring needs to be built. Two possible paths should be 
considered--evolution from the existing EPA UIC program or a separate 
program that covers all the regulatory aspects of CO/2/ 
sequestration.
    5.  The government needs to assume liability for the sequestered 
CO/2/ once injection operations cease and the site is closed. 
The transfer of liability would be contingent on the site meeting a set 
of regulatory criteria (see recommendation 4 above) and the operators 
paying into an insurance pool to cover potential damages from any 
future CO/2/ leakage.
                                 ______
                                 
    Mr. Costa. Thank you very much, Mr. Herzog. Two witnesses 
in a row under five minutes. We have a streak going here. Our 
next witness, Mr. Vello Kuuskraa, did I pronounce that name 
correctly? Kuuskraa. Thank you very much, Mr. Kuuskraa. You are 
President of Advanced Resources, and we look forward to your 
testimony.

            STATEMENT OF VELLO KUUSKRAA, PRESIDENT, 
                       ADVANCED RESOURCES

    Mr. Kuuskraa. Good afternoon. In addition to being 
President of Advanced Resources, I also serve on the board of 
directors of Southwestern Energy which is an oil and gas and 
utility company, and we began to address many of these 
questions. I am very pleased to address this joint 
subcommittee. My topic is how to productively begin to use and 
reuse our industrial and power plant CO/2/ emissions 
for increasing domestic oil recovery.
    Our nation's oil basins are mature and declined. In the 
past 20 years, domestic oil production has dropped by three 
million barrels a day while consumption has continued to 
increase. As a result, imports now provide over 60 percent of 
the oil we use with serious implications for our domestic 
energy security.
    However, we still have nearly 400 billion barrels of oil 
left behind. This is because of our current production methods 
recover only about one-third of the original oil in place from 
domestic oil fields. Accelerated application of CO/2/ 
enhanced oil recovery and particularly what I call next 
generation technology would enable industry to recover a much 
larger portion of this left behind oil.
    As already noted, CO/2/ enhanced oil recovery is 
already underway, though to a limited extent, in west Texas and 
New Mexico, along the gulf coast of Louisiana and Mississippi, 
and in the Rockies. However, many barriers still stand in the 
way. One of the most significant of these barriers is the lack 
of sufficient, affordable, and what I call EOR ready 
CO/2/. At the same time, we emit to the atmosphere 
significant volumes of CO/2/ from our industrial and 
electric power plants.
    Capturing and productively using a portion of these 
emissions in domestic oil fields would have two important 
benefits. First, it would enable industry to recover over 50 
billion barrels of additional domestic oil, enough for two to 
three million barrels a day of the oil production. This is 
equal to all of the oil we currently import from the Middle 
East. With next generation technology, these oil volumes would 
be appreciably higher.
    Second, it would provide a secure geological setting for 
storing 8 to 12 billion tons of industrial and power plant 
CO/2/. This is enough storage capacity for all of the 
CO/2/ emissions from 80 to 120 large 500 megawatt 
coal-fired power plants. Next generation technology would also 
increase the capacity of our reservoirs to store the 
CO/2/.
    The above information on domestic oil recovery and 
productive use of CO/2/ is available in a series of 10 
basin studies and other reports prepared by our company and the 
Department of Energy in response to previous Congressional 
budget language. In summary, three Congressional actions would 
be of great benefit in my view. First, to provide incentives 
for capturing and productively using industrial and power plant 
CO/2/ emissions for enhanced oil recovery, such as a 
tax credit of $15 per metric ton. This would enable and 
encourage power plant operators to engage the oil industry as a 
value-added customer for their CO/2/.
    Second, establish a new research and technology institute 
for building next generation CO/2/ EOR technology. 
This would greatly expand the size of the market for 
CO/2/ for the power sector as well as further 
increased domestic oil production. Third, support a large 
number, 30 or so, of commercial sized demonstrations of 
CO/2/ capture and storage. This would help drive down 
the costs of CO/2/ capture and build confidence in 
CO/2/ storage.
    Expansion of efforts such as those in Senate Bill 962 would 
be an important step in this direction. Thank you very much.
    [The prepared statement of Mr. Kuuskraa follows:]

              Statement of Vello A. Kuuskraa, President, 
                    Advanced Resources International

    Good Afternoon. I am pleased to address the House Subcommittee on 
Energy and Resources on the topic of productivity using industrial and 
power plant CO/2/ emissions for increasing domestic oil 
production.
    Our nation's oil basins are mature and in decline. In the past 20 
years, domestic oil production has dropped by 3 million barrels per day 
while demand for oil has continued to grow. As a result, imports now 
provide over 60% of the oil we use, with serious implications for 
energy security.
    However, we still have nearly 400 billion barrels of oil left 
behind or ``stranded'', Figure 1. This is because our existing primary 
and secondary oil recovery methods recover only about one-third of the 
original oil in-place from domestic oil fields, Figure 1. Accelerated 
application of CO/2/-enhanced oil recovery (CO/2/-
EOR) technology, particularly ``next generation'' CO/2/-EOR 
technology, would enable industry to recover a large portion of this 
left behind (stranded) domestic oil.
    CO/2/-enhanced oil recovery is underway (to a limited 
extent) in the Permian Basin of West Texas and New Mexico, along the 
Gulf Coast in Louisiana and Mississippi and in the Rockies in Colorado, 
Utah and Wyoming, Figure 2. However many barriers stand in the way. One 
of the most significant of these barriers is the lack of sufficient, 
affordable ``EOR-ready'' supplies of CO/2/.
    At the same time, the nation emits to the atmosphere significant 
volumes of CO/2/ from its industrial and electric power 
plants. Capturing and productively using a portion of these large 
CO/2/ emissions in domestic oil fields would have two 
important benefits:
      It would enable industry to recover 40 billion barrels of 
additional domestic oil, enough to support two to three million barrels 
per day of domestic oil production, equal to all of the oil we 
currently import from the Middle East. With ``next generation'' 
CO/2/-EOR technology, these oil volumes would be appreciably 
higher.
      It would provide a safe, secure geological setting for 
storing 8 to12 billion tons of industrial and power plant 
CO/2/. This would provide productive use and eventual storage 
of all of the CO/2/ emissions from 80 to 120 large (500 MW) 
coal-fired power plants for the next 35 years.
    The information on the potential for domestic oil recovery and 
productive use of CO/2/ is based on a series of ten ``basin 
studies'' prepared by our company and the Department of Energy in 
response to previous Congressional Budget language, Figure 3. Three 
Congressional actions would greatly help realize these important and 
complementary objectives:
    1.  First, provide incentives for capturing and using industrial 
and power plant emissions for CO/2/-EOR, such as a tax-credit 
of $15 per metric ton. This would encourage industrial and power plant 
operators to engage the oil industry as a ``value-added'' market for 
CO/2/.
    2.  Second, establish a new research and technology institute for 
building ``next generation'' CO/2/-EOR technology. This would 
greatly expand the size of the market for CO/2/ emissions for 
the power and other coal-using sectors.
    3.  Third, support a large number of commercial-size demonstrations 
of CO/2/ capture and storage. This would enable the costs of 
CO/2/ capture to be reduced significantly, further expanding 
the market for productive use of CO/2/ and would help build 
confidence in CO/2/ storage.
    I urge you to support this three-part initiative, a ``win-win'' 
situation for U.S. industry and consumers, Figure 4.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Response to questions submitted for the record by Vello Kuuskraa

1.  Could you provide additional detail about what you mean by ``next 
        generation'' enhanced oil recovery technology, in addition to 
        what you testified at the hearing? Are there specific 
        technologies that are being developed for this next-generation 
        EOR, and could you describe them?
    ``Next generation'' CO/2/-EOR is the integrated 
application of a series of scientifically established but not yet 
proven (in field applications) oil recovery technologies. These 
technologies would enable the CO/2/-EOR process to become much 
more efficient and predictable. These technologies include:
      Advanced well drilling designs (e.g., maximum reservoir 
contact wells) and CO/2/ injection designs (e.g., gravity 
stable CO/2/-EOR) that would enable the injection 
CO/2/ to contact much more of the ``left behind'', residual 
oil in the reservoir (Figure 1 illustrates one such ``next generation'' 
CO/2/ injection design);
      New CO/2/ mobility control and miscibility 
enhancement materials and processes;
      Much larger CO/2/ injection volumes, combined 
with more efficient use of the injected CO/2/; and
      A series of real-time information and feedback systems 
(e.g., permanent downhole seismic arrays and ``smart wells'') that 
would enable the CO/2/-EOR operator to ``steer and control,'' 
not just operate, the CO/2/-flood.
    The two key benefits of ``next generation'' CO/2/-EOR 
technology--doubling oil recovery shown efficiency and nearly tripling 
the CO/2/ storage capacity of domestic oil fields--are shown 
on Figure 2. This figure also provides the web site for the report on 
``next generation'' CO/2/-EOR technology prepared by my firm, 
Advanced Resources International, for the U.S. Department of Energy.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

   One of my top priority recommendations is that Congress 
establish a new research and technology institute for CO/2/-
EOR technology (as set forth in my testimony):
        ``Second, establish a new research and technology institute for 
        building `next generation' CO/2/-EOR technology. This 
        would greatly expand the size of the market for CO/2/ 
        emissions for the power sector, as well as further increase 
        domestic oil production.''
    A complementary goal for the institute would be to integrate ``next 
generation'' technology with CO/2/ sequestration.
    Such an institute is essential because a serious market 
imperfection exists in the enhanced oil recovery R&D market place 
V, precluding higher oil prices (on their own) from assuring 
the timely development and use of ``next generation'' EOR technology.
---------------------------------------------------------------------------
    \\ The recently issued CBO Paper entitled ``Evaluating the Role of 
Prices and R&D in Reducing Carbon Dioxide Emissions'' (September 2006), 
recognizes and further elaborates on this market imperfection.
---------------------------------------------------------------------------
    As the major oil companies have exited onshore domestic oil 
production, this sector has increasingly become dominated by a host of 
smaller independent producers. None of these independent producers 
control a large enough portion of the onshore oil resource to justify 
incurring, on their own, the high costs of developing this ``next 
generation'' know-how and technology. (Historically, in this sector, 
patents have not been able to sufficiently protect a company's 
investment in new technology.)
    As important, our domestic oil fields are mature, with many of 
these fields near abandonment. As such, time is of the essence because, 
once abandoned, re-entering these fields with CO/2/-EOR 
becomes much more costly, if not prohibitive.
    One specific way to establish this institute would be for Congress 
to add ``Integrated CO/2/-EOR and CO/2/ Storage 
Technology'' to Sec. 999 of the Energy Policy Act (EPAct) of 2005, and 
authorize and appropriate $100,000,000 per year of funding to this 
activity for years 2007 through 2016. These funds would be from Federal 
royalties, rents and bonuses derived from Federal onshore and offshore 
oil and gas leases issued under the OCS Land Act and the Mineral 
Leasing Act.
    In Subtitle J of EPAct, Sec. 999H(e) Authorization of 
Appropriations provides room for an additional $100,000,000 to be 
appropriated to carry out this section for each of the Fiscal Years 
2007 through 2016.
    Given that a non-profit organization called RPSEA (Research 
Partnership to Secure Energy for America) has already been formed and 
authorized by the Secretary of Energy to carry out two technology 
topics set forth in Sec. 999--ultra deepwater and unconventional 
natural gas--adding CO/2/-EOR/CO/2/ sequestration 
(which is already noted in Sec. 999(a) (other petroleum resources, 
sequestration of carbon) could be relatively straightforward and be 
quick to get started.
2.  Do you have any estimates of what the costs would be for a 15 
        dollar per metric ton tax credit for carbon capture and 
        sequestration for EOR?
    My estimate is that the costs of the $15 per metric ton of 
CO/2/ tax credit for productively using industrial and power 
plant CO/2/ for EOR would be $80 million for the next five 
years and about $800 million for the next ten years. This estimate is 
based on the following data and assumptions:
      Oil production volumes are from Figure 3 of my testimony. 
Half of the incremental oil volumes attributed to the CO/2/ 
Sequestration and Tax Credits wedge of oil production (on Figure 3) 
would result from the $15 per metric ton of CO/2/ tax credit. 
The other half of the incremental oil would be due to proposed 
revisions to existing Sec. 43 EOR tax credits to provide a floor oil 
price for CO/2/-EOR to mitigate price risk (as discussed in 
previous House testimony.)
      The volumes of oil production in the Base Case (on Figure 
3) are assumed not to be eligible for tax credits. Since no Federal or 
state programs currently exist for Accelerated Research, Technology 
Development and Field Demonstration (see Figure 3) these oil volumes 
are also not included.
      Finally, based on our work in the ten ``basin studies'', 
we use a factor of 0.25 metric tons of purchased CO/2/ (about 
5 Mcf) to produce one barrel of incremental oil.

