[Senate Hearing 110-425]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-425
 
                CARBON CAPTURE AND STORAGE TECHNOLOGIES 

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON ENERGY

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   TO

RECEIVE TESTIMONY ON THE CHALLENGES ASSOCIATED WITH RAPID DEPLOYMENT OF 
          LARGE-SCALE CARBON CAPTURE AND STORAGE TECHNOLOGIES

                               __________

                      BISMARCK, ND, MARCH 26, 2008


                       Printed for the use of the
               Committee on Energy and Natural Resources

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
KEN SALAZAR, Colorado                JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel
                                 ------                                

                         Subcommittee on Energy

                BYRON L. DORGAN, North Dakota, Chairman

DANIEL K. AKAKA, Hawaii              LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    LARRY E. CRAIG, Idaho
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

   Jeff Bingaman  and Pete V. Domenici are Ex Officio Members of the 
                              Subcommittee

























































































                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Criswell, Gordon, Environmental Manager, PPL Montana, Billings, 
  MT.............................................................    27
Dorgan, Hon. Byron L., U.S. Senator From North Dakota............     1
Harju, John A., Associate Director of Research, Plains 
  Co2 Reduction Partnership, Grand Forks, ND..........    36
Klara, Scott M., Director, National Energy Technology Laboratory, 
  Department of Energy, Pittsburgh, PA...........................     7
Loop, Gary G., Chief Operating Officer and Senior Vice President, 
  Dakota Gasification Company, Bismarck, ND......................    41
Lovelace, Bonnie, Chief, Water Protection Bureau, Montana 
  Department of Environmental Quality............................    12
Spangler, Lee, Director, Big Sky Carbon Sequestration 
  Partnership, Bozeman, MT.......................................    31
Spisak, Tim, Division Chief, Fluid Minerals, Bureau of Land 
  Management, Department of the Interior.........................     4
Tabor, Sandi, General Counsel, Lignite Energy Council, Bismarck, 
  ND.............................................................    22
Tester, Hon. Jon, U.S. Senator From Montana......................     3

                                APPENDIX

Responses to additional questions................................    55


                CARBON CAPTURE AND STORAGE TECHNOLOGIES

                              ----------                              


                       WEDNESDAY, MARCH 26, 2008

                               U.S. Senate,
                            Subcommittee on Energy,
                 Committee on Energy and Natural Resources,
                                            Bismarck, North Dakota.
    The subcommittee met, pursuant to notice, at 10:34 a.m., in 
the Missouri Room, Bismarck State College, Hon. Byron Dorgan 
presiding.

 OPENING STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM 
                          NORTH DAKOTA

    Senator Dorgan. I am going to call the hearing to order 
this morning. This is a hearing of the Senate Committee on 
Energy and Natural Resources, the Energy Subcommittee of that 
full committee.
    The purpose today is an oversight hearing to receive 
testimony on the challenges associated with rapid deployment of 
large-scale carbon capture and storage technologies.
    Let me give a brief opening statement and then turn to my 
colleague, Senator Tester from Montana, who is also a member of 
the Senate Energy Committee for an opening statement, after 
which we will take testimony from witnesses.
    This is an interesting and challenging issue. Fifty percent 
of the electricity in this country comes from our coal 
resources. We are not going to see 5 or 10 or 20 years in the 
future a future in which coal is not used. We are going to 
continue to use our most abundant resource, that is coal. We 
have hundreds and hundreds of years of coal resources here in 
the Fort Union basin. The question is not whether we use coal. 
The question is how we use the coal.
    We are now coming to a different and challenging 
intersection in public policy, and that intersection is not 
just about energy policy. It's also about climate change and 
legislation that affects climate change.
    In June, the U.S. Senate will have on the floor of the 
Senate a climate change bill, the Warner-Lieberman bill. We 
will be debating that. At the same time that we discuss that, 
we also have to be mindful of the urgency of establishing 
targets and timetables for energy development that fit the 
needs of climate change, even as climate change has to have 
targets and timetables that fit the needs of this technology 
deployment that we are talking about today.
    I chair this subcommittee, but I also chair the 
subcommittee on appropriations that funds the energy and water 
programs in our country. I have added in the past year $71 
million above President Bush's budget for the issues of clean 
coal and carbon capture and enhanced oil recovery with carbon. 
I have done that because there is a real urgency to develop 
these pilot projects, to learn from them, and to determine what 
kinds of technologies will be deployable at commercial scale.
    There are many issues attendant to the issue of carbon 
capture. I was touring last week a pilot project in Arizona 
where they are capturing CO2 and using it to produce 
algae and then harvesting the algae for diesel fuel. It is a 
fascinating approach, because algae uses sunlight and consumes 
CO2 in water to produce diesel fuel. It is one 
approach that might be used in commercial scale. They stopped 
the research on that 15 years ago. As chairman of the 
subcommittee last year, I put some money in to begin that 
research once again, and we have some pilot projects going on.
    A company from Texas came to us and said they have two 
small pilot projects in which they are taking the flue gas from 
plants and chemically treating it, and it produces hydrogen. It 
produces baking soda and produces chloride. The CO2 
is stored in the baking soda and they simply landfill the 
baking soda. Would that not be interesting? Is that 
commercially deployable? I do not have any idea.
    What we are doing is taking a look at pilot projects to do 
a lot of innovative, interesting things in capturing 
CO2 and sequestering it or using it.
    Now, some of the challenges are, what about the risks? For 
example, if you capture CO2 and use it for enhanced 
oil recovery, you are sticking it underground. You enhance oil 
recovery. That is a benefit. So you have beneficial use of 
captured CO2. You protect the air shed on the one 
hand and you enhance oil recovery on the other hand. But what 
are the risks of sequestering underground? Will it leak? Will 
it leach? If so, who has the liability for that?
    All of these questions are questions that overhang the 
proposition that Senator Tester and I are interested in. What 
is commercially capable of being done to capture 
CO2, sequester CO2, and to unlock the 
opportunity for us to continue to use our vast coal resources 
without injuring our environment?
    Montana and North Dakota are poised, I think, to become to 
two States in the Nation that can provide a significant boost 
to our country's energy development. We have vast coal 
deposits. We have oil and gas. We have the Bakken shale that 
straddles both States. We have a lot to offer our country. We 
have similar interests in trying to make sure that, as we move 
forward, we are not only leaders in the production of new 
energy, but we are leaders in the demonstration of new 
technologies of how to capture carbon, sequester carbon, use 
carbon in a beneficial way and, at the same time, protect the 
air and the environment in this country.
    Senator Tester is a very valuable member of the Energy 
Committee, and it is just many ways coincidence that the two of 
us from these two States serve in this position right now at a 
time that is very, very important to be answering the energy 
questions for the future. We want our States to be leaders, and 
that is the purpose of this hearing.
    This is a regional hearing that encompasses the interests 
not just of our region, but of our Nation and also the world 
because when we develop new technologies, we want it to be 
offered to the rest of the world. But we are here especially 
because we are concerned about the interests of our region as 
well. We want to do things. We want to continue to do them, and 
we want to do them right.
    So, Senator Tester, thank you for coming over this morning 
from Montana and being with me. Why do you not proceed, if you 
have an opening statement?

          STATEMENT OF HON. JON TESTER, U.S. SENATOR 
                          FROM MONTANA

    Senator Tester. I do. I want to thank you very much, 
Senator Dorgan, for holding this hearing. I also want to thank 
you for your leadership in energy issues over the past many 
years.
    It is very, very good to be here in North Dakota. It was a 
little over 100 years ago my great grandfather was tilling the 
soil about 200 miles east of here. So it is good to be back in 
the old country with you, Senator Dorgan. It is great to be 
here.
    I want to introduce a couple folks, if I might, from 
Montana: Bonnie Lovelace, who will be on this first panel, who 
is Bureau Chief of Water Protection at the Montana Department 
of Environmental Quality. We have got Lee Spangler, sitting 
toward the back of the room, who will be on the next panel, 
Director of Big Sky Carbon Sequestration Partnership at Montana 
State University; and Gordon Criswell, who is the Environmental 
Manager at PPL Montana, which happens to be our biggest power 
supplier in Montana.
    This topic is very, very important for both of our States, 
and we do share some of the same reserves in the lignite 
formation as well as some oil formations, the Bakken shale, 
Williston Basin.
    Montana is the sixth largest producer of coal in this 
country. It has the biggest reserves, about 120 billion tons. 
Coal, as Senator Dorgan said, is going to be a part of our 
energy future for a long time to come. So we have got to figure 
out ways that we can burn it in a way that does not put us out 
of business as people.
    So this hearing is important on those lines.
    There seems to be a perfect storm brewing. If you take a 
look at the climate change legislation that we are going to be 
taking up in the Senate here in June, along with the efforts to 
capture carbon because of CO2 impacts on the 
environment, along with ways to enhance our oil recovery in the 
oil fields, this really can be a win-win-win situation. But we 
need more research. We need more technology. We need everybody 
at the table. We need to figure out ways we can do things and 
do them right.
    As we move forth in this country, we have tremendous 
challenges as far as our energy portfolio into the future, and 
it does include renewables, but it also includes coal. How we 
develop the technology that revolves around carbon capture and 
transportation and storage is going to determine how successful 
we are economically as a country.
    This is a worldwide problem, and I refer back to when the 
President of France was giving a statement to the joint session 
of Congress about a year ago and said when it comes to climate 
change, the world is waiting for the United States to lead. The 
Inspector General said the same thing of the United Nations, 
said we are waiting for the United States to step up to the 
plate.
    We can do it. It is going to take a public-private 
partnership to get it done, but hopefully with the leadership 
of Senator Dorgan and the folks that are on these panels here 
today and the rest of the people in Congress; we can come up 
with some common sense solutions to a worldwide problem.
    So with that, thank you, Senator Dorgan, for bringing 
everyone here together today, and I look forward to the 
testimony.
    Senator Dorgan. Senator Tester, thank you very much.
    I want to introduce the first panel. We have Tim Spisak, 
who is the Fluids Manager Division Chief from the U.S. 
Department of the Interior in Washington, DC. We have Scott 
Klara, the Director of the Office of Coal and Power R&D, 
National Energy Technology Laboratory in Pittsburgh, 
Pennsylvania; and Bonnie Lovelace, the Chief of the Water 
Protection Bureau of the Montana Department of Environmental 
Quality.
    I would say to you and to all the witnesses that your 
entire statement will be made a part of the record, the 
permanent record, and we would ask that you summarize your 
statement. Mr. Spisak, we will ask you to go first.