Fig ure 3. Projected Domestic Oil Production from Accelerated 
        Development of CO/2/-EOR Technology and Integration 
        with CO/2/ Sequestration

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    The benefits of providing this incentive are significant 
(assuming an oil price of $50 per barrel): (1) additional domestic oil 
production of 215 million barrels (reaching 160,000 barrels per day) in 
10 years; (2) improvement in the trade balance of nearly $11 billion; 
(3) additional state oil severance tax revenues of about $600 million 
and additional state and Federal royalty revenues of about $700 
million. (These revenues could be used to fund the new ``research and 
development'' institute for building ``next generation'' 
CO/2/-EOR technology.); and, (4) a significant number of new 
high value, high paying domestic jobs.
3.  Do you believe that such a tax credit should be specific for EOR? 
        Or should it be for any capture and storage of carbon dioxide? 
        Since the recovered oil has value, should any tax credit be 
        scaled to reflect the higher costs for non-EOR storage?
    Please note that I limited my testimony to the topic of 
productively using industrial and power plant CO/2/ emissions 
for CO/2/-EOR. Clearly, capturing and non-EOR storage of 
CO/2/ (in settings such as deep saline formations) is more 
costly. Under today's technology, the cost of CO/2/ capture 
and storage from a coal-fired electric power plant is $35 to $40 per 
metric ton of CO/2/, with CO/2/ capture being the 
dominant cost.
    At this time, the most productive step in my view is to initiate a 
series of actions that could cut the cost of CO/2/ capture by 
half, as set forth in my testimony:
        Third, support a large number, 30 or so, of commercial-size 
        demonstrations of CO/2/ capture and storage. This 
        would help drive down the costs of CO/2/ capture and 
        build confidence in CO/2/ storage. Expansion of 
        efforts, such as those in Senate Bill 962, would be an 
        important step in this direction.
    To gain the full scope of benefits, this demonstration program 
would need to be underlain by a robust and growing program of research 
and development.
    While implementing this recommendation would cost on the order of 
$25 to $30 billion ($2.5 billion per year for the next 12 years), if 
successful, it would save the domestic industry and consumers about 
$200 billion should full-scale implementation of CO/2/ capture 
and storage be required for the 250 or so new coal-fired power plants 
(with 1,000 MW of capacity) expected to be installed by 2050.
4.  In Ms. Fairburn's testimony, she reports that EnCana injects 6,600 
        tons of carbon dioxide per day, allowing them to produce over 
        30,000 bbls day as opposed to the 13,000 bbls day that would be 
        produced in the absence of the injection. That works out to 
        17,000 bbls day due to the injection, or about 2.5 barrels for 
        every ton of carbon dioxide. Given that a barrel of oil 
        produces roughly 20 gallons of gasoline, and each gallon of 
        gasoline produces roughly 20 pounds of carbon dioxide, it 
        appears that just from the gasoline component of the newly 
        recovered oil, approximately 1,000 pounds of carbon dioxide are 
        being generated. This doesn't include jet fuel, diesel, 
        kerosene, or other fractions from the barrel. So, given that 
        the sequestration of one ton of carbon dioxide for EOR 
        generates at least a half-ton of additional carbon dioxide that 
        would otherwise not be generated, should we scale incentives 
        for EOR to reflect the total lifecycle climate impact of the 
        technology?
    Most likely, the same volume of gasoline (or diesel) will be 
consumed by the domestic transportation sector, whether that gasoline 
(or diesel) is produced domestically with CO/2/-EOR, is 
imported as crude oil or product, or is produced by coal to liquids.
    The benefit of obtaining this transportation fuel from domestic use 
of CO/2/-EOR is that, as set forth in the above example, as 
much (or more) CO/2/ is put into the ground (and sequestered) 
as is contained in the produced oil. As such, the oil produced by 
CO/2/-EOR would be carbon neutral or ``green oil''. However, 
should this oil be imported, it would not be carbon neutral, and if 
produced by coal-to-liquids, it would be even more carbon intensive.
    Given these choices and the value of energy security, the 
incentives for CO/2/-EOR should not be scaled back. Rather, 
they could be further strengthened to give more preference to producing 
domestic ``green oil'', particularly with ``next generation'' 
CO/2/-EOR technology.
                                 ______
                                 
    Mr. Costa. Thank you very much, Mr. Kuuskraa, and you too 
have stayed within the five-minute rule. So we have a real 
streak going here, and thank you for your succinct testimony as 
well. It will encourage some questions. Our next witness, Dr. 
William Schlesinger, who is the Dean of the Nicholas School 
from Duke University, otherwise known as Chairman Rahall's alma 
mater, is that correct?
    Mr. Rahall. That is correct.
    Mr. Costa. That is correct. I knew there was a reason we 
had a good Duke Dean here.

STATEMENT OF WILLIAM SCHLESINGER, DEAN OF THE NICHOLAS SCHOOL, 
                        DUKE UNIVERSITY

    Mr. Schlesinger. Well I am glad to be here. I have spent 
the last 30 years or so studying various aspects of the carbon 
cycle of the planet, particularly forests and soils in both 
forests and agricultural situations, and today, of course, we 
are here to talk about carbon sequestration, and I think the 
thing that everybody needs to realize is that trees do a 
remarkable service for us. Like all plants, every year all the 
time, they take carbon dioxide out of the atmosphere in 
photosynthesis and fix it into tissues such as wood which is 
close to 50 percent carbon by weight, and that is one form of 
carbon sequestration that has gone on for long periods of time.
    Now, of course, not all plant parts live forever. Some of 
them are leaves and roots and bark and parts that fall off, 
fall to the ground, and when they hit the ground, they are 
subject to the action of bacteria and fungi and some portion of 
that, usually a large fraction, decomposes and puts the carbon 
dioxide or the carbon in those tissues back to the atmosphere 
as carbon dioxide.
    But a small amount typically can escape decomposition and 
store carbon in the soil, and that is another form of carbon 
sequestration. So we can look to the land surface and say that 
trees and wood in trees and soil carbon, humus as we might call 
it in a garden, might be good places to store carbon. I also 
want to mention that a lot of this pertains to some of the 
questions we had at the end of the previous session here.
    The uptake of carbon by trees and the release of carbon in 
decomposition that is part of the natural carbon cycle, and the 
same occurs on the surface of the ocean. The ocean takes up 
carbon. The ocean gives off carbon. These are huge amounts of 
carbon. But they have been balanced through geologic time. And 
it really was not until the industrial revolution came on 
strong and humans began to dig into the crust of the earth for 
coal and oil and natural gas and burn it, bring it to the 
surface and burn it, that we had an emission of carbon dioxide 
in the atmosphere that had no natural balance.
    And what we are talking about here today with carbon 
sequestration is to try to produce some process by which we can 
get carbon dioxide out of the atmosphere to balance what we are 
mining out of the surface. And so it is the perturbation of the 
carbon cycle not these large natural backgrounds that really 
makes the difference.
    I want to talk about sequestration today in two units. When 
we talk about an individual forest or individual soil, we will 
use grams of carbon per square meter per year, and for a little 
comparison, a graphite pencil lead in a new pencil has about a 
gram of carbon in it. So when I talk about a gram of carbon per 
square meter per year storage in soils or wood, think of each 
gram as being equivalent of a pencil.
    When we talk about the whole country, I prefer to use the 
word teragrams, Tg, grams of carbon. That is a million metric 
tons of carbon, and right now the U.S. emits about 1,600 Tg of 
carbon to the atmosphere every year in our burning of fossil 
fuels, and so when we think about carbon sequestration in trees 
and soils, we need to compare it to the emission of as much as 
1,600 Tg of carbon to the atmosphere. That is our basis of 
comparison.
    Now there is no doubt that young and growing forests take 
up carbon. We can see they get bigger from one year to the 
next, and a lot of that increase in size is in wood, and the 
wood is 50 percent carbon, and a landscape that is a mix of old 
and young trees typically takes up about 300 grams of carbon 
per square meter per year. That is a good kind of round number.
    If you envision planting young forests to take up 10 
percent of the nation's carbon dioxide emissions at that rate--
sort of take the typical rate--you would need an area roughly 
the size of the State of Texas. That gives you an indication of 
the magnitude of the carbon that we need to deal with--a 
reduction of 10 percent of our emissions by planting new forest 
where forest does not currently exist in an area the size of 
the State of Texas.
    Now why do I stress young and often planted forests? 
Eventually a forest matures, and at that time which we call 
steady state, there is really no further net uptake of carbon. 
Growth matches death at that point. Now sure there are still 
some trees growing in an old forest but others are dying. So if 
you look at an acre, there is no net increase in carbon. And so 
it is really only in young forests that we can expect a 
substantial increase in carbon sequestration, in other words 
removal of carbon dioxide from the atmosphere.
    We heard several comments earlier about the temptation to 
cut down old mature forests in which we would not expect much 
carbon sequestration to be going on and replace them with young 
forests, and I want to stress today I think that would be a 
huge mistake. When an old forest is cut, much of the carbon 
that it contains and that it has accumulated over many years is 
released to the atmosphere, and the net carbon sequestration 
that would count and make a difference in reducing atmospheric 
carbon dioxide levels will be the difference between the uptake 
in planted forests versus the release from a cut down forest, 
and so when we look at forests, we want to think about the 
value of the storage in old growth forests as they stand before 
us.
    It is really only the planting of forests where forests do 
not currently exist, either reforestation or afforestation, 
that will produce a net uptake of carbon. I can see the red 
light was on. My previous colleagues quit early. I better stop 
at this point.
    [The prepared statement of Mr. Schlesinger follows:]

   Statement of William H. Schlesinger, Dean of the Nicholas School 
         of the Environment and Earth Sciences, Duke University

    Good afternoon. I am William Schlesinger, currently Dean of the 
Nicholas School of the Environment and Earth Sciences at Duke 
University. (N.B. in late May, I will become President of the Institute 
of Ecosystem Studies in Millbrook, N.Y.) I have spent the past 30 years 
conducting scientific investigations of the global carbon cycle, 
especially on the carbon content of trees and soils and how they may 
affect the content of carbon dioxide (CO/2/) in Earth's 
atmosphere.
    We are here today to talk about carbon sequestration. Trees, like 
all plants, take carbon dioxide from the atmosphere in the process of 
photosynthesis, and they store some of what they take up in wood, which 
is about 50% carbon by weight. Carbon storage in trees is one form of 
carbon sequestration.
    Some of the carbon that trees take up is allocated to leaves, small 
branches and fine roots that do not live for long. When these plant 
parts die and fall to the ground, they decompose, returning carbon 
dioxide to the atmosphere. If any of these materials escapes 
decomposition, it accumulates in the soil as soil organic matter or 
humus. That storage is another form of carbon sequestration.
    Today, I will refer to carbon sequestration using units of grams of 
carbon-per-square-meter-per-year (gC/m2/yr) for individual 
forests or soils. For comparison, a graphite pencil lead contains about 
1 gram of carbon. In contrast, when we talk about the annual rate of 
storage of carbon in trees and soils for the entire United States, we 
will use units of teragrams (TgC/yr). This is equivalent to a million 
metric tons.
    Each year the U.S. emits more than 1600 TgC to the atmosphere as 
carbon dioxide by burning coal, oil and natural gas. This is a huge 
mass. For perspective, a long train of coal--100 rail cars of 100 tons 
each, carries 1/100th of a teragram of carbon, which is converted to 
carbon dioxide and added to the atmosphere when it is burned.
    The potential for carbon sequestration in forests and agricultural 
soils must be measured against our nation's annual emissions of 1600 
TgC/yr.
    Young growing forests can accumulate more than 500 gC/
m2yr,disturbed sites stores much less (Clark et al. 2004). 
In the southeastern U.S., where young pine plantations cover large 
areas of the coastal plain, average carbon accumulation is 100 g/
m2/yr (Binford et al. 2006). To accumulate 10% of the 
nation's emissions of carbon dioxide in wood, it would take an area of 
planted forests about the size of the state of Texas. No small order.
    Why do I refer to young, planted forests? Because eventually all 
forests mature to what is known as a steady-state, where growth matches 
death, and there is no further sequestration of carbon. Even then, some 
trees in the forest are growing, but others are dying and the total 
biomass per acre does not show an increase in carbon content. Only in 
young forests can we expect significant carbon sequestration.
    It is tempting to suggest that we should cut down such old, mature 
forests that no longer provide carbon sequestration and replace them 
with young forests that do so. This would be a mistake. When an old 
forest is cut, much of the carbon that it contains is released back to 
the atmosphere as CO/2/. Net sequestration is thus the 
difference between carbon stored in the planted forest minus the carbon 
released from the previous forest, and the value is often neutral, or 
even negative. Nearly twenty years ago, Mark Harmon and his colleagues 
(1990) showed that timber harvest results in a net release of carbon 
dioxide to the atmosphere. Long-lived timber products--houses, 
furniture, coffins--do not store large amounts of carbon--about 6 TgC/
yr for the U.S. (Woodbury et al. 2007). (Remember our emissions are 
closer to 1600 TgC/yr). Old growth forests retain large stores of 
carbon, and we should make every effort to retain them.
    This means that if we wish to store more carbon in forests--that is 
carbon sequestration--we need to do so by planting forests in areas 
that were previously harvested (reforestation) or by encouraging 
successful forest growth in areas that have never contained forests 
(afforestation). We can expect those forests to accumulate carbon 
dioxide from the atmosphere for a number of decades, perhaps even at 
rates somewhat higher than today's growth rates due to rising 
concentrations of carbon dioxide in the atmosphere (DeLucia et al. 
1999). We would need to allow those forests to grow to maturity, and to 
maintain them as mature forests or use them as a substitute for fossil 
fuels if we are to see any benefit from the carbon they have 
sequestered.
    In forests, there is also carbon beneath our feet. A typical forest 
soil contains about 10,000 gC/m2, but it accumulates new 
carbon at a rate of only about 2.5 gC/m2/yr (Schlesinger 
1990). When forests are cut and replanted immediately, there is little 
loss of soil carbon, but where forests have been converted to 
agricultural fields for significant periods of time, there are often 
large losses of soil organic matter, which contributes carbon dioxide 
to the atmosphere. Replanting forests on those areas can be expected to 
restore soil carbon and offer another form of carbon sequestration. 
Typically the rates of carbon storage in soils abandoned from 
agriculture are 30 to 40 gC/m2/yr (Post and Kwon 2000)--less 
than 1/10 of the rate of carbon storage in wood. Nevertheless, as 
native vegetation has returned to lands enrolled in the Conservation 
Reserve Program (CRP), it has undoubtedly resulted in some carbon 
sequestration in soils during the past few decades.
    In recent years, rather outlandish claims have been made for the 
potential for better management of agricultural lands to result in 
significant carbon sequestration in soils (Lal 2004). These should be 
examined carefully. In many cases, irrigation and a greater use of 
nitrogen fertilizer result in additional carbon dioxide emissions to 
the atmosphere (Schlesinger 2000). Conversion of cultivated lands to 
no-till agricultural practice offers rather limited benefits in terms 
of carbon storage (Baker et al. 2007), and these can be erased by a 
single act of cultivation at a later time (Six et al. 2004). West and 
Post (2002) found average rates of carbon sequestration were 57 gC/
m2/yr with conversion to no-till, but Kern and Johnson 
(1993) estimated that the conversion of all U.S. farmland to no-till 
would store only 1% of U.S. carbon emissions in soils. Only the 
abandonment of agriculture in favor of planted or natural regeneration 
of forest is likely to produced significant carbon sequestration 
(Jackson and Schlesinger 2004).
    So, my take-home message today is not an optimistic one. Growing 
forests store carbon in wood and soil, but we should not sacrifice old-
growth forest to increase the nation's carbon sequestration, and carbon 
sequestration in forests is not likely to offer much overall benefit to 
the problem of global climate change.
    If credit is given to those who choose not to cut existing forests, 
an increasing global demand for forest products will simply shift 
deforestation to other areas. Frequent audits of carbon sequestration 
projects will be needed to determine current carbon uptake, insurance 
will be necessary to protect past carbon sequestration from destruction 
by fire or windstorms, and payments will be necessary if the forest is 
eventually cut. All these efforts will be costly to administer, 
diminishing the value of the rather modest carbon credits expected from 
forestry (Schlesinger 2006).
    Abandoning agricultural lands might offer some soil carbon 
sequestration, but large-scale agricultural abandonment seems unlikely 
at a time when there is so much enthusiasm for biofuels to power the 
nation's future energy needs. For me, the only realistic way for the 
United States to contribute meaningfully to reduced concentrations of 
carbon dioxide in the atmosphere will be to curtail emissions, from a 
combination of conservation, efficiency and non-fossil sources of 
energy production.
    Thank you.
References
Baker, J.M., T.E. Ochsner, R.T. Venterea, and T.J. Griffis. 2007. 
        Tillage and soil carbon sequestration--What do we really know? 
        Agriculture, Ecosystems and Environment 118: 1-5.
Binford, M.W., H.L. Gholz, G. Starr, and T.A. Martin. 2006. Regional 
        carbon dynamics in the southeastern U.S. coastal plain: 
        Balancing land cover type, timber harvesting, fire, and 
        environmental variation. Journal of Geophysical Research 
        111:doi:10.1020/2005 JD006820.
Clark, K.L., H.L. Gholz, and M.S. Castro. 2004. Carbon dynamics along a 
        chronosequence of slash pine plantations in north Florida. 
        Ecological Applications 14: 1154-1171.
DeLucia, E.H. J.G. Hamilton, S.L. Naidu, R.B. Thomas, J.A. Andrews, A. 
        Finzi, M. Lavine, R. Matamala, J.E. Mohan, G.R. Hendrey, and 
        W.H. Schlesinger. 1999. Net primary production of a forest 
        ecosystem with experimental CO/2/ enrichment. Science 
        284: 1177-1179.
Harmon, M.E., W.K. Ferrell, and J.F. Franklin. 1990. Effects on carbon 
        storage of conversion of old-growth forests to young forests. 
        Science 247: 699-702.
Jackson, R.B. and W. H. Schlesinger. 2004. Curbing the U.S. carbon 
        deficit. Proceedings of the National Academy of Sciences 
        101:15827-15829 (Perspective).
Kern, J.S. and M.G. Johnson. 1993. Conservation tillage impacts on 
        natural soil and atmospheric carbon levels. Soil Science 
        Society of America Journal 57: 200-210.
Lal, R. 2004. Soil carbon sequestration impacts on global climate 
        change and food security. Science 304: 1623-1627.
Post, W.M. and Kwon. 2000. Soil carbon sequestration and land-use 
        change: processes and potential. Global Change Biology 6: 317-
        326.
Schlesinger, W.H. 1990. Evidence from chronosequence studies for a low 
        carbon-storage potential of soils. Nature 348: 232-234.
Schlesinger, W.H. 2000. Carbon sequestration in soils: Some cautions 
        amidst optimism. Agriculture, Ecosystems and Environment 82: 
        121-127.
Schlesinger, W.H. 2006. Carbon trading. Science 314: 1217
Six, J., S.M. Ogle, F. J. Breidt, R.T. Conant, A.R. Mosier, and K. 
        Paustian. 2004. The potential to mitigate global warming with 
        no-tillage management is only realized when practiced in the 
        long term. Global Change Biology 10: 155-160.
West, T.O. and W.M. Post. 2002. Soil organic carbon sequestration rates 
        by tillage and crop rotation: A global analysis. Soil Science 
        Society of America Journal 66: 1930-1946.
Woodbury, P.B., J.E. Smith and L.S. Heath. 2007. Carbon sequestration 
        in the U.S. forest sector from 1990 to 2010. Forest Ecology and 
        Management 241: 14-27.
                                 ______
                                 

     Response to questions submitted for the record by William H. 
                              Schlesinger

    I am writing to respond to your letter of 7 May, asking three 
questions arising from the 1 May 2007 hearing on carbon sequestration 
by the Subcommittee. These are:
 ``Do you believe that converting a field to no-till agriculture would 
        be a bad offset in a carbon regulatory scheme?''
    In brief: not a bad offset, but probably not a significant offset.
    Generally, one can assume that raising the level soil organic 
matter offers a number of benefits, so it is good to encourage land 
management practices that increase soil carbon accumulation. West and 
Post (2002) report that carbon sequestration averages 0.57 tonsC/ha/yr 
in soils when farm fields are converted from conventional to no-tillage 
agriculture. Note that something on the order of 35% of U.S. farmlands 
are already under no-till management (Uri 1999), where credit should 
not be granted for carbon accumulations that are not incremental to 
current practice. In some cases conversion to no-till simply slows the 
loss of soil carbon, so it should not get any credit at all (Huggins et 
al. 2007).
    Baker et al. (2007) question whether high rates of soil carbon 
accumulation in no-till fields are real; most studies reporting high C 
sequestration in no-till have considered only the gain in the surface 
layers whilst the lower layers often lose carbon. Policy makers must 
also insist on permanence of the incremental carbon storage in soils. 
Several studies have suggested that a single subsequent tillage can 
release most of the carbon stored by several years of no-till 
management (VandenBygaart and Kay 2006)
    Unless the value of offsets is extremely high ($100/ton), it is 
unlikely that farmers will convert much new acreage to no-till based on 
the value of the carbon credits alone. The small amount of carbon that 
will be accumulated and the cost of doing so do not speak strongly for 
the potential for no-till agriculture to contribute much to the 
nation's carbon emissions problem. There are a number of problems with 
the auditing and validation of such carbon credits that are outlined in 
an editorial I recently published in Science, which is attached here as 
an appendix.
 ``In your testimony, you mention using forests as substitutes for 
        fossil fuels. Do you have any estimates of how much energy we 
        could get out of forests while still being environmentally 
        sound? Could you elaborate on your thoughts on this matter?''
    At Princeton University, Robert Williams (1994) has conducted a 
number of analyses indicating that biomass could provide a significant 
fraction (perhaps 20%, p. 217) of the nation's energy without major 
environmental degradation. The most obvious potential stems from 
substituting biomass for coal in power plants, but trees could also 
provide liquid fuels in the form of cellulosic ethanol when the 
technology for the efficient conversion of wood to ethanol is improved. 
Trees for both uses would need to be grown in fast-growing plantations, 
but I would not recommend a policy of removing native old-growth 
forests to establish these plantations. They could certainly be 
established on otherwise barren or degraded lands.
    It will be important to investigate the net energy return from 
managed plantations. In one recent study by Markewitz (2006), the net 
carbon gain in soil organic matter during 25-year rotations was about 
equivalent to the carbon released in fossil fuels used during 
silviculture operations. Nevertheless, whenever we substitute biomass 
for fossil fuels, we lessen human impact on the global carbon cycle.
 ``Are there management methods that can be used to increase carbon 
        uptake in mature forests?''
    In brief: this will be difficult.
    With a few noteworthy exceptions, mature forests tend to show low 
rates of carbon accumulation, much less than in younger forests (e.g., 
Clark et al. 2004, Law et al. 2003, Zhou et al. 2006). Management to 
maintain uptake in older stands could focus on carbon accumulation in 
soils, riparian sediments, and downstream wetlands (Jandl et al. 2007). 
Even careful, selective harvest of large trees from old-growth forests 
is not likely to result in a significant carbon sink in forest 
products, given that the overall U.S. sink for carbon in forest 
products is currently only 0.006 PgC/yr, or <1% of our emissions 
(Woodbury et al. 2007).
    I hope this material is useful. Do not hesitate to contact me if 
you need any further information. Do note that next week my address 
will change to:
    William H. Schlesinger
    President, The Institute of Ecosystem Studies
    Millbrook, N.Y. 12545
    Office phone: 845-677-5343
    Email:[email protected]
References
Baker, J.M., T.E. Ochsner, R. T. Venterea, and T. J. Griffis. 2007. 
        Tillage and carbon sequestration--what do we really know? 
        Agriculture, Ecosystems and Environment 118: 1-5.
Clark, K.L., H.L. Gholz, and M.S. Castro. 2004. Carbon dynamics along a 
        chronosequence of slash pine plantations in north Florida. 
        Ecological Applications 14: 1154-1171.
Huggins, D.R., R.R. Allmaras, C.E. Clapp, J.A. Lamb, and G.W. Randall. 
        2007. Corn-soybean sequences and tillage effects on soil carbon 
        dynamics and storage. Soil Science Society of America Journal 
        71: 145-154.
Jandl, R., M. Lindner, L. Vesterdal, B. Bauwens, R. Baritz, F. 
        Hagedorn, D.W. Johnson, K. Minkkinen, and K.A. Byrne. 2007. How 
        strongly can forest management influence soil carbon 
        sequestration. Geoderma 137: 253-268.
Law, B.E., O.J. Sun, J. Campbell, S. Van Tuyl, and P.E. Thornton. 2003. 
        Changes in carbon storage and fluxes in a chronosequence of 
        ponderosa pine. Global Change Biology 9: 510-524.
Markewitz, D. 2006. Fossil fuel carbon emissions from silviculture: 
        Impacts on net carbon sequestration in forests. Forest Ecology 
        and Management 236: 153-161.
Uri, N.D. 1999. Factors Affecting the Use of Conservation Tillage in 
        the United States. Water, Air and Soil Pollution 116: 621-38.
VandenBygaart, A.J. and B.D. Kay. 2004. Persistence of soil organic 
        carbon after plowing a long-term no-till field in southern 
        Ontario, Canada 68: 1394-1402.
West, T.O. and W.M. Post. 2002. Soil organic carbon sequestration rates 
        by tillage and crop rotation: a global data analysis. Soil 
        Science Society of America Journal 66: 1930-1946.
Williams, R. 1994. Roles for biomass energy in sustainable development. 
        Pp. 199-225. In R. Socolow, C. Andrews, F. Berkhout and V. 
        Thomas. (Eds.). Industrial Ecology and Global Change. Cambridge 
        University Press.
Woodbury, P.B., J.E. Smith, and L.S. Heath. 2007. Carbon sequestration 
        in the U.S. forest sector from 1990 to 2010. Forest Ecology and 
        Management 241: 14-27.
Zhou, G., S. Liu, Z. Li, D. Zhang, X. Tang, C. Zhou, J. Yan, and J. Mo. 
        2006. Old-growth forests can accumulate carbon in soils. 
        Science 314: 1417.
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    Mr. Costa. Well we broke a streak but I guess coming from 
Duke University, sharing the alma mater of our Chair, that is 
OK. If you wanted to complete, we did not want to get you at 
mid thought.
    Mr. Schlesinger. Most of the rest of what I was going to 
say is in the printed statement, and we can deal with it in the 
question period.
    Mr. Costa. Very good. All right. Our next witness, Mr. 
George Kelly, who is Treasurer I guess of the National 
Mitigation Banking Association, is that correct?
    Mr. Kelly. Yes, sir.
    Mr. Costa. Mr. Kelly.

             STATEMENT OF GEORGE KELLY, TREASURER, 
            NATIONAL MITIGATION BANKING ASSOCIATION

    Mr. Kelly. Mr. Chairman and members of the committee, it is 
a great pleasure to be here this afternoon to testify on behalf 
of the National Mitigation Banking Association. My testimony 
really relates to forest sequestration, and that from a 
perspective of a market participant. Before I give you an 
example of some of the activities we are working on, I wanted 
to give you a little bit of background about the Association 
and Mitigation Banking because I think there are some lessons 
to be learned from that particular industry.
    The Association represents commercial businesses that are 
restoring and protection wetland stream habitat through what is 
called conservation and mitigation banks. Now they have been 
operating banks since 1990. My company, Environmental Bank and 
Exchange, formed in 1997, is a member of the Association. We 
have restored over 6,000 acres of wetlands, over 34 miles of 
stream and hundreds of acres of critical habitat using these 
market-based approaches.
    Now mitigation banking is a market-based approach that 
provides advanced consolidated mitigation to basically 
compensate for these unavoidable impacts. In terms of the 
mitigation banker role, typically we restore and enhance and 
preserve a degraded system in advance of the impacts, and then 
sell those credits in the marketplace to those we are 
impacting.
    Now the National Academy of Sciences, the Society for 
Wetland Scientists have basically said this is one of the 
preferred approaches to mitigation, and as a result there has 
been a significant proliferation of banks. In 1992, there were 
46 banks. Now in 2005, there are over 450 banks. So why this 
proliferation? For one, there was a clear regulatory driver for 
mitigation. In addition, Congress stepped in and actually 
created a preference for mitigation banking for Federally 
funded roads when there were impacts to those roads, and 
actually created that preference for mitigation banking.
    There have been issues with our industry including the 
issue of payment for fees, the concept of in lieu fees where 
you are paying for mitigation which often understates the real 
cost of mitigation. So why am I going through all this litany 
on mitigation banking? Because I think there are tremendous 
lessons to learned in the carbon marketplace.
    So the four points that I would like to raise with respect 
to that is: One, the marketplace is working because there has 
been a clear regulatory driver. In the case of wetlands and 
stream, it has been the Clean Water Act or in the case of 
species banking, it is the Endangered Species Act. In addition, 
there has been a consistent application of standards to all 
impactors, and that in essence also might be applicable to the 
carbon context.
    Moreover, there is an opportunity for the private market to 
play a role in restoring these resources through the concept of 
offsite mitigation, and finally, as I addressed in the last 
point is that really we are now resolving some of the issues of 
letting the market decide the pricing in terms of what the 
mitigation should actually cost.
    So what about the carbon marketplace? Right now we have a 
voluntary marketplace that is very fragmented. It lacks 
standards. The pricing is extremely variable. In addition, 
there are some regulatory standards at the state level. We have 
had the Global Warming Solution Act in California which is a 
statewide emissions cap which does contemplate a market-based 
approach. Those regulations are anticipated in 2011.
    Moreover, we have the regional greenhouse gas initiative 
which is basically 10 northeastern and Mid-Atlantic states. Now 
in that instance that only applies to power plants and is a cap 
on power plants. Interestingly enough from the forestry 
perspective, 3.3 percent of the emission reductions can be met 
through carbon offsets, and that is an important element.
    We understand that there are a number of bills being 
considered here in Congress, one of which would allow up to 30 
percent of offsets. The question here is what percentage of 
offsets would ultimately dictate what kind of forestry projects 
might be available. So with respect to forestry mitigation or 
sequestration, there are four techniques: Afforestation, 
reforestation, avoided deforestation and forestry conservation 
practices.
    I thought it might be helpful for the committee to hear a 
recent example of an initiative we recently participated in 
where there were five utilities under the RGGI regime seeking 
to buy 7.5 million tons of carbon dioxide. Now under RGGI there 
are six types of offsets allowed including afforestation. The 
RGGI standards are very, very strict though and only allowing 
afforestation on properties that have been in a non-forested 
condition for 10 years. In addition, there must be a permanent 
easement. The trees must be planted. Sustainable forestry 
practices would then apply. Monitoring and verification would 
be done over five-year periods, and then there is a 60-year 
accounting for the carbon.
    I think the points raised in this initiative is one, there 
are buyers in the marketplace in RGGI because there is a 
mandatory cap that is looming. Second, the standards are very 
strict, and we will have a result of having increased price per 
unit because it is limited to afforestation, does not allow 
avoided deforestation or forestry conservation practices, and 
it has a 60-year accounting period.
    I think that one of the biggest points--and I will close 
with this--is as we as investors in these forest sequestration 
projects look at these, we need to be able to recoup our funds 
within a 5 to 10-year period, and the concept of for credit 
sale is a very important facet. With that I see my red light. I 
am sorry to have gone over. Thank you very much.
    [The prepared statement of Mr. Kelly follows:]

 Statemnet of George W. Kelly, National Mitigation Banking Association.