STATEMENT OF TIM SPISAK, DIVISION CHIEF, FLUID MINERALS, BUREAU 
         OF LAND MANAGEMENT, DEPARTMENT OF THE INTERIOR

    Mr. Spisak. Good morning, Mr. Chairman and Senator Tester. 
Thank you for the opportunity to present BLM's views on carbon 
capture and storage.
    The challenges of addressing carbon dioxide accumulation in 
the atmosphere are significant. Fossil fuel usage, a major 
source of CO2 emissions to the atmosphere, will 
continue in both industrialized and developing nations. 
Therefore, within a number of Federal and State agencies, a 
variety of strategies are being investigated to reduce 
emissions and remove CO2 from the atmosphere. These 
strategies include the capture and long-term storage of 
CO2 by injection into geologic formations.
    As we discuss the various aspects of carbon sequestration, 
we should also consider the potential benefits associated with 
the resource. CO2 is a leasable commodity under the 
Mineral Leasing Act. The BLM currently collects revenues 
derived from the sale of carbon dioxide produced in connection 
with oil production on public lands. In 2007, the sale of 
CO2 generated over $23 million in royalty revenue in 
the States of Colorado, New Mexico, and Wyoming.
    The BLM currently approves the injection of CO2 
into existing oil fields to increase oil production. The 
benefits derived from carbon injection are not limited to 
enhanced oil recovery, though. Carbon injection in oil-bearing 
formations yields valuable data that will inform efforts to 
capture and sequester carbon dioxide effectively in geologic 
formations found on public lands.
    Public Law 110-140, the Energy Independence and Security 
Act of 2007, which the President signed into law this past 
December, includes provisions on carbon capture and storage 
that the Department is working to implement. In fiscal year 
2008, the Department will begin developing a methodology to 
conduct a national assessment of CO2 storage 
capacity in oil and gas reservoirs and saline formations. An 
independent panel of experts and stakeholder organizations will 
be convened to provide a technical review of the methodology.
    The Act includes provisions on carbon capture and storage 
that the BLM is implementing. Section 713 of the Act directs 
the BLM to maintain records on, and an inventory of, the 
quantity of carbon dioxide storage within Federal mineral 
leaseholds. The BLM will coordinate with the Minerals 
Management Service on changes that may be required to the oil 
and gas operations report that is used to collect production 
and injection data on Federal mineral estates.
    In addition, section 714 of that Act directs the Department 
to develop a framework for geological sequestration of carbon 
dioxide on public land and to report back to the committee by 
December 2008. This effort, coordinated among several agencies 
within the Department, will result in recommendations for: 
criteria for identifying candidate geological 
sequestrationsites in several specific types of geological 
settings; a proposed regulatory framework for leasing of public 
land or of an interest in public land for long-term 
sequestration; ensuring any geological carbon sequestration 
activities on public land provide for public review and protect 
the quality of the natural and cultural resources; additional 
legislation that may be required to ensure that public land 
management and leasing laws are adequate to accommodate the 
long-term geological sequestration of carbon dioxide; and 
additional legislation that may be required for issuing rights-
of-way for CO2 pipelines on public land.
    The report will also address legal and regulatory issues in 
split estate situations.
    It is clear that addressing the challenge of reducing 
atmospheric CO2 and understanding the effect of 
global climate change is a complex issue with many interrelated 
components. The assessment activities called for in the Act 
should ultimately increase the information base upon which 
decisionmakers will rely as they deal with these issues.
    In addition to addressing the challenges presented by 
carbon dioxide, we should also, again, recognize that this 
commodity provides continuing opportunities for future 
knowledge and use. Our experience demonstrates that there is a 
demand and a value to this resource.
    The Bureau now stands ready to assist Congress as it 
examines the challenges and opportunities presented by carbon 
sequestration. I thank you for this opportunity to present this 
testimony, and I am prepared to answer any questions that you 
may have.
    [The prepared statement of Mr. Spisak follows:]
   Prepared Statement of Tim Spisak, Division Chief, Fluid Minerals, 
         Bureau of Land Management, Department of the Interior
                              introduction
    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to be here today in Bismarck, North Dakota, to discuss 
large scale carbon capture and storage technologies. My testimony today 
will address the Bureau of Land Management's (BLM) perspective on 
carbon capture and storage as it relates to on-going and future work of 
the BLM, particularly with respect to implementation of Sections 713 
and 714 of the Energy Independence and Security Act of 2007 (EISA).
    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 for the foreseeable 
future 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 for the capture and storage of 
carbon dioxide through terrestrial sequestration using soils and trees, 
or by injection into geologic formations.
    Carbon injection techniques also have useful practical applications 
in processes known as enhanced oil recovery (EOR), which currently 
takes place on some public lands managed by the BLM. These processes 
often allow the recovery of additional energy resources from older oil 
and gas fields. Carbon dioxide is a leasable commodity under the 
Mineral Leasing Act of 1920. The BLM currently collects revenues in the 
form of royalties derived from the sale of carbon dioxide produced in 
connection with oil and gas production on public lands. In 2007, for 
example, the sale of carbon dioxide generated over $23 million in 
royalty revenue in the states of Colorado, New Mexico, and Wyoming.
    In addition to enhancing oil recovery, EOR's utilization of carbon 
injection may yield valuable data that will inform efforts to capture 
and sequester carbon dioxide effectively in geologic formations found 
on public lands. A critical issue for evaluation of storage capacity is 
the integrity and effectiveness of these formations for sealing carbon 
dioxide underground, thereby preventing its release into the 
atmosphere.
                       geologic storage of carbon
    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 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. How much of this carbon dioxide storage 
capacity would be economically feasible (assuming some price on 
carbon), however, is not known. Also, geologic storage capacity may 
vary widely on a regional and national scale. A more refined 
understanding of geologic storage capacity is needed to address these 
knowledge gaps.
    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. Most of the potential carbon 
dioxide storage capacity in the U.S. is in deep saline formations.
                            ongoing efforts
    The EISA includes provisions on carbon capture and storage that the 
BLM is implementing. Section 713 of EISA directs the BLM to maintain 
records on, and an inventory of, the quantity of carbon dioxide stored 
within Federal mineral leaseholds. The BLM is reviewing its current 
data collection structures and methods, including commercially 
available data, and will determine how this new data collection 
requirement can be incorporated into existing systems. The BLM will 
coordinate with the Minerals Management Service on changes that may be 
required to the Oil and Gas Operations Report that is used to collect 
production and injection data on Federal mineral estate. We do not 
anticipate any obstacles with collecting the additional information at 
this time.
    Section 714 of the EISA directs the Secretary of the Interior to 
submit a report containing a recommended framework for geological 
sequestration on public land to this Committee, as well as to the House 
Committee on Natural Resources, by December 2008.
    This effort, coordinated among several agencies within the 
Department of the Interior, is anticipated to result in recommendations 
relating to:

   criteria for identifying candidate geological sequestration 
        sites in several specific types of geological settings;
   a proposed regulatory framework for the leasing of public 
        land or of an interest in public land for the long-term 
        geological sequestration of carbon dioxide;
   a procedure for ensuring any geological carbon sequestration 
        activities on public land provide for public review and protect 
        the quality of natural and cultural resources;
   if appropriate, additional legislation that may be required 
        to ensure that public land management and leasing laws are 
        adequate to accommodate the long-term geological sequestration 
        of carbon dioxide; and
   if appropriate, additional legislation that may be required 
        to clarify the appropriate framework for issuing rights-of-way 
        for carbon dioxide pipelines on public land.

    The report will also describe the status of Federal leasehold or 
Federal mineral estate liability issues related to the release of 
carbon dioxide stored underground in public land, including any 
relevant experience from enhanced oil recovery using carbon dioxide on 
public lands.
    In addition, the report will identify issues specific to the 
issuance of pipeline rights-of-way on public land and legal and 
regulatory issues specific to carbon dioxide sequestration on land in 
cases in which title to mineral resources is held by the United States, 
but title to the surface estate is not.
    This effort will be undertaken in coordination with the 
Environmental Protection Agency, the Department of Energy, and other 
appropriate agencies.
                               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. The assessment 
activities called for in EISA should ultimately increase the 
information base upon which decision makers will rely as they deal with 
these issues. In addition to addressing the challenges presented by 
carbon dioxide, we should also recognize that this commodity presents 
certain opportunities for future knowledge and use. As a leasable 
commodity, our experience demonstrates that there is a demand and a 
value attributable to this resource. As we examine undeveloped oil and 
gas reservoirs, we should consider the potential benefits of accessible 
sequestered carbon dioxide. It is clear that the discussion on this 
subject will continue and the BLM stands ready to assist Congress as it 
examines these challenges and opportunities. Thank you for the 
opportunity to present this testimony. I am pleased to answer questions 
you and other Members of the subcommittee might have.

    Senator Dorgan. Mr. Spisak, thank you very much. I should 
have mentioned that Mr. Spisak has 23 years of government 
service with the U.S. Bureau of Mines, including service as a 
petroleum engineer and supervisory petroleum engineer, masters 
in business administration, bachelors in petroleum and natural 
gas engineering from Penn State. We appreciate your being here.
    Next, we will hear from Scott Klara. He is currently the 
Director for the Strategic Center for Coal at the National 
Energy Technology Laboratory. Mr. Klara is responsible for 
overseeing the Department's $500 million per year coal research 
and development program that consists of several hundred 
projects related to technology areas such as coal gasification, 
carbon sequestration, fuel cells, advanced turbines, coal 
liquids, and so on. He has over 20 years of experience in 
engineering and management. Mr. Klara, thank you for being with 
us. You may proceed.