    Good Afternoon. My name is George W. Kelly and it is my pleasure to 
be present today to address the issue of terrestrial carbon 
sequestration. I am here as a member of the Board of the National 
Mitigation Banking Association. The focus of my testimony will be on 
the use of forestry-based sequestration from the perspective of an 
entrepreneur in the natural resource credit business.
National Mitigation Banking Association and Mitigation Banking
    As a matter of background, the National Mitigation Banking 
Association (``Association'') represents commercial businesses 
committed to the restoration and preservation of our nation's wetlands 
and natural habitat through the use of mitigation and conservation 
banks. The Association's members have established and operated 
mitigation banks throughout the United States since the early 1990s.
    Environmental Banc & Exchange (``EBX'') has been a member of the 
Association since 2003. Founded in 1997, EBX is one of America's 
leading full-service providers of ecosystem mitigation and offsets. It 
has completed over 35 mitigation banks and client specific projects 
nationwide, restored 34 miles of stream, restored over 6,000 acres of 
wetlands and rehabilitated hundreds of acres of forest and other 
critical habitats. EBX has demonstrated a particular expertise with the 
restoration of bottomland hardwood systems.
    Mitigation banking is a market-based industry which involves 
creation of sites of advanced, consolidated mitigation for the express 
purpose of compensating for the adverse impacts on wetlands or streams 
authorized by a permit under Section 404 of the Clean Water Act 
(``CWA''), 33 U.S.C. Sec. 1344, or other similar laws. Mitigation 
bankers are in the business of restoring, enhancing and sometimes 
creating wetlands, in advance, to sell as compensatory mitigation when 
mitigation cannot be achieved at the development site. A mitigation 
bank typically utilizes a medium to large degraded wetland site, and 
improves the ecological characteristics of the site through restoration 
and enhancement efforts, or through wetlands creation. The units of 
restored, enhanced or created wetlands are expressed as ``credits,'' 
which mitigation bankers sell to developers or other Section 404 
permittees to offset the ``debits'' that will result from permitted 
filling at the project development site.
    Since the seminal report, Protecting America's Wetlands: An Action 
Agenda, the Final Report of the National Wetlands Policy Forum (The 
Conservation Foundation, 1988), mitigation banking has been recognized 
as most appropriate for CWA compensatory mitigation. Indeed, after a 
comprehensive two-year study, the National Academy of Sciences affirmed 
that mitigation banking offers advantages over traditional mitigation 
approaches. National Research Council, Compensating For Wetland Losses 
Under the Clean Water Act (National Academy Press 2001). The Society of 
Wetland Scientists also expressed support for mitigation banking in its 
Wetland Mitigation Banking, Position Paper, February 2004.
    In the last 15 years, mitigation banks have proliferated across the 
country. The Environmental Protection Agency estimates that mitigation 
banking has grown from 46 banks in 1992, to 219 banks by the end of 
2001, to an estimated more than 450 in 2005. According to Corps of 
Engineers data, as of 2000, there were between 370 and 400 mitigation 
banks nationwide, in more than 35 states. The Environmental Protection 
Agency has recognized that ``entrepreneurial providers of bank credits 
have emerged as a nationally-organized industry contributing hundreds 
of millions of dollars annually to the domestic product.'' With respect 
to wetland restoration in general, the Fish and Wildlife Service 
estimated that more than $139 million would be spent in 25 states and 
one territory by the end of Fiscal Year 2004 to restore or protect more 
than 167,000 acres of wetlands.
    There are approved wetland and stream mitigation banks in at least 
42 States, based on 2004 data:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    It is important to note that the mitigation banking marketplace 
is entirely driven by rules and regulations under the Clean Water Act 
and the Endangered Species Act. Those who want to impact wetlands, 
streams or protected species are required to obtain permits and 
compensate for the impacts; the basic standard is to provide a ``no net 
loss'' in functions and area. Without strict rules and enforcement of 
the rules, there is no market for mitigation credits. Because 
mitigation banks are heavily regulated and have a proven track record 
of success, Congress has provided a preference for mitigation banking 
where there are impacts from federally-funded road projects. The 
preference ensures a certain allocation of the marketplace to 
mitigation banking.
    Notwithstanding the positive rules, the mitigation banking 
marketplace has also suffered from the growth of in-lieu fee projects, 
under which mitigation requirements may be met through payment of fees. 
The fees are often set by rule, or in other methods that fail to 
capture the real cost of mitigation because the actual plan for 
mitigation (how to spend the money) is developed after the fees are 
collected. Such programs undermine investment in effective mitigation. 
Recognizing the importance of a level playing field among mitigation 
providers, Congress recently enacted a law that requires that the Army 
Corps promulgate regulations that promote equivalent standards for all 
forms of mitigation. This was also intended to address the variability 
in regional approaches that can undermine the marketplace for 
mitigation credits.
    We believe that any policy relating to the carbon market should 
take into account the lessons learned in the wetland mitigation 
marketplace, including: (1) establishment of clear regulatory drivers; 
for wetlands and streams, the driver is the very strict requirement to 
obtain a permit and the mitigation requirement for impacts; (2) 
consistent application of the rules and inclusiveness for all or most 
sources of emissions; for wetlands and streams, very few impacters are 
exempt from the regulatory system; (3) authorization for private 
markets in offsets; for wetlands and streams, this means authorization 
for off-site mitigation; and (4) let the market decide the price of the 
credits; for wetlands and streams, mitigation fees set by statute or 
rule (in-lieu fees) impede the credit market and often fail to meet the 
offset goals.
Carbon
    Carbon markets can be separated into two major categories: the 
regulatory (or compliance) and voluntary markets. Currently, in the US, 
in light of the lack of national standards, there exists a patchwork of 
both voluntary and regional regulatory markets. Unlike the regulated 
market, the voluntary market does not rely on legally mandated 
reductions to generate demand. Often, the voluntary market participants 
are motivated by positive public relations and the potential to 
position themselves as early movers in a marketplace. At the consumer 
level, participants are trying to reduce their carbon footprint through 
acquisition of carbon offsets. Currently, there exists the Chicago 
Climate Exchange whose 52 members have voluntarily committed to reduce 
their emissions. Also, there exist some three dozen companies offering 
voluntary carbon offsets. The voluntary market suffers from 
fragmentation, lack of standards and pricing variability.
    From a regulatory perspective, the states and regions are serving 
as the laboratory for the carbon marketplace. California and the 
Northeastern states have taken the lead. California enacted in 2006 the 
Global Warming Solution Act, which contemplates a market-based approach 
to achieve a statewide emissions cap. Regulations are being formulated 
and must be in place by 2011. Also, California announced that it would 
participate in the recently publicized Western Regional Climate Action 
Initiative with Washington, Oregon and New Mexico. In the Northeast, 
some 10 states in the Northeast and the Mid-Atlantic have committed to 
enter into the Regional Greenhouse Gas Initiative, otherwise known as 
RGGI. RGGI only applies to power plants in those 10 states and imposes 
a cap on the total emissions, which in turn is allocated among the 
states. The states have the discretion to allocate to the power plants. 
The goal is to meet these standards by 2009. RGGI also allows carbon 
offsets to cover 3.3% of a facility's carbon emissions, and that 
percentage will rise to 5% if the price of CO/2/ goes beyond 
$7/ton.
    Carbon offset trading will need a regulatory system with features 
similar to wetland mitigation banking, if there is to be a viable 
market in such credits. As noted with respect to the wetland and stream 
mitigation marketplace, without a clear legal driver mandating carbon 
reductions, the market will remain fragmented. In addition, policies 
need to be in place that allow for flexible mechanisms, such as cap-
and-trade, which in turn allows for emitters to identify the most cost-
effective options in reducing their carbon emissions. All or most 
emitters must be included in the regulatory system. The system must 
require actual offset projects, rather than establish regulatory fees 
or allow in-lieu fee programs. If all players must meet meaningful 
limits, the price will be set by the marketplace at the cost effective 
level. Both the California Act and RGGI provide for such market-based 
approaches. In this fashion, emitters can decide whether to internally 
reduce emissions, or purchase either carbon offsets or allowances from 
another facility.
    Carbon offsets from natural resource restoration projects will 
involve issues of restoration science and land management very familiar 
to wetland mitigation bankers. Habitat restoration, primarily forestry 
projects fall under the category of carbon offsets projects. To develop 
a market for carbon from habitat restoration/forestry, the regulatory 
system for greenhouse gas reduction needs to authorize a significant 
percentage of reductions to be met through offsets. It is our current 
understanding that there are a number of bills pending before Congress, 
some of which would authorize up to 30% of the carbon reductions to be 
met through offsets. The offset policy is key to determining the extent 
that habitat restoration and forestry projects would participate in 
greenhouse gas emission control. As we mentioned, RGGI allows 3.3% of a 
facility's emissions to be met by offsets.
Forestry Projects
    Forestry projects include afforestation (planting tress on area 
with no previous cover), reforestation, agroforestry, forest 
conservation and avoided deforestation. Forestry projects not only 
sequester carbon, they provide numerous co-benefits such as biological 
diversity, erosion reduction, enhanced water quality and enhanced 
recreational opportunities. Forestry projects also are tangible and 
provide a strong symbol of permanent conservation. They provide natural 
infrastructure for the planet. Absent incentives for restoration and 
protection, our forest resources continue to be lost and degraded. 
Areas needing re-vegetation or reforestation often cannot attract 
investments, and payments for the storage of carbon may help reduce the 
conversion of these systems to other so-called ``highest and best use'' 
alternatives.
    As we explore the role of forest carbon sequestration, I thought it 
would be helpful for illustration to review a recent Request for 
Proposal to purchase 7.5m tons of CO/2/ credits issued by the 
Climate Trust in February, 2007. The Request was initiated by the fact 
that there are 5 participants who are electric utilities under RGGI 
that will be subject to regulated standards in 2009. As noted, RGGI 
allows for six types of carbon offset projects, including 
afforestation. Afforestation under RGGI means the site had to have been 
in a non-forested state for 10 years or more. To obtain credit under 
RGGI for afforestation, the site must be replanted; it is subject to 
strict monitoring and verification protocols (every 5 years); it must 
be subject to a permanent easement and sustainable forest management 
practices; and credits may be generated over a 60-year period, even 
though other programs allow for a 100-year period. If the site is used 
for other regulatory purposes, such as wetland or ``tree save'' 
mitigation, it is not eligible for use for carbon offsets. Also, the 
project must start only after carbon funding is available to 
demonstrate ``additionality.'' ``Additionality'' means that the project 
will add the function of carbon sequestration beyond the level attained 
without the project.
    RGGI standards provide an example of forestry more strict than 
other offset forestry programs. RGGI does not allow avoided 
deforestation or forest conservation practices to get carbon credit. 
Also, the 60-year accounting period tends to make the unit price of a 
credit more expensive than a 100-year accounting period because there 
are fewer tons of CO/2/ sequestered over the shorter period, 
yet the unit costs to produce the credit (i.e., grading, tree planting, 
monitoring) remain the same. Also, for those submitting a proposal to 
provide carbon offsets, it is imperative that the initial capital costs 
of a forestry project be recouped in the early stages, otherwise these 
projects would never be considered commercially reasonable. 
Accordingly, the concept of forward credit sale, where payments are 
made for credits before carbon is actually sequestered, is important in 
forestry projects. Such forward crediting should only be allowed if 
there exist adequate safeguards, such as reserves, insurance and 
monitoring and verification protocols. Prices may be discounted to 
account for time value of money and the risk of non-delivery. In this 
fashion, project developers could get early financing for up-front 
project costs, without waiting 60 to 100 years.
    While many wetland and stream mitigation projects can meet 
performance standards quickly, the mitigation banking industry has 
experience with slow growth vegetation as well. The mitigation banking 
marketplace similarly uses the concept of forward selling for wetland 
mitigation projects involving slow growth trees. For example, it 
typically takes some 80 years for newly restored bottomland hardwood 
systems to reach maturity. Nevertheless, mitigation bankers are given 
credit over 5 to 10 year period, which covers the time while the 
project is graded, planted and closely monitored for early vegetation 
success. This monitoring period serves as a proxy for demonstrating 
whether these newly restored systems are on a trajectory to achieve 
success. There are also other protections, such as financial assurances 
and staggered release of credits, to provide additional safeguards to 
ensure performance. This provides a balance between ecology and 
economics. Without the ability to recoup an investment in a reasonable 
period, there would be very few investors in this significant 
restoration program.
Conclusion
    While there are a number of bills pending in Congress addressing 
carbon and offset credits, the Association has not take a position on 
any particular bill. Therefore I am not going to comment on any 
specific bills.
    However, I have been pleased to share with you our experience that 
certain features are important to creation of environmental credit 
markets. There need to be consistent standards applied nationwide, and 
these standards should be predictable in their application. There also 
should be built-in flexible market mechanisms with an allocation for 
carbon offset projects. For forestry projects, the concepts of forward 
selling should be considered, so long as there are adequate safeguards 
to ensure permanence of the trees. Insurance products supported by the 
U.S. Government, such as those proposed under the 2007 Farm Bill would 
be helpful. Moreover, as the mitigation banking marketplace has taught 
us, having systems that set fee caps or allow fees to be paid in lieu 
of actual carbon reductions would undermine investment and likely 
produce inadequate results for carbon reduction.
    Thank you for the opportunity to present this information to your 
joint committees. I would be happy to answer your questions.
                                 ______
                                 
    Mr. Costa. That is OK. Anyhow, we have our last witness but 
certainly not the least, and we will move on to questioning by 
members of the committee. Mr. Michael Goergen, is that correct?
    Mr. Goergen. Goergen, but that is fine.
    Mr. Costa. Goergen. OK. I am sorry. Executive Vice 
President and CEO of the Society of American Foresters.