    STATEMENT OF SCOTT M. KLARA, DIRECTOR, NATIONAL ENERGY 
  TECHNOLOGY LABORATORY, DEPARTMENT OF ENERGY, PITTSBURGH, PA

    Mr. Klara. Thank you, and I am pleased to be here. I 
appreciate the opportunity to provide comments and testimony on 
the Department of Energy's development of carbon capture and 
storage technologies as a potential solution to mitigate 
greenhouse gases. Throughout these remarks, I will refer to 
carbon capture and storage as CCS.
    As you are well aware, fossil fuels will play a critical 
role in the Nation's future energy strategy. CCS is a key 
pathway that the Department of Energy is pursuing to ensure the 
continued use of fossil fuels in a possible carbon-constrained 
world. We are working with the brightest minds in the country 
through research and development with government-industry-
academic partnerships that are focused on developing the 
knowledge base and technologies to overcome the issues 
associated with wide-scale deployment.
    The sequestration program specifically is addressing the 
key challenges that confront the wide-scale deployment of CCS 
technologies through research on cost effective capture 
technologies; monitoring, mitigation, and verification 
technologies to ensure permanent storage; permitting issues, 
liability issues, public outreach and infrastructure needs.
    The program has been performing sequestration field tests 
for many years where we are drilling wells and potential 
storage locations and injecting small quantities of carbon 
dioxide to validate the potential of these locations.
    Substantial progress has also occurred in the area of 
monitoring, mitigation, and verification, with the development 
and refinement of technologies to better understand storage 
stability, permanence, and the characteristics of 
CO2 migration.
    Research has also focused on the development of technology 
options that dramatically lower the cost of capturing carbon 
dioxide at fossil fuel power plants. This research is exploring 
a wide range of approaches. Some examples would include 
membranes, oxy-combustion concepts, solid sorbents, 
CO2 hydrates, and advanced gas/liquid scrubbing 
technologies. These efforts cover not only improvements to 
state-of-the-art technologies but also the development of 
revolutionary concepts. Some of these, for example, are metal 
organic frameworks, ionic liquids, and enzyme-based systems.
    A key centerpiece for the program is the regional carbon 
sequestration partnerships. Two of those will be represented in 
the next panel.
    Geographic differences in fossil fuel use and potential 
storage sites throughout the country dictate regional 
approaches in addressing CCS.
    The seven partnerships represent more than 350 unique 
organizations in 41 States, 3 Indian nations, and 4 Canadian 
provinces. Each partnership is focused on a specific region 
that has similar characteristics related to carbon capture and 
storage opportunities. Together these partnerships form a 
network of capability, knowledge, and infrastructure to enable 
carbon sequestration technology to play a major role in a 
national strategy to mitigate greenhouse gas emissions.
    Collectively, the partnerships represent regions 
encompassing 97 percent of CO2 emissions from coal, 
97 percent of industrial CO2 emissions, and 96 
percent of the total land mass of the United States, and 
essentially all geologic storage potential opportunities 
throughout the country.
    The partnerships have identified the most promising 
opportunities for carbon sequestration in their regions and are 
performing widespread multiple geologic and terrestrial field 
tests, more than 25 in total.
    The partnerships are also addressing key infrastructure 
issues related to permitting, pore space ownership, site 
access, liability, public outreach, and education.
    Over the course of these projects, the Department and the 
partnerships will jointly develop best practice manuals on 
topics such as site characterization, site construction, 
operations, monitoring, mitigation, closure, long-term 
stewardship, and all the issues you might imagine associated 
with putting commercial-scale projects on the ground. These 
manuals will serve as guidelines for a future geologic 
sequestration industry in their regions and help transfer the 
lessons learned from the Department's programs to all regional 
stakeholders.
    In summary, the Department's sequestration program is 
playing a key role in ensuring that CCS technologies will be 
available. The United States should continue to share 
leadership in technology development future deployment. This 
leadership could bring economic rewards in new business 
opportunities it creates here and abroad and provide important 
leverage to help speed engagement by developing countries like 
China and India.
    I applaud the efforts of this committee for taking the 
leadership role in this very important issue. I would be happy 
to engage in further discussions after the testimony. Thank 
you, Mr. Chairman.
    [The prepared statement of Mr. Klara follows:]
    Prepared Statement of Scott M. Klara, Director, National Energy 
      Technology Laboratory, Department of Energy, Pittsburgh, PA
    Thank you, Mr. Chairman and Members of the Committee. I appreciate 
this opportunity to provide testimony on the Department of Energy's 
(DOE's) development of Carbon Capture and Storage (CCS) technologies as 
a potential solution to mitigate greenhouse gas emissions.
    Fossil fuels will play an important role in the Nation's future 
energy strategy. In a scenario of a future carbon-constrained world, 
successfully developing technologies to mitigate the release of carbon 
dioxide (CO2) into the atmosphere will permit the continued 
use of fossil fuels. Economic growth has been shown to be tied to 
energy availability and consumption. However, we are striving to reduce 
the energy intensity of the economy, which would help decouple economic 
growth and energy availability and consumption. To retain coal, and to 
a lesser extent natural gas, as viable energy sources, CCS technologies 
must play a central role. CCS is a key pathway that DOE is pursuing to 
make the continued use of fossil fuels practical in a possible carbon-
constrained future.
    DOE is taking a leadership role in the development of carbon 
capture and storage technologies. Through its Carbon Sequestration 
Program, which is managed within the Office of Fossil Energy and 
implemented by the National Energy Technology Laboratory (NETL), DOE is 
developing both the core and supporting technologies through which CCS 
is expected to become an effective and economically viable option for 
reducing CO2 emissions. We are working with the brightest 
minds in the country through research and development (R&D) with 
Government-industry-academic partnerships that are focused on 
developing the knowledge base and technologies to overcome potential 
barriers to the widespread deployment of carbon capture and storage 
technologies.
    The Carbon Sequestration Program is addressing the key challenges 
that confront the wide-scale deployment of capture and storage 
technologies through research on cost-effective capture technologies; 
monitoring, mitigation, and verification technologies to ensure 
permanent storage; permitting issues; liability issues; public 
outreach; and infrastructure needs. As an example, today's commercially 
available capture and storage technologies will add approximately 80% 
to the cost of electricity for a new pulverized coal plant, and about 
35% to the cost of electricity for a new advanced gasification-based 
plant.\1\ The Program is aggressively pursuing developments to reduce 
these costs to less than a 10% increase in the cost of electricity for 
new gasification-based energy plants, and less than a 30% increase in 
the cost of electricity for pulverized coal energy plants (the 30% goal 
for pulverized coal energy plants is tentative and under development).
---------------------------------------------------------------------------
    \1\ Cost and Performance Baseline for Fossil Energy Plants, Volume 
1: Bituminous Coal and Natural Gas to Electricity, U.S. Department of 
Energy/National Energy Technology Laboratory, DOE/NETL-2007/1281, Final 
Report, May 2007.
---------------------------------------------------------------------------
    The Carbon Sequestration Program encompasses several key elements: 
Core R&D, Technology Validation, and Infrastructure Development. The 
Core R&D Program continues to make great strides toward meeting future 
technology needs. The Program has been performing CCS field tests for 
many years, drilling wells in potential storage locations and injecting 
small quantities of CO2 to validate the potential of key 
storage locations throughout the country. Substantial progress has 
occurred in the area of monitoring, mitigation, and verification with 
the development and refinement of technologies to better understand 
storage stability, permanence, and the characteristics of 
CO2 migration.
    Research is also focused on developing technology options that 
dramatically lower the cost of capturing CO2 from fossil 
fuel energy plants. The research in this area can be categorized into 
three pathways: post-combustion, pre-combustion, and oxy-combustion. 
Post-combustion refers to capturing CO2 from the stack gas 
after a fuel has been combusted in air. Pre-combustion refers to a 
process where a hydrocarbon fuel is gasified to form a mixture of 
hydrogen and carbon dioxide, and CO2 is captured from the 
synthesis gas before it is combusted. Oxy-combustion is an approach 
where a hydrocarbon fuel is combusted in pure or nearly pure oxygen 
rather than air and produces a mixture of CO2 and water that 
can easily be separated to produce pure CO2. This research 
is exploring a wide range of approaches: membranes; oxy-combustion 
concepts; solid sorbents; CO2 hydrates; and advanced gas/
liquid scrubbing technologies. These 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.
    A key centerpiece for the Program is the field program, which is 
being implemented through the Regional Carbon Sequestration 
Partnerships. The technologies, processes, and scientific knowledge 
necessary for carbon capture and storage depend in part on patterns of 
fossil fuel use and geology, which can vary between geographic regions 
of the United States, and even within regions. The Program is testing 
geologic storage in several different geologies in different regions of 
the country in order to build experience that will allow broad 
application of carbon capture and storage. The Regional Partnerships 
are teams comprised of state agencies, universities, and private 
companies with the goal of developing the knowledge base and 
infrastructure for the wide-scale deployment of carbon capture and 
storage technologies. The seven Partnerships represent more than 350 
unique organizations in 41 States, 3 Indian Nations, and 4 Canadian 
Provinces. It is important to note that the cost share for the Regional 
Partnerships is about 40% (including in-kind contributions of 
CO2, a major program cost), which indicates significant 
industry and other partner interest in the success of this program.
    Collectively, the seven Regional Carbon Sequestration Partnerships 
represent regions encompassing 97% of coal-fired CO2 
emissions, 97% of industrial CO2 emissions, 96% of the total 
landmass, and essentially all of the geologic storage sites in the 
country that can potentially be available for carbon sequestration. The 
field test program is structured with a three-phase approach.
    The first phase, called the Characterization Phase, was initiated 
in 2003 and focused on characterizing regional opportunities for carbon 
capture and storage, and identifying regional CO2 sources 
and storage formations. The Characterization Phase was completed in 
2005 and led into the current Validation Phase.
    The Validation Phase focuses on field tests to validate the 
efficacy of carbon sequestration technologies in a variety of geologic 
storage sites throughout the country. Using the extensive data and 
information gathered during the Characterization Phase, we identified 
the most promising opportunities for carbon sequestration in their 
regions and are performing widespread, multiple geologic field tests 
an--more than 25 field tests in total. We are also addressing key 
infrastructure issues related to permitting, space ownership, site 
access, liability, public outreach, and education. It is important to 
note that small-scale CO2 injection is already occurring at 
several sites throughout the country and in Canada. Our close 
cooperation with the Environmental Protection Agency (EPA) and other 
Federal and State agencies has led to favorable permitting decisions 
for these projects. We continue to work closely with EPA and others in 
developing CCS regulations, which will provide additional certainty 
regarding CCS project siting and development.
    The third phase, the Demonstration Phase, of the Partnerships was 
initiated in fiscal year 2008. This phase is focused on conducting 
large-scale injection tests in representative geologies to demonstrate 
that CO2 capture, transportation, injection, and storage can 
be accomplished at a scale equivalent to future commercial deployments. 
The geologic structures to be tested during these large-volume 
sequestration tests will likely serve as the candidate sites for 
initial deployment of future commercial applications of carbon capture 
and storage technologies. DOE is developing a peer-reviewed plan to be 
completed this spring that will identify the scientific and engineering 
test parameters to guide design and selection of large-scale tests. 
Items to be addressed include: rate of injection, duration of 
injection, and number and phasing of tests.
    Over the course of these field projects, DOE, with support from the 
Regional Carbon Sequestration Partnerships, will develop Best Practice 
Manuals on topics such as site characterization, site construction, 
operations, monitoring, mitigation, closure, and long-term stewardship. 
These Manuals, which will be developed in conjunction with DOE's Office 
of Science, will serve as guidelines for a future geologic 
sequestration industry, including regional considerations, and help to 
transfer the lessons learned from DOE's Program to all stakeholders.
    DOE recognizes the importance of developing the talent base in 
engineering, science, trades, law, and government. These disciplines 
will be necessary for a future sequestration industry. Partners such as 
industry, universities, and government see the need to train students 
and professionals in carbon capture and storage. DOE research and field 
projects can serve as the foundation for training grounds, future text 
books, and case studies that will educate the future workforce for 
carbon capture and storage deployment.
    Of particular note relative to Program accomplishments, the 
Sequestration Program has produced the world's first CO2 
source/sink database--the ``National Carbon Sequestration Database and 
Geographical Information System (NATCARB).'' NATCARB provides a 
graphical user interface on the internet that allows users to search 
regions of the country for CO2 sources and geologic storage 
locations. NATCARB is constantly updated with emerging information 
through databases that are maintained by the Regional Partnerships, as 
well as databases from the Environmental Protection Agency and the 
United States Geological Survey. NATCARB is available ``free of 
charge'' on the internet and is now receiving over 600 unique users per 
month from across the world.
    The Sequestration Program has created a national methodology to 
assess the capacity for CO2 storage in the United States and 
Canada. A National Atlas (another world first) was generated using 
NATCARB. The ``2006 Carbon Sequestration Atlas of the United States and 
Canada'' shows the aggregate CO2 storage capacity for 
geologic formations in the United States and parts of Canada to be 
estimated at over 3,500 billion tons, enough capacity to store more 
than 600 years of the United States total CO2 emissions at 
current annual generation rates. The Atlas, along with these storage 
estimates, will be updated every few years as emerging new information 
is incorporated into the NATCARB database.
    In summary, CCS will likely play an important role in mitigating 
CO2 emissions under potential future stabilization 
scenarios. The Department's Sequestration Program is playing a key role 
in ensuring that carbon capture and storage technology will be 
available. The United States should continue to show leadership in 
technology development and future deployment. This leadership could 
bring economic rewards in the new business opportunities it creates 
here and abroad, and through the Carbon Sequestration Leadership Forum 
and other organizations, it will provide important leverage to help 
speed engagement by critical developing countries like China and India. 
I applaud the efforts of this Committee for taking a leadership role in 
this very important issue.
    Mr. Chairman, members of the Committee, this completes my 
statement. I would be happy to answer any questions you may have.