STATEMENT OF MICHAEL GOERGEN, EXECUTIVE VICE PRESIDENT AND CEO, 
                 SOCIETY OF AMERICAN FORESTERS

    Mr. Goergen. Thank you very much, Mr. Chairman, members of 
the committee. I am thrilled to be here today in front of you 
talking about what I see as really some very important issues 
that are related to forests and carbon and our ability to do 
something about the challenges that face us today.
    Mr. Costa. Well we are thrilled to have you here.
    Mr. Goergen. Thank you. The Society represents 15,000 
members who are forest managers, consultants, academics, and 
researchers. We promote sustainable forest management for 
balance and diverse values. SAF members are working on these 
challenges in a variety of different settings, through their 
research units, through companies that they are working with in 
some of the mitigation banking concepts that we have been 
hearing about already this morning.
    There are a number of factors that really mandate a 
prominent role for forests in any comprehensive solution that 
addresses climate change. Forests globally, above ground and in 
the soil, store 50 percent more carbon than is actually in the 
atmosphere. Forests in the United States sequester 
approximately 200 to 280 million tons of carbon per year, 
offsetting 10 to 20 percent of our country's emissions from 
fossil fuels.
    In addition, forest biomass could be used to generate 
energy and can provide as much as 30 percent of the nation's 
renewable energy supply. Given today's improved technologies, 
analysis has shown that for every bone dry ton of biomass used 
to generate power, there is a net reduction of approximately 
one ton of greenhouse gases. So forests are not the solution to 
the carbon question but they are certainly an important part of 
a broad set of strategies and recognizing this introduces a 
number of policy implications for forests and forest 
management. I would like to review a few key points today.
    The first is that forests are storing carbon right now. 
What can we do to make sure that forests stay forested so that 
there is not pressure to convert forests to other uses that 
would reduce the amount of carbon being stored? The second is, 
that we need to find new markets for people who own forests. 
Remember 57 percent of our nation's forests are held by 
private, small landowners.
    They need markets. We need a carbon market that actually 
makes sense for them, that is easy to participate in, and the 
rules are not so onerous that they can participate in a 
relatively economical way. We also need to look at biomass 
energy and biofuels as certainly a potential for forests and 
forest products.
    The second point I would like to make is that this 
renewable resource that we have really could do something about 
our energy independence needs, and as I mentioned before we 
could generate 30 percent of our renewable energy needs from 
forests and forest products. Another important policy 
implication concerns wildfire and forest health. Our Federal 
lands alone--there are approximately 100 million acres of 
forests--are at unnaturally high risk of catastrophic fire.
    A wildfire on these lands can emit up to 100 tons of 
greenhouse gases, aerosols and particulates per acre. So it is 
incredibly important to increase management activities on these 
lands, mostly in the form of thinnings for treating hazardous 
fuels and reducing the threat from uncontrolled fires. In order 
to help develop renewable energy from biomass obtained from 
forest treatments, one particular issue that we would need to 
take a look at is the Section 45 production tax credit for wind 
and geothermal energy. That is twice the rate right now that it 
is for biomass energy. That is something Congress could take a 
look at that could really provide some incentives for 
investment in forest biomass energy.
    If you take a look at life cycle analysis for forest 
products, there are really some opportunities here. 
Substitutes--steel, concrete--they actually can consume 250 
percent more energy than using the same type of building 
materials from forests. There is a tremendous opportunity that 
we have right in front of us today to use more forest products 
to sequester more carbon and reduce the total greenhouse gas 
emissions.
    Finally, I would like to sum up by saying that hopefully we 
can get away from the old ``us versus them'' rhetoric and 
really focus on the positive dialogue that is now being 
generated amongst conservation groups, forest industry, 
scientists, government agencies, and others on the essential 
role of forest and forest management in accomplishing carbon 
sequestration and mitigating global warming. Forests are the 
only form of sequestering and offsetting carbon that also 
provide many other benefits that we all count on such as clean 
water, wildlife habitat, biological diversity, wood products 
and aesthetics, all necessary for the successful functioning of 
our society. We cannot afford to miss this important 
opportunity. Thank you.
    [The prepared statement of Mr. Goergen follows:]

    Statement of Michael Goergen, Executive Vice President and CEO, 
                     Society of American Foresters

    Chairmen Costa and Grijalva, Ranking Members Pearce and Bishop, and 
Members of the Committee on Natural Resources, I am Michael Goergen, 
Executive Vice President and CEO of the Society of American Foresters 
(SAF). The Society has 15,000 members who are forest managers, 
consultants, academics, and researchers and promotes sustainable forest 
management for balanced and diverse values.
    Many SAF members are working on climate change issues through their 
respective universities, agencies, organizations or companies and have 
already begun to inform the dialogue concerning the essential role of 
forests and forest management in offsetting greenhouse gas emissions 
(GHG).
    They, and others, have uncovered a number of factors that mandate a 
prominent role for forests in any comprehensive solution addressing 
climate change. Forests globally, above ground and in the soil, store 
fifty percent more carbon than is in the atmosphere. Forests in the 
United States sequester approximately from 200 to 280 million tons of 
carbon per year, offsetting 10 to 20 percent of our country's emissions 
from fossil fuels. In addition, forest biomass can be used to generate 
energy and could provide as much as 30 percent of the nation's 
renewable energy supply. Given today's improved technologies, analyses 
have shown that for every bone dry ton of biomass used to generate 
power, there is a net reduction of approximately one ton of greenhouse 
gasses. At worst, energy derived from woody biomass is carbon neutral. 
This is also the case for biomass converted into biofuels such as 
cellulosic ethanol or biodiesel, which are decidedly better 
alternatives than corn, which when converted into bioethanol is a net 
GHG emitter.
    So forests are not the solution to controlling GHG, but they are 
certainly an important part of a broad set of strategies. Recognizing 
this introduces a number of policy implications for forests and forest 
management. I'll review a few of those today.
    First and foremost, it will be critical to stabilize the nation's 
forestland base, reducing forest loss from conversion to other land 
uses. Fortunately, the total number of forested acres in the U.S. has 
remained relatively stable for nearly one hundred years; however, we 
are starting to see an increase in the loss of forestland to 
development, now occurring at a rate of 1 million acres per year. Since 
57 percent of our forests are owned privately, and most of those are in 
the hands of small, non-industrial, family landowners, economics plays 
a large role in decisions to convert forestland. The development of 
carbon markets, that provide income to landowners for sequestering 
carbon, could have a major affect on reducing forest conversion. Matt 
Smith and Steven Ruddell, both members of SAF, have recently published 
articles in SAF publications on carbon markets. They are very 
informative and are attached to my testimony. I respectfully request 
that they be submitted for the record. In summary of their findings: 
most carbon markets do not currently recognize carbon from managed 
forests, those that do, such as the California Climate Action Registry, 
are currently establishing rules and standards for participation. As 
these protocols are implemented and the markets mature, it is likely 
that they will provide a significant investment and cash flow 
opportunity for owners of sustainably managed forests.
    Another important forest policy implication concerns wildfire and 
forest health. As this Committee is well aware, catastrophic wildfires 
are on the increase in this country for a variety of reasons but 
largely as a result of the increase of hazardous woody debris in our 
forests, a direct result of overstocking and insect-caused mortality, 
together with increased human development in the wildland-urban 
interface. On our federal lands alone there are approximately 180 
million acres at an unnaturally high risk of catastrophic fire. A 
wildfire on these lands can emit up to 100 tons of greenhouse gasses, 
aerosols and particulates per acre. One study of the 2002 Hayman Fire 
in Colorado found that more GHGs were emitted from that event than from 
all the automobiles in the state that year. So it is incredibly 
important to increase management activities on these lands, mostly in 
the form of thinnings, for treating hazardous fuels and reducing the 
threat from uncontrolled wildfire. This, of course, was the purpose 
behind passage of the Healthy Forests Restoration Act of 2003. Even 
though the amount of funding and the number of acres treated has 
quadrupled in recent years, the amount of work being done is still 
inadequate--a major constraint being available funding. As stated 
above, new markets in the form of woody biomass for renewable energy 
and biofuels could provide significant revenues that could help pay for 
or reduce the costs of fuels treatments.
    In order to help develop renewable energy from the biomass obtained 
from forest treatments, one issue, in particular, must be addressed. 
Currently the Section 45 Production Tax Credit (PTC) for wind and 
geothermal energy is twice the rate available for biomass energy 
investments. If investment in a broad array of renewable energy is to 
be encouraged, Congress must provide a level playing field for all 
renewable energy sources, including forest biomass. Fortunately, 
Representatives Meeks and Herger have introduced H.R. 1924 to provide 
tax parity for renewables. I encourage your support for this 
legislation.
    Finally concerning wildfire, given the huge amount of forestland 
with unnatural accumulations of hazardous fuels, even if we greatly 
increase the number of acres treated, we will still continue to see 
some large landscape scale fires for decades to come. Since young, 
growing forests sequester carbon in significant amounts, it is 
important to insure prompt assessment of needed remediation measures 
and rapid regeneration through planting following many of these fires, 
in order to establish a new forest as quickly as possible. This not 
only helps sequester carbon, it also insures prompt restoration of 
watersheds and water quality, wildlife and fisheries habitats, and 
public recreational opportunities. Another significant forest policy 
consideration concerns the use of wood products. The dais in front of 
you is a form of sequestered carbon. Though wood products do not 
provide permanent sequestration, it is well documented that they do 
store carbon for long periods of time. For example, consider that many 
towns in the original thirteen colonies still preserve and feature as 
tourist attractions wood frame homes that were built during the 
earliest days of our settlement as a nation. Many are older than three 
hundred years. In addition, life cycle assessments of various building 
materials show that using wood framing for construction and housing 
consumes up to 250 percent less energy in its manufacture and 
installation than alternatives such as aluminum, steel, concrete or 
plastic. Besides being obtained from a renewable resource, the use of 
wood products over other construction alternatives substantially allows 
us to reduce our carbon footprint. When it comes to climate change, 
wood products obtained from sustainably managed forests are a very wise 
preference, particularly when combined with effective recycling.
    On the other hand, wood obtained from international sources has 
diverse implications. The world is currently experiencing a net loss of 
about 45 million acres of forestland per year. Most of this is from 
conversion to cropland, but some is the result of inappropriate or 
illegal logging and unsustainable forest practices in developing 
countries. There is much that could be said on the many issues related 
to international forest management, but for the sake of time today, 
I'll just say that aid to foreign countries in the form of education 
and technology should be an important priority, and technical 
assistance for reforestation and forest management could pay major 
dividends in helping manage carbon internationally. Ultimately, 
however, it is probably most important that we continue to improve upon 
forest practices in our own country where we can have the most effect 
on insuring sustainable management, energy independence and in 
providing the many goods and services that come from healthy, well-
managed, and diverse forests.
    Implementing appropriate forest practices and applying the best 
available science is probably more important now than ever, given the 
increases in atmospheric temperature that we are witnessing. Forests 
will be affected by this trend in various ways--affecting forest 
insects, disease, wildfire, tree species composition, and a host of 
other variables. Forests have changed with climate through the 
millennia and will continue to do so, but as we rely on forests for 
many values and amenities, we recognize that well managed and 
functioning forests are the most resilient to drought, insects, 
disease, invasive species, and changing temperatures.
    For example, a cool wet climatic phase coupled with the effects of 
human fire suppression and other land management practices has led to a 
forest condition across the Inland Northwest (Montana, Idaho, eastern 
Washington and Eastern Oregon) that is characterized by homogeneous 
dense forests comprised largely of shade tolerant and fire intolerant 
conifers. Scientific analysis of past climatic events indicates that 
historical warm dry phases resulted in severe large landscape 
wildfires. Forests historically survived these warm dry periods because 
they consisted of patchy mosaics of different ages and species 
distributions. All of the best science with regard to future climates 
indicates that we are in a warm dry phase, exacerbated by greenhouse 
gases creating a climatic shift of a magnitude that significantly 
exceeds the warm dry phases that occurred over the past several 
thousand years. Given these conditions, current and extensive 
ecological research indicates that active forest management that 
converts homogenous forest landscapes into patchy mosaics of age 
classes and species will increase the resilience of these forests. It 
must also be stressed that forests across the Inland Northwest must be 
managed for future climatic conditions and that a policy of restoring 
forests to a condition that reflects the climate of 200 years ago may 
not be facilitating the survival of these forests for future 
conditions. Since we have the ability to predict the future climatic 
conditions with some degree of accuracy we also have the ability to 
moderate the effects of predicted global warming on our forests.
    Forestry has been the source of much debate in this country for a 
number of years, particularly in relation to management of our national 
forests and other federal lands, and though that tension has lessened 
as science and forest practices have continued to improve and as groups 
and individuals are learning to work together to find common ground, 
there still exist unfortunate lingering effects from those old battles. 
Almost everyone in the forestry community supports some protections for 
old growth, roadless areas and wilderness, but we also recognize the 
importance and value of maintaining a full array and diversity of 
forest types, age classes and management regimes. Hopefully, the old 
``us verses them'' rhetoric will not obscure the positive dialogue that 
is now being generated among conservation groups, forest industry, 
scientists, government agencies and others on the essential role of 
forests and forest management in accomplishing carbon sequestration and 
mitigating global warming. Forests are the only form of sequestering 
and offsetting carbon that also provide many other benefits such as 
clean water, wildlife habitat, biodiversity, wood products and 
aesthetics--all necessary for the successful functioning of society. We 
cannot afford to miss or neglect this important opportunity.
                                 ______
                                 
    [The article by Matt Smith submitted for the record 
by Mr. Goergen follows:]

      Carbon Market May Offer Opportunities for Forest Landowners 
                           By Matt Smith, CF

    The greenhouse affect, global warming, biofuels, alternative or 
``green'' energy, carbon neutrality, emissions reduction, carbon 
sequestration--these are just some of the terms that have become 
increasingly prevalent in the media today. The global initiative to 
reduce the effects of fossil fuel consumption, combined with the 
controversial issue of dependence on sources of foreign oil, has 
developed into what could be considered a renaissance when it comes to 
environmental policy and responsible environmental practices. It 
certainly appears that the time has arrived for real progress on the 
issue of global warming and its effect on our society.
    So, what does this all mean for forestry? There are four main 
methods by which a greenhouse gas-emitting entity can reduce its 
emissions to comply with an emissions cap. These are the reduction of 
point emissions, reduction of the entity's' carbon ``footprint'' by 
using alternative fuels or energy sources, the purchase of offset 
credits from another entity that has reduced its emissions below the 
cap, or the purchase of offset credits from sequestration projects 
(projects that fix carbon in some way). Forests are just one type of 
sequestration project considered an offset in many registries and 
markets today.
    Although the four primary types of forestry offset projects--
afforestation, reforestation, managed forests, and forest 
conservation--are all important aspects of forest carbon sequestration, 
the primary focus of this article is sustainably managed forests, which 
are somewhat controversial in the world of carbon sequestration.
A Test Case for Sustainably Managed Forests
    Sustainably managed forests are believed to have the greatest 
potential for sequestering carbon in the United States. Forests that 
are managed for some mix of objectives and benefits, such as 
recreation, biodiversity, wood products, esthetics, or water quality, 
benefit society most by providing all of these benefits along with 
clean air and reduced greenhouse gas buildup in the atmosphere. This 
suite of environmental services is matched by no other type of offset.
    So, what is the income potential of participation by managed 
forests in carbon markets? To find out, we decided to test the actual 
performance of a managed forest, a 9,000+ acre privately owned parcel 
of high-quality hardwood forest in the northeastern US, which we'll 
call the ``K tract.'' At the date of the analysis, the tract was 
comprised of a mix of age classes distributed in even-aged stands 
across the property.
    Although there are a variety of market opportunities available for 
carbon offset credits at this time, our analysis is based on the only 
open market available in the United States--the Chicago Climate 
Exchange (CCX). CCX is the world's first and North America's only 
voluntary, legally binding, rules-based greenhouse gas emission 
reduction and trading system. It started in 2003 with 13 members and 
now has approximately 250, including companies such as Rolls Royce, 
Dow, DuPont, Ford, IBM, International Paper,MeadWestvaco, and Stora 
Enso NA; municipalities such as the state of New Mexico and the cities 
of Boulder, Colorado; Chicago, Illinois; Portland, Oregon; and Berkeley 
and Oakland, California, as well as several others.
    Our test was built to answer one primary question: ``How would the 
K tract have performed as a forestry offset project from 2001 to 2006 
had the landowner entered the CCX without changing his or her 
management plan?'' Our test involved the establishment of baseline 
carbon stocks from existing forest inventory, modeling growth using the 
CCX-approved NE TWIGS growth model, and removing harvest volumes 
annually, all under the CCX rule set. Other edits included adjustments 
for other activities such as forest road construction. It should be 
noted that during the analysis period, total harvest levels equated to 
roughly 40 percent of overall growth (a key factor in the calculation 
of net volumes of carbon).
    To start the analysis, it was necessary to establish our project's 
baseline carbon stocks for the beginning of 2001. To accomplish this, 
we converted per species volume estimates from a 2001 forest inventory 
to its carbon dioxide equivalent. The result was overall estimates of 
carbon stocks that averaged 28 metric tons of carbon dioxide equivalent 
(MtCO/2/e) per forested acre. Using this baseline data and the 
actual harvest levels, along with estimates of growth from the NE TWIGS 
growth model, net sequestration for the K tract was calculated for each 
year. The results revealed that our managed forest sequestered an 
average of about 14,850 MtCO/2/e annually, or about 1.69 
MtCO/2/e per forested acre per year.
    After calculating the sequestration levels for our forest, we then 
calculated the estimates of income through the sale of the resulting 
carbon ``credits'' on the CCX platform. At the time of the project 
carbon credits sold for values between $.95 and $3.70 per 
MtCO/2/e. Using these historical prices for carbon, our 
project yielded gross income of $135,738.00 for the period.
    The cost side of our analysis breaks the various costs for the 
project into two categories, start-up costs and participation costs. 
Start-up costs can include forest inventory costs, costs of third-party 
certification of sustainability (such as SFI or FSC), and lastly, 
project preparation costs. Participation costs include fees associated 
with aggregation, trading, reporting, and verification. These costs are 
incurred after the project is approved and are dependent on the scope 
of the project and the amount of carbon generated for trading or 
banking. For the K tract the total costs for participation for the 6-
year period equated to $91,779.53
    The end result of our economic analysis for the K tract revealed 
net revenue from the sale of carbon credits of $43,959, or about $.83 
per forested acre per year. These results are summarized in Table 1 
(see below).
    Although $.83 per forested acre per year is a positive economic 
outcome, it is hardly worth getting excited about. Thus, landowners 
faced with the choice of whether or not to enter this ecosystem market 
will not be likely to do so at this level of financial incentive.
Carbon in Harvested Wood Products
    As we consider the outcome of this historical analysis and look to 
the future for managed forests in carbon markets, it is important to 
keep an eye on policy and rule setting developments that are on the 
horizon. From a broad perspective, as we think about accounting for 
sequestered carbon from our forests it's easy to understand that growth 
and harvest are the key factors influencing our net carbon stocks. 
Growth represents our sequestration and harvest equates to our 
``emission.'' The problem with this train of thought is that the 
harvesting of trees does not fully release the associated carbon stocks 
into the atmosphere. Wood is made into products, which then have a 
lifespan of their own and they continue to sequester carbon that can be 
accounted for and that is not emitted at the time of harvest.
    If we implement the Department of Energy's 100-year depreciation 
model method for harvested wood products in use on the K tract, the 
resulting net revenue increases from $.83 per forested acre per year to 
$1.14 per forested acre per year--a 37 percent increase in net revenue. 
While this income level is still not very significant, you can see the 
effect of this policy development on the project's economic 
performance.
The Current Market Result
    When we completed the K tract analysis in August 2006, the sale 
price of one MtCO/2/e on the CCX platform was $4.35. This is 
significantly more than the $.95 to $3.70 per MtCO/2/e used in 
the historic K tract economic analysis.
    If we take the sequestration estimates from our K tract analysis 
and apply the current price of carbon for each year in the period, our 
net income estimates rise to nearly $4.70 per forested acre per year. 
If we then add in the ability to take credit for harvested wood 
products in use, our net revenue rises to $5.92 per forested acre per 
year, for total revenue of more than $310,000 for the 6-year period. As 
these results suggest, market conditions and policy developments are 
creating income opportunity for forest landowners that could be 
significant over time. It is at these levels of net revenue that we 
believe forest landowners will be interested in making the commitments 
and investments required to participate in carbon markets.
Summary
    The results of the K tract analysis reveal several important and 
interesting aspects about sustainably managed forests and rapidly 
developing carbon markets. While the historical economic results 
weren't very impressive, the K tract test model did produce a positive 
financial result. The result is even more encouraging when you consider 
the current price of carbon, which could result in revenue streams 
similar to those currently generated through recreational leases on 
forestland.
    By interviewing representatives from carbon markets and registries, 
and reading through volumes of carbon market rules and policies, it 
becomes evident that this business is in its infancy and is changing 
rapidly. Rule sets are quickly developing in response to new policies 
and other influences. The various viewpoints on additionality, 
assuredness, andpermanence, combined with outside political pressures, 
will make the acceptance of offset credits from managed forests 
inconsistent at best. As a result, experts expect that a federal 
greenhouse gas program will be created in the coming years. To ensure 
that this program benefits the forestry community, the profession 
should prepare to act. In sum, the potential for managed forests in 
this new ecosystem market is significant, and rising prices for carbon 
credits are creating a significant opportunity for some forest 
landowners. Better yet, no other form of carbon offset can produce a 
volume of carbon credits to mitigate climate change with all of the 
other positive ancillary benefits that managed forests provide. Clean 
water, biodiversity, esthetics, wood products, and recreation are just 
a few of the valuable cobenefits from forests that are not associated 
with other types of sequestration projects.
    Smith is director of land management for ``Forecon Inc. For more 
information, contact him at Forecon Inc., 1890 East Main Street, 
Falconer, NY 14733; (716) 664-5602, ext 313; [email protected].
    [NOTE: Additional information submitted for the record has been 
retained in the Committee's official files.]
                                 ______
                                 

            Response to questions submitted for the record 
                           by Michael Goergen

 Your submitted testimony notes that current carbon sequestration in 
        our nation's forests is about 200-280 million tons per year. Do 
        you know how this compares to our country's historical forest 
        sequestration ability or its future forest sequestration 
        potential?
    There are no quantitative data on how much carbon was stored in 
pre-European forests. Because these forests had a higher proportion of 
old growth the total amount of carbon stored in historical forests 
would have been greater than it is today. However, because historical 
forests were older, the rate of carbon sequestration per year and net 
carbon uptake was most likely much less than in today's forests that 
have a higher proportion of young trees.
    The future of carbon sequestration by U.S. forests is largely 
dependent on ensuring that existing forest land remains in forest and 
not converted to other land uses. This is particularly important given 
that more than half the U.S. forest land base is managed by some 11 
million small, non-industrial or family owners who are under increasing 
pressure to sell to developers. Another factor is the need to provide 
incentives for forest owners to manage sustainably.
 You also talk about creating incentives for forest landowners by 
        giving them access to carbon markets. I imagine that providing 
        such an incentive would involve some sort of commitment from 
        the landowner to manage their land in a particular carbon 
        neutral way. In practice, how long would the individual 
        landowner have to commit to certain management practices to 
        serve as a verifiable carbon sink? Would the timeframe vary by 
        forest type?
    Tree growth is carbon neutral in that the amount of carbon taken up 
in photosynthesis is balanced by the amount returned to the atmosphere 
when that tree or harvested wood is ultimately decomposed or burned. In 
the process of management, there are carbon costs from the use of 
machinery and fuel for transportation. However, wood products from 
forest management are renewable and when used for building or 
construction have a far lower carbon cost than using alternatives such 
as steel, aluminum, concrete or plastic which are not renewable and use 
substantially greater amounts of energy for manufacture. (Dr. Lippke at 
the University of Washington has shown that it takes 250-280% more 
fossil fuel energy to create the steel or concrete product compared to 
the equivalent wood product. In addition, it has been shown that 1 bone 
dry ton of woody biomass used for power generation provides a net 
reduction of 1 ton of green house gas emissions and a direct offset for 
coal or natural gas-fired powerplants: Dr. Gregg Morris, Future 
Resources Association.)
    The time frame does not depend on forest type directly, but the 
market for carbon sequestration is more attractive for those forest 
types or growing conditions that are more productive, sequester carbon 
at a higher rate, and store more carbon.
    The amount of time required for a forestry project to serve as a 
verifiable carbon sink depends on the particular protocol or set of 
rules being used and these vary both nationally and internationally. 
The simplest case is when land is reforested that has not had trees 
growing on it for some time (1990 is often used as the datum). A 
project of this kind can immediately qualify as a carbon sink (or 
carbon offset) if the trees are not intended for harvest or if canopy 
cover is maintained above a prescribed level. Existing forests can 
qualify if management is undertaken that is verifiably oriented to 
carbon storage and is additional to ``business as usual''. The 
requirement that the forest used for carbon storage is ``permanent'' 
varies among protocols and sometimes is for a rotation of perhaps 
several decades or 100 years, or it may be required that the forest be 
placed under a conservation easement. Because of differing requirements 
among regions of the country in addressing issues of additionality, 
base line condition, and permanence there is need for establishing a 
common basis under which forestry carbon projects are managed.
    In the U.S., EPA's focus has been on annually determining 
nationwide carbon emissions and sinks; not carbon marketing. Hence, 
there has been no regulatory effort that would require methodology for 
baseline characterization and management scenarios for carbon 
absorption and release over time. Fortunately, there is a substantial 
body of knowledge that has addressed this issue. Again, Dr. Bruce 
Lippke has been a leader in this regard. In addition, Richard Birdsey, 
Kenneth Skog, Linda Heath, and other U.S. Forest Service researchers 
have spent years producing life cycle analysis information, publishing 
results by geographic area and species.
    By landowners describing their management plans (commercial 
thinnings at certain ages and final regeneration), the carbon 
absorption rate from growth, decreases in carbon at harvest, then 
accelerated growth afterwards, can be graphed. In addition, 
determination of the disposition of the harvested carbon is readily 
available. Some of the carbon will be stored long-term in wood 
products, some used for pulp and paper, and the remainder may be used 
as woody biomass feedstock for electric power generation. Eventual 
decomposition and the associated rates and corresponding CO/2/ 
release rates are well documented for post-harvest activities. Carbon 
costs from the use of machinery and fuel for transportation can also be 
calculated.
    Once the graph of a landowner's management strategy is completed, 
an annual ``net sequestration rate'' can be determined along with the 
corresponding annual amount of carbon for marketing purposes.
    Concerning the markets themselves, forest landowners in the U.S. 
wishing to access carbon markets to trade carbon offsets have only one 
option--the Chicago Climate Exchange. The CCX has established ``market 
periods'' where landowners can access the CCX trading platform through 
bodies called Aggregators, using the rules set by the CCX. Landowners, 
under CCX rules, must maintain their forests as carbon stocks through 
the current market period for the years 2006-2010. The CCX is a 
voluntary cap-and-trade program driven by its members. The length of 
the current market period was based, in part, on the uncertain 
direction and timing of federal mandatory climate change regulation. 
Future market periods can be established that provide for longer 
commitments, ensuring longer term climate change mitigation.
    The other option available to some forest landowners is marketing 
carbon stock on the retail or direct sale market. There are about 35 
offset providers/buyers in the U.S. retail market, who are providing/
buying offsets from a variety of projects, including alternative 
energy, landfill methane, soil conservation, and forestry projects. 
Since there are no U.S. standards under which the retail market 
qualifies, quantifies, verifies, and sells offsets, the requirements 
for how long landowners must commit to maintaining their forests as 
carbon stocks varies.
    The proliferation of ``Registries'' in the U.S. (for example the 
California Climate Action Registry, Regional Greenhouse Gas program, 
Chicago Climate Exchange, and multistate The Climate Registry) is also 
a result of the current uncertain regulatory environment. These 
Registries set their own rules regarding the type of forest offset 
project, e.g. forestation and managed forests, which can participate as 
offsets within the Registry. In many cases the Registries sell credits 
into the retail market based on the certainty and quality of the 
credits provided by these Registries. Buyers can reduce their risk of 
buying forestry offsets by knowing the rigor of the rules behind the 
quantification, verification, and registration of a Registries offsets. 
Again, the forestry rules that these Registries use are quite 
different.
    The rules set by offset providers/buyers and Registries address, to 
varying degrees, the key UNFCCC carbon principles of additionality, 
permanence, and leakage for forest offset projects. These rules are not 
wholly appropriate for forest offset projects, creating barriers for 
promoting sustainable forest practices and creating the incentives 
required to help keep forests as forests.
    For either case, trading on the CCX or selling in the retail 
market, the economics of forests participating is largely based on the 
size of the ownership, favoring larger acreages, and the productivity 
of the site. Since most non-industrial, private ownerships are less 
than 100 acres, comprising nearly 60% of the forests in the east, the 
current market rules and structures are barriers for these landowners.
    Maybe the most significant long term barrier for forestlands to 
participate in carbon markets is that managed forests--and the 
harvested wood products that provide long-term storage of carbon--are 
not fully recognized in the U.S. Registries or retail market.
    So the creation of incentives must address setting rules in any 
federal cap-and-trade program that allows all forest projects, 
including sustainably managed forests, to fully participate as offsets. 
We can implement mechanisms that provide cost effective access to 
trading platforms or retail markets for the non-industrial private 
forests, ensuring that this important group of landowners can gain 
additional revenues that will help maintain family forests as forests.
                                 ______
                                 