    Senator Dorgan. Mr. Klara, thank you very much.
    Next, we will hear from Bonnie Lovelace, the Chief of Water 
Protection Bureau at the Department of Environmental Quality in 
Montana. She has managed the subdivision, reviewed it as part 
of the Water Protection Bureau. Prior to managing that, she 
worked 12 years in the coal mining regulation program serving 
as bureau chief for 9 years. A B.S. in geology, mathematics, 
and M.S. in geology.
    Ms. Lovelace, you may proceed.

 STATEMENT OF BONNIE LOVELACE, CHIEF, WATER PROTECTION BUREAU, 
          MONTANA DEPARTMENT OF ENVIRONMENTAL QUALITY

    Ms. Lovelace. Thank you, Mr. Chairman and Senator Tester. I 
appreciate the opportunity for the State of Montana to be here 
today.
    I need to talk to you a little bit today about what a 
robust regulatory program might look like. Montana's 
legislature is real busy right now with an interim committee 
studying carbon sequestration. We have heard from industry. We 
have heard from the agency now, and we are taking a hard look 
at it. I do not know at this point whether there will be any 
legislation resulting from that effort, but we are certainly 
getting an education, and I appreciate the fact that you are 
too.
    We are concerned about the pollution risks of carbon 
sequestration. Industry has indicated that if they take carbon 
out of the flue gas, they can take about 90 percent of the 
pollution out of there. The pollution that is there is whatever 
is going up the stack. So whatever kind of industry that is, if 
it is a power plant, it is what is in the coal. If it is an 
incinerator, it is whatever is being incinerated. So those are 
the pollutants we are concerned about.
    The 10 percent that they cannot get is what would go into 
the ground. We are concerned about leakage to the surface. We 
are concerned about pollution of groundwater, and we are 
concerned about the interaction of those chemicals with the 
geology itself. Certain pH levels can mobilize metals and that 
is a broad range, and the actual pollutants themselves can 
mobilize metals and other pollutants, break it down in the 
geology, if you will, and mobilize those pollutants.
    So what we would be asking for would be a robust regulatory 
scheme that would cover those things, and I would like to 
describe a little bit what that might be.
    We think all of the pollutants that are being injected need 
to be identified. An analysis of the site and how it would 
interact with those pollutants would be important. We would 
like to have proper definition of the extent of the area for 
those analyses. A line on a map that says you are injecting 
here may not be enough. What is happening underground may be 
bigger than that.
    We would like to see stringent requirements for injection 
well construction, and of course, that is an engineering 
aspect.
    We would like to see engineering and testing of all the 
wells and the distribution network.
    We would like to see long-term monitoring; assurances of 
some financial responsibility, assurances that they will have 
the ability to manage the site properly; site safety 
requirements and perhaps bonding; well closure plans. Then 
after the wells are closed how the site in post-closure is 
going to be operated and managed and fully maintained.
    Public participation has to be an important part of any 
regulatory scheme, and then the ongoing liabilities. I 
appreciate your comments on that, Senator Dorgan. Clearly what 
they are, and we support that entirely and that those all be 
looked at. Of course, any regulatory scheme has enforcement 
provisions and should.
    The State of Montana has looked at the IRGCC proposed 
regulations, and a lot of these pieces are missing from those. 
They acknowledge that they were not trying to do all of that, 
but we would want to see that.
    The EPA is writing regulations under the Safe Drinking 
Water Act and possibly a new class--we are not sure yet, but a 
possible new class of underground injection control. We 
certainly would want to look at that in the State of Montana. 
However, when we obtained our Class II authority through the 
EPA that took a good 10 years. We cannot do things that slowly. 
So we would certainly like any help that we get, if that is 
going to happen on an expedited process and freedom for the 
States to move more quickly with that, more quickly as history 
has shown.
    In Montana, we have a Water Quality Act and then we have 
the oil and gas regulation. They intermix in this case. When 
you are talking about enhanced oil recovery, then we are going 
to have one regulatory scheme. If enhanced oil recovery is over 
and it can't be used, when we are talking about putting carbon 
sequestration into our groundwater, that is a different 
setting; and so different laws will come into play. I guess my 
point there is that we are operating under our existing laws. 
They may need to be changed and States may need time to do that 
and consider those possibilities.
    The liabilities, obviously, have three main parts: when 
they are operating and putting it in the ground, the storage 
period, and then what if they take it out in the future. So we 
need to cover all of those aspects.
    We need help with startup programs and funding. Montana has 
a fee program and will not have anybody to charge fees here to 
start a program. It would have to be existing to do that.
    Then finally, it was addressed earlier, the split estate 
issue. Montana does have a lot of split estates, where they 
have a lot of checkerboard patterned land. We think the pores 
will be owned by the surface owners. This has never been tested 
in court. But how that would interact with mineral owners in 
the future will be, I think, resolved by the courts and we do 
not have any good answers.
    [The prepared statement of Ms. Lovelace follows:]
Prepared Statement of Bonnie Lovelace, Chief, Water Protection Bureau, 
              Montana Department Of Environmental Quality
    The State of Montana greatly appreciates the leadership the 
Committee has quickly taken to inform themselves of the issues 
surrounding carbon capture and storage. There can be no question that 
energy needs combined with climate change and general environmental 
impacts are causing us to take a close look at opportunities to conduct 
our business differently than we have in the past. Carbon capture and 
storage are at the forefront of methods being considered for handling 
the pollutants affecting our environment.
                               the issues
    Montana has embarked upon some study of the issues surrounding 
possible capture and storage of carbon dioxide. Our legislature during 
the last legislative session considered but did not pass legislation 
establishing a regulatory scheme for capture and storage. In the 
interim between legislative sessions a legislative committee is 
studying capture and storage and the myriad of issues involved with its 
practice.
    Parts and pieces of the practice of putting carbon dioxide in the 
ground are well known. The oil industry has successfully used 
pressurized carbon dioxide for enhanced oil recovery for many years. 
However, we also know that if, on a large scale, we capture flue gas, 
pressurize it and put it in the ground, the oil industry cannot use all 
that would be produced. We know that designing and building the 
infrastructure for moving the pressurized carbon dioxide is possible 
and, in fact, there is a history of success.
    I would like to address what we do not know and what should be 
included in a robust regulatory scheme if we begin to capture flue gas 
from carbon dioxide emitters and put it in the ground.
    Carbon dioxide becomes problematic when we take it in a polluted 
form, pressurize it and try to store it in the ground where it may move 
where we don't want it, mix with water or mobilize metals.
    In Montana, fly ash from burned coal has been found to contain a 
number of pollutants including Boron, Selenium, Arsenic, Mercury, 
Sodium, Potassium, Magnesium, Sulfate, Calcium, Chloride and 
radioactive material. If we add cement plants to the group of 
facilities capturing emissions for sequestration, then we add more 
pollutants to the mix. The possible pollutants increases as types of 
processes are added to the universe of those capturing the emissions. 
The best numbers we have heard regarding cleaning the pollutants from 
the flue gas is about 90%. That leaves 10% of the pollutants that could 
be in the liquid put under ground. Once underground, the carbon dioxide 
and companion pollutants may: 1) work their way to the surface where 
pressure loss will return it to a gaseous and deadly state, 2) may move 
with groundwater as a pollution plume, and 3) may interact with the 
geologic body and mobilize more pollutants. In the best of 
circumstances, the polluted carbon dioxide will stay put in the 
location chosen for it.
                          a regulatory scheme
    The best scenario for sequestration would be to select proper sites 
that will hold the carbon dioxide in the chosen location, use only 
those types of sites, engineer the injection facility to the best 
controls and to monitor over the long run to be sure the carbon dioxide 
stays in place. A proper regulatory program would include permitting 
requirements to cover:

   Identification of all pollutants in the injected substance
   Site characterization to include analysis of substance 
        volumes injected, buoyancy analysis, viscosity factors, 
        corrosivity analysis, and permanency factors related to geology
   Proper definition of the extent of the area to review and 
        monitor
   Stringent requirements for injection well construction
   Engineering testing of the well and distribution network
   Monitoring
   Assurances of financial responsibility of the sequestration 
        operator/owner
   Site safety requirements and bonding
   Well closure plans and requirements
   Post closure plans and requirements
   Public participation, including environmental analysis 
        preparation
   Clear definition of ongoing liabilities for managing and 
        maintaining the site.
   Enforcement provisions

    The EPA is drafting a set of rules under the Safe Drinking Water 
Act Underground Injection Control program. If these rules go forward, 
the program needs to be delegable to states whether or not the other 
elements of Underground Injection Control are delegated. The delegation 
process needs to be rapid and separate from the historically slow 
processes. Federal agencies that are working on carbon sequestration 
need to make a major effort to share information about technologies, 
analysis methods and new developments.
    Under Montana's current law and regulations governing discharges to 
groundwater, carbon sequestration could take two roads. First, if the 
sequestration is for enhanced oil recovery, the Underground Injection 
Control, Class II program would regulate its use. This program is 
delegated to the Department of Natural Resources and Conservation and 
such operations are exempt from the Montana Water Quality Act permit 
requirements. If the sequestration is for storage, but not enhanced oil 
recovery, the Montana Water Quality Act would prevail as the regulatory 
framework. The Water Quality Act includes authority for discharges to 
groundwater. Two main factors would drive the regulatory framework. The 
actual discharge of pollutants would require a groundwater permit which 
would be written for meeting groundwater standards. Also, a 
nondegradation policy would apply which ratchets down the pollutant 
amounts allowed to be discharged. The actual values of allowable 
pollutants would depend on the quality of the receiving water. Many of 
the items listed above describing a robust regulatory program are 
lacking authority in the Montana Water Quality Act.
    Risks to the public health and safety and the environment from 
sequestration operations include chemical interactions that may occur 
in the ground, movement of pollutant plumes, and leakage of the carbon 
dioxide from the storage site to either groundwaters or to the surface. 
Seismically active areas would pose a serious risk to storage site 
leakage potential.
                              liabilities
    Liabilities and any regulatory approach to them will be to some 
degree dependent upon the view of whether or not sequestered carbon 
dioxide is a pollutant or a commodity. This is a time oriented 
determination if while being injected for storage it is a pollutant, 
but after injection is complete it becomes a commodity (or in some 
cases, vice versa). Potentially responsible parties include storage 
site landowners, injectors, operators, transporters, generators, 
lenders or contractors. A regulatory program needs to clearly define 
and delineate liabilities with respect to portions of the operation, 
storage period and, if used, the withdrawal of the carbon dioxide for 
use in the future.
                                funding
    Further, if carbon capture and storage practices are of true 
importance, the federal government needs to assist states with 
financing to start up and manage proper programs. The Underground