    Mr. Costa. Thank you. Now moving to the question stage 
here. Mr. Herzog, do you have an opinion on enhanced oil 
recovery or enhanced coal bed methane recovery as a method for 
carbon sequestration?
    Mr. Herzog. Yes. I think enhanced oil recovery is in the 
near-term sort of a first step. I think in the long-term the 
amount of storage capacity and enhanced oil recovery is limited 
compared to say the vast amount you have in the saline 
aquifers. So for the longer term, the saline aquifers would be 
more important, but I think in the shorter term because of the 
economic benefit that Vello talked about enhanced oil recovery 
would be important.
    In terms of the coal bed methane or coal beds in general, I 
do not think that is as far along advanced in terms of our 
understanding and what its potential is. So I think there is a 
lot of work to be done to understand that, and I do not think 
those are ready for the real large scale demonstrations of, 
say, a million tons with demonstrations.
    Mr. Costa. All right. Are you familiar with H.R. 1267?
    Mr. Herzog. Is that the one----
    Mr. Costa. Mark Gordon. Congressman Gordon's measure that 
would direct the USGS to do a national assessment of carbon 
storage.
    Mr. Herzog. I am not intimately familiar but I am somewhat 
familiar.
    Mr. Costa. Does it get at the recommendation from your 
study do you think?
    Mr. Herzog. Yes. I think basically it does. I think the one 
comment I would have is in our study we recommend a 
collaboration between USGS and DOE, and I think the----
    Mr. Costa. Do you think DOE is moving quickly enough?
    Mr. Herzog. In terms of doing the assessment?
    Mr. Costa. Right.
    Mr. Herzog. I think what is limiting DOE right now is their 
budget.
    Mr. Costa. So you think they ought to be moving faster. You 
said current projects are not meeting the criteria outlined in 
your testimony because we already know how to inject carbon 
dioxide into the ground, but do we know how to do so at rates 
that would be needed for the kind of large-scale commercial 
developments that we are talking about if we are going to try 
to reach the goals we are setting?
    Mr. Herzog. Yes. I think, as you point out, it is a scale 
issue. A lot of the demonstrations show that when you inject a 
lot in the ground, the pressure response really pushes back on 
you, and we are not really seeing those in a lot of the 
injection ones. We need to understand that for the longer term.
    Mr. Costa. That is back to the permeability issue that I 
was talking about earlier with the seal?
    Mr. Herzog. That is correct. Permeability is how well it 
flows in there, and what you want to do is----
    Mr. Costa. Still have the seal.
    Mr. Herzog. What?
    Mr. Costa. You still have a seal.
    Mr. Herzog. And still have the seal. Right. What happened 
is you put it in. The pressure will rise but you have to keep 
that pressure below the seal. So it is called injectivity. How 
much can you really get in, and that feeds back on how much 
real capacity you have.
    Mr. Costa. All right. Mr. Vello Kuuskraa, can you describe 
in more detail what you mean? You kept making references to the 
next generation of enhanced oil recovery technology. We have 
done some of that in the Kern County area in my district but 
what do you mean by next generation?
    Mr. Kuuskraa. This would be a step forward in terms of the 
efficiencies. Today's CO/2/ enhanced oil recovery 
might recover let us say 10 to 15 percent of the oil in place. 
Some of the very best ones. The type of technology we are 
talking about and I think Ms. Fairburn at EnCana and the 
practice they are using comes as close to it, and possibly what 
Exxon is doing comes as close to it, as the models we are 
thinking about which would push the recovery to 20 to 25 
percent, basically doubling what the----
    Mr. Costa. So that next generation, how far away? It sounds 
like it is taking place now.
    Mr. Kuuskraa. Well, pieces are----
    Mr. Costa. Not in the next generation.
    Mr. Kuuskraa. Pieces of it are. There are a number of 
things that we would need to bring together. Particularly, the 
way I like to describe it is, basically, put some headlights 
and a steering wheel on the CO/2/ process, not just 
push it down the hill, which is mostly what is being done today 
without being too critical.
    Mr. Costa. You talk about 40 billion barrels of oil using 
conventional techniques. Where did you get that number?
    Mr. Kuuskraa. That comes from the studies that I reference. 
The studies were done in response to Congressional language to 
look at how use of CO/2/ could be productively used to 
develop more of our domestic oil reserves. There is a series of 
10 reports. They cover essentially all of the U.S. except the 
Appalachians, unfortunately, and the deep water offshore.
    Mr. Costa. All right. I have some other questions with 
regards to the issue of the carbon tax credit issue but I will 
submit them for you to respond later on. Mr. Schlesinger, 
quickly before my time expires, you talked about the National 
Academy of Sciences and the report on no-till policies on 
agricultural areas. But it seems like an awfully small amount 
that would be said. We are talking about 4 and then we talk 
about 1 percent. Which of these figures is most accurate?
    Mr. Schlesinger. Those figures are the percent of current 
emissions of carbon dioxide from the U.S. that could 
potentially be sequestered in agricultural soils. Generally 
speaking the estimates have ranged from 1 to 4 percent at best. 
So the----
    Mr. Costa. Seems minuscule. I do not know.
    Mr. Schlesinger. What is that?
    Mr. Costa. Seems minuscule.
    Mr. Schlesinger. It is very small.
    Mr. Costa. In the bigger picture.
    Mr. Schlesinger. Yes. Everybody likes soil and organic 
matter, but it is not going to make a huge difference to 
atmospheric carbon dioxide levels.
    Mr. Costa. My time has expired but not for the gentleman 
from New Mexico who is next in line.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Costa. You are at the plate.
    Mr. Pearce. Mr. Schlesinger, in answer to Mr. Brown and Mr. 
Shuster you had mentioned that it is the perturbation that is 
the problem. What was the perturbation that occurred to create 
those seashells 25 miles inland? In other words, that is quite 
a long distance. So there had to be some disturbance that 
caused enough warming to create a rise in the sea level.
    Mr. Schlesinger. Both that and the coastline itself has 
been in some kind of up and down movement as well. Deposits 
like that undoubtedly date back into the Pleistocene where we 
went through glacial and interglacial epics.
    Mr. Pearce. But what caused the melting? I mean you had to 
have a change in the earth's temperature.
    Mr. Schlesinger. In the position of the earth and the tilt 
of the earth relative to the sun--what are known as 
Milankovitch cycles--that play out over hundreds of thousands 
of years. For the last 8,000 to 10,000 years carbon dioxide--
and that includes all of organized human society--language, 
cities, culture, money, all of that, agriculture--carbon 
dioxide levels and temperature have been remarkably stable.
    Mr. Pearce. New Mexico is at 3,600 MSL, mean sea level, and 
we have great indicators of inland oceans there. So you do not 
have the seashore moving up and down causing that. I used to 
hunt arrowheads all over in New Mexico, and you would just find 
seashells laying out there everywhere, and the great 
indications are that the sea existed there. So there have been 
some previous perturbations.
    Mr. Kuuskraa, you had mentioned that it is a fairly 
expensive process. At what dollar value of oil does the 
reinjection of CO/2/ become economic?
    Mr. Kuuskraa. There is no single number even today.
    Mr. Pearce. Just approximately.
    Mr. Kuuskraa. Sure. You would need a price of somewhere 
between $30 and $40 for the very best fields, and you would 
need prices of $50 to $70 for the more average or let us say 
typical fields, and then the remnants--and there are many of 
those--you really need just new technology to make it efficient 
enough to bring those on.
    Mr. Pearce. Ms. Fairburn, you had also testified about 
this. You testified about your project, and I have seen 
projects very similar, and am appreciative of them. If you were 
to take a look at all oil fields in the U.S.--and I am just 
asking you because you are probably the best here today to make 
a guess and I understand it is going to be a guess--what 
percent of those oil fields open would be potential candidates 
for the reinjection like you are doing in large scale there in 
Canada?
    Ms. Fairburn. While I could answer the question, I know 
Vello is an expert in this.
    Mr. Pearce. You bet. Why don't you take a stab at it, and 
we are going to give him a second shot at it, but I want him to 
know he is second fiddle on this deal to you. No. I am just 
joking.
    Ms. Fairburn. From what we are aware of, the State of Texas 
is probably where the best opportunities are, and California 
offers some good candidates as well. So generally in that area. 
A little bit in Appalachia and we focused a lot in Canada in 
terms of where the potential is there.
    Mr. Pearce. Would you just go to any one of your fields and 
put it in? Is it a thing you have to be cautious with? That is 
what I am trying to get a broader understanding of.
    Ms. Fairburn. Very good. Take Weyburn as an example. It 
took years of technical analysis--now granted, the technology 
has evolved since then--to make sure that the geology was 
appropriate plus negotiations with an adequate CO/2/ 
supplier. You need to have a CO/2/ supply that is 
quite pure, and the supply in North Dakota was a good fit for 
us. It was only 200 miles away, and because it comes from the 
gasification it was quite pure, and a lot of discussions have 
to go on with all the landowners in the area, the property 
rights owners underground, to pull that all together. So that 
is what is required. So each project is unique.
    Mr. Pearce. OK. Mr. Kuuskraa, not on that. We are in the 
short rows here but how big a cost is the transportation? In 
other words, how close does your CO/2/ have to be to 
be economically viable to reinject? And I think both of you--in 
fact, Mr. Chairman, this is a super panel--I think if we took 
both panels and us as policymakers and sat around for a couple 
of days I think we probably could reach a balance, but go 
ahead.
    Mr. Kuuskraa. It depends on the volume of CO/2/. 
With big pipelines, you can bring it down like currently takes 
place in Permian Basin. With a smaller volume, like at Weyburn, 
you can pipeline it about 200, 300 miles. So it is a volume 
type of issue. The costs are not outlandish. CO/2/ 
once you compress it works somewhat like a fluid, and so it is 
cheaper to transport. Packs together very well.
    Transportation costs might be on the order of let us say 50 
cents an mcf, which would be what? About $8 a ton or so of 
CO/2/. About half of our U.S. oil fields would be 
amenable to CO/2/. We have looked at all the large 
ones in the country. Not all of those are economic but a large 
portion are.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Grijalva. [Presiding.] Thank you, sir. Dr. Schlesinger, 
let me thank you for being here. In your testimony you state 
that we should not sacrifice old growth forests to increase the 
nation's carbon sequestration. Could you elaborate on the point 
about the net release of carbon dioxide into the atmosphere 
when an old forest is cut?
    Mr. Schlesinger. When you cut an existing old growth 
forest, not only is a lot of the material left in the slash 
that decomposes so it used to hold carbon and now it is 
returning carbon dioxide to the atmosphere, but very typically 
the product stream out of that forest enters into products, 
wood and paper and things, that have relatively limited 
lifetimes. Houses are probably the longest. Pizza boxes and 
things like that probably relatively short lifetimes, and those 
are either burned or decompose and return carbon dioxide to the 
atmosphere.
    So the sequestration needs to balance the loss of carbon 
that used to be stored in an old growth forest against the 
uptake with what you replant there, and typically that comes 
out to be a wash or even negative. There is a disadvantage to 
carbon sequestration by cutting old growth.
    Mr. Grijalva. Yes. Let me just talk a little bit with you 
about your testimony regarding reforestation and the role that 
can play in the carbon sequestration process. Last Congress at 
a hearing on reforestation we heard testimony from Dr. Jerry 
Franklin that emphasized the importance of structurally 
complex, gradual reforestation for ecological diversity. That 
is the point he was making. Could you address reforestation 
objectives from a forest health perspective, and why we need to 
avoid the pitfalls of plantation style reforestation?
    Mr. Schlesinger. Right. Plantations are vulnerable to lots 
of things, particularly fire and insect attack. If you have a 
species, a single species plantation that is subjected to 
either insects or other kind of pathogen, it could wipe the 
whole project out.
    So that a healthy forest--and Jerry Franklin is certainly 
one of the nation's premiere people to testify on that--is one 
that has trees of a variety of species, at a variety of ages, 
an under story and an over story that has the biological 
diversity that essentially becomes a self-protection for it. It 
will harbor certain kinds of predatory insects and birds that 
will keep down populations of things that might wipe out a much 
less diverse forest. And typically if you look at carbon 
sequestration rates, they are not terribly different between 
the plantation and the mixed diversity, mixed age forest.
    Mr. Grijalva. Thank you. Mr. Goergen, did I say that 
correctly?
    Mr. Goergen. It is Goergen, but that is fine.
    Mr. Grijalva. Goergen. Thank you, sir. A recent hearing 
that we had on the impacts of climate change on public lands we 
heard testimony from Dr. Anthony Westerling who said that most 
of the increase in forest wildfire is due to climate change and 
earlier springs. You state in your testimony, if I am not 
mistaken, that the wildfires are largely the result of an 
increase of hazardous fuels in our forest. Do you agree with 
Dr. Westerling's published study that climate change increases 
wildfire activity in our forests out west or not?
    Mr. Goergen. There definitely is an impact from climate 
change on fire severity. There is no doubt about that but it is 
a combination of things. It is not so easy to say that there is 
one factor that is causing the problems that we have with 
forest health throughout the western U.S. and on a lot of the 
national forest lands. There are multiple factors, and if the 
climate is changing at the rate that the models seem to 
predict, what we need to do is be prepared for the future, and 
that is going to require management of forests to make sure 
that we can reduce the risk of that catastrophic fire.
    Mr. Grijalva. Right.
    Mr. Goergen. And make sure that those systems are 
functioning within the range that that new climate is going to 
be, and so, for example, the Hayman Fire in Colorado in 2002, 
that fire actually released as much carbon as all the cars in 
that state that year. So we have to be careful with what we can 
accomplish by reducing the risk of catastrophic fire on 
national forest lands.
    Mr. Grijalva. But nevertheless climate change being a 
factor in that wildfire activity?
    Mr. Goergen. Absolutely. There is a link between all of 
these factors, and as we plan for the future, we really need to 
look at managing for what that future climate is going to be, 
not based on 200, 400 years ago when the climate was 
significantly different than it will be in the future.
    Mr. Grijalva. I do not have any questions. Mr. Sarbanes, do 
you have any questions, sir?
    Mr. Sarbanes. Thank you, Mr. Chairman. A number of you--and 
I am forgetting which because it is a large panel, I appreciate 
your testimony--talked about the importance of demonstration 
projects with respect to geological sequestration I guess was 
where we focused that, and we have also heard about how the 
amount of time it takes to judge the risks and benefits of this 
is pretty extended.
    So I wondered if you could speak to exactly how a 
demonstration project would work. What are the things that you 
would be looking at, and when would you be looking at them? In 
other words, how quickly could we kind of get back an 
assessment off of these demonstration projects? And for those 
dealing with the terrestrial sequestration, is there a similar 
opportunity to do demonstration projects in that area? I would 
imagine it might be a little more difficult to do but maybe you 
could speak to that as well.
    Mr. Herzog. I will start by taking a quick crack. In the 
MIT study, we look at these projects as 8 to 10-year type of 
timeframe. Two to three years upfront to do the planning and 
get ready for the injection, an injection period of four to 
five years, and then two to three years afterwards of post 
injection monitoring and analysis of all the data. So you are 
looking at about 8 to 10 years.
    What you really want to do is really instrument this well, 
both methods such as seismic but also methods such as 
monitoring wells to take samples. So you really want to monitor 
this well and that, of course, takes some time up front in that 
first two to three years to set up also.
    Mr. Sarbanes. And are there a number of alternative methods 
that you would be testing the different methods with these 
demonstration projects? Is that how you envision it, a sort of 
a bundle of demonstration projects work?
    Mr. Herzog. Well what we are looking at--I think the 
biggest difference between--we say we should maybe do three to 
five in the United States, maybe 10 worldwide. You want to look 
at different geologies because not every saline aquifer is the 
same. Some are high permeability. Some are low permeability. 
Some are carbonate reservoirs. Some are silicate reservoirs. So 
you want to sort of have a representative geology, and we 
should pick here in the U.S. the geologies which are our 
biggest resources to look at.
    Mr. Sarbanes. Right. OK. And what about in the terrestrial 
sequestration area?
    Mr. Kelly. Congressman Sarbanes, in terms of demonstration 
projects, I would say there has been a history over the last 
seven years of a number of large scale reforestation projects 
in the Louisiana, Mississippi delta that has already taken 
place, and a lot of these projects were done by utilities. A 
group called UtiliTree which was kind of a mutual fund of 
utilities actually trying to plant and reforest trees to 
sequester carbon.
    The bigger issue is what standards are these projects going 
to be held to, and as a result, that dictates different 
results, and so in the voluntary market people are planting 
trees left and right but there is not real strict standards. In 
the regulatory marketplace you have heard a description under 
the RGGI context where there are very strict standards. And so 
that really is the issue that dictates the type of projects 
that are out there but there has been a host of them.
    Mr. Sarbanes. Thank you.
    Mr. Grijalva. Thank you. Mr. Inslee?
    Mr. Inslee. I am going to try this out. I thank you. 
Through our discussion of global climate change we repeatedly 
hear references that 96 or 97 percent of the CO/2/ 
going in the atmosphere is natural. It is part of the natural 
cycle. We are only responsible for the 3 or 4 percent. It is 
the Alfred E. Neuman theory of chemophysics that we should not 
worry then. What me worry?
    And I have been trying to think of the right metaphor. I 
want to try one out on some of you that it is like our diet. We 
have kind of a balance. I weigh about 200 pounds. There is a 
kind of a balance to what I take in and what I burn up. It is 
pretty much in balance, at least in a good month anyway. It is 
pretty much balanced.
    But if I eat an extra doughnut a day, just a doughnut, I 
think I would probably gain at least four pounds a year. Just 
one doughnut a day. And then the next year I would gain another 
four pounds, and then the next year another four pounds, and 
then in 20 years I would weigh 280 pounds. Just one doughnut a 
day, and I would only be increasing my caloric intake by 3 to 4 
percent, but I would weigh 280 pounds.
    Now is that at least a rough metaphor for why our 3 or 4 
percent increase in the rate of CO/2/ going in the 
atmosphere is something we should worry about and not adopt the 
Alfred E. Neuman approach?
    Mr. Schlesinger. I will take that one. I had not thought of 
the doughnut analogy but I think it is not bad and, of course, 
when we talk about carbon sequestration that is the equivalent 
of saying, OK, are you going to spend an extra hour on a 
treadmill somewhere to balance that doughnut? We are all in the 
business and for 150-or-so years we have been in the business 
of putting carbon dioxide from the earth's crust into the 
atmosphere. Until carbon sequestration began to be in vogue and 
talked about, we hadn't really talked about doing something the 
equivalent of the treadmill that would get it out of the 
atmosphere. So I like that analogy.
    Mr. Inslee. I will go with both of them. We will use both 
of them. Dr. Herzog, you talked about I think you said three 
potential sites for actually doing a program. How does that 
compare to the FutureGen project now?
    Mr. Herzog. I think the FutureGen project can be considered 
one of the demonstrations. It will eventually choose a single 
site. It is about the right size. I think hopefully they will 
have the monitoring equipment that will be sufficient to learn 
from it. So that could be considered one of the three to five 
that we would recommend.
    Mr. Inslee. Yes. Ms. Fairburn?
    Ms. Fairburn. I would like to make it clear that our 
project that we have been doing since 2000 is a very excellent 
example of carbon capture and storage with coal gasification in 
North Dakota. Extensive monitoring has been going on in 2000 to 
2004 as reported in the IA report. So I think you have one 
excellent example of a demonstration at commercial scale 
already performed.
    Mr. Inslee. Dr. Herzog, I am asking you to look in a 
crystal ball a little bit but can you give me your seat-of-the-
pants estimate of the number of coal facilities today that you 
think 20 years from now there is at least approaching a 
probability that we will have technology if we become 
aggressive about it? If we become aggressive about it. Roughly 
could you give us any parameters--what are the number of coal 
sites today where we have a coal-fired plant where we are using 
CGCC or some technology where sequestration is likely to be an 
option? Any estimate at all? Ten percent of the existing 
plants? Fifty? Eighty? Just kind of any sense of that at all?
    Mr. Herzog. How many years from today?
    Mr. Inslee. Say 20 years from now.
    Mr. Herzog. Well I will say the number is less than 10 
percent, and part of it is until we get the economic incentive 
out there, it is a problem.
    Mr. Inslee. Yes. Let me rephrase my question. Assuming we 
have a cap and trade system which creates a real economic 
incentive for sequestration, makes it economically competitive, 
assuming the Federal government gets active and really makes a 
major league investment like the Apollo project, if we really 
make this a high priority, what is sort of in the realm of the 
feasible?
    Mr. Herzog. You know retrofits are going to be difficult. 
So I think where you will see this coming in is a lot with new 
builds and building it directly because that is going to be 
less expensive than the retrofits. I think eventually as you 
see capital stock turnover, which may happen over decades, then 
I think you start seeing the----
    Mr. Inslee. So maybe let me ask this. Of the plants that 
you would see going in, of the new plants, kind of what rough 
percentage or fraction could you think making sequestration 
possible?
    Mr. Herzog. Depending on the policy, it could be close to 
100 percent of the new plants.
    Mr. Inslee. Thank you. I have one more question I wanted to 
ask quickly, Mr. Goergen. Dr. Schlesinger basically said that 
there is a net disadvantage for taking out old growth forests 
and replanting with fast growing. There is a net disadvantage 
from a CO/2/ perspective. Do you agree with that?
    Mr. Goergen. I do not know anyone that is credibly talking 
about cutting down old growth for carbon storage. I do not 
think that that is even a realistic option for most folks. If 
you look at the carbon balance of it, I am not sure if it is a 
negative. It is probably a wash.
    Mr. Inslee. OK. There are some people because they were in 
my office last week. Thank you.
    Mr. Goergen. I said credibly, Mr. Inslee.
    Mr. Grijalva. Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman. Mr. Schlesinger, you 
had mentioned that we have had 8,000 or 10,000 years of stable 
temperatures, but when I look at the chart from U.N. 
intergovernmental panel on climate change they show a swing of 
about 20 degrees over the last 1,000 years. In other words, the 
medieval period is about 10 degrees warmer, and a little ice 
age about eight and a half degrees cooler. Does that fall 
within your definition of stable temps for the last 10,000 
years or do you disagree with intergovernmental?
    Mr. Schlesinger. I would have said that the numbers you had 
were too high by a factor of 10. Yes.
    Mr. Pearce. So you think the U.N. has----
    Mr. Schlesinger. Well----
    Mr. Pearce. These are degrees Celsius by the way. You can 
have staff carry it out there and let him look. If you say that 
we have a net carbon loss when we cut a tree, now we just 
recently did some work on my house over here on Sixth Southeast 
and it was built 100 years ago. Those two-by-fours that were 
put into place, do they just bleed out their carbon all of a 
sudden? If the wood is not decayed, does it lose its carbon?
    Mr. Schlesinger. No. As long as the house is standing there 
and the two-by-fours are there, that is a sink for carbon.
    Mr. Pearce. So we would have an incentive to go ahead and 
use the tree. If we cut the trees down, then we do not 
contribute back to the carbon. So we use them as forest 
products like Mr. Goergen says we can really reverse that net 
loss trend. Mr. Herzog, you had mentioned kind of the strenuous 
liability that we need to be very careful with this 
reinjection. That there are definite problems.
    You had mentioned the government liability. In other words, 
I contemplate that also because again you see it up close, and 
you see the volatility, and that is something that we work with 
but that is something you want to be careful with. Do you have 
any idea what the liability might be nationwide for this sort 
of large scale reinjection?
    Mr. Herzog. Yes. I actually think it could be fairly 
minimal because I think if the sites are well chosen and before 
the companies turn the sites over to the government there is 
some very strict guidelines on best practices, I think the 
chance of leakage is fairly small and, as it says in the 
literature, as time goes on, the CO/2/ in the ground 
gets immobilized. The pressure goes down. The CO/2/ 
loses its buoyancy through absorption in both the soil and the 
water so the chances of leakage goes down. But the companies, 
especially the utility companies I speak with, just do not want 
to take on that risk.
    Mr. Pearce. Mr. Kuuskraa, if we contemplate the use of 
these carbons to reinject in oil fields, now up near Clayton, 
New Mexico--the Bravo Dome--is where we take our carbon from 
and take it down to Denver City, Texas. So about 400 miles I 
guess, 300 miles something like that. At what level do we have 
to get the cost of the CO/2/ when we are talking about 
sequestering but you have to economically get it down to where 
it is as cheap as that we are getting out of the Bravo Dome and 
the transportation cost, and I would like your input and Ms. 
Fairburn's input. I mean help us. I understand the prospect but 
I do not know nationwide the economics of it.
    Mr. Kuuskraa. Sure. Let me take a stab at this. There is no 
true market for CO/2/ because of certain limitations 
but it is probably on the order of $20 a ton give or take your 
distance from the source.
    Mr. Pearce. OK. Ms. Fairburn?
    Ms. Fairburn. I concur with the $20 a ton number, and as 
information a lot of the cost of CO/2/ would be much 
greater than, maybe $50, $80 from power plant CO/2/ to 
get it pure enough. So that is one of the huge challenges out 
there right now.
    Mr. Pearce. OK. Mr. Kelly, you talked about mitigation. 
There have been articles about fraud in mitigation. Are those 
articles factual? In other words, people are either cooking the 
books or claiming stuff that cannot be claimed? Are those 
factual articles or do you think there is no fraud in those 
mitigation projects?
    Mr. Kelly. I am not quite sure of the articles you are 
referring to but I will say mitigation banking is the most 
heavily regulated industry of all forms of mitigation. We are 
subject to an entitlement process that sometimes takes three 
years with over 12 agencies participating. We then get our 
credits released over a five-year timeframe.
    Mr. Pearce. So you think the articles are not correct?
    Mr. Kelly. I think there are probably some factual 
misrepresentations and some taken out of context.
    Mr. Pearce. Mr. Schlesinger, I will give you the last time 
to respond to that one chart there if you want to as my time 
elapses. You can take the rest. Thank you.
    Mr. Schlesinger. Right. So this chart is not a chart that 
shows the change in temperature over the last 1,000 years or so 
but the absolute temperatures, and the changes are less than a 
degree from today. Less than a degree colder during the cold 
periods and about a degree warmer during the warm periods. So 
there----
    Mr. Pearce. That median line, there is a median line 
running through the chart that says that is the 20th century 
average temperature.
    Mr. Schlesinger. Right.
    Mr. Pearce. And it goes 10 degrees warmer during the 
medieval period.
    Mr. Schlesinger. No. But the 20th degree average 
temperature is at 9.3 degrees. So when you see it go up to 10, 
that is a .7 degree change. That is relatively small.
    Mr. Pearce. So the scale on the chart is----
    Mr. Schlesinger. It is the absolute scale not the change.
    Mr. Pearce. Why is that line not just flat there showing 
that it is about the same? Point seven tenths of a degree is a 
very narrow parameter. But my time has elapsed, Mr. Chairman. 
You can answer that in writing if you would like but there are 
people who say that it was tremendously warmer in the middle 
ages than now, and it was tremendously colder at other times. 
They say that is the reason that we have seashells at 3,600 
feet elevation in New Mexico. Thank you, Mr. Chairman.
    Mr. Grijalva. Thank you, Mr. Pearce. Let me thank the 
witnesses for your very valuable testimony. The members of the 
Subcommittee may have some additional questions. We are going 
to keep the record of this hearing open for 10 days, with the 
expectation of getting your responses if questions are directed 
to you. There is no further business before the Subcommittee, 
and again thank you to the members of the Subcommittee and our 
witnesses, and with that the meeting stands adjourned.
    [Whereupon, at 4:40 p.m., the Subcommittee was adjourned.]

                                 
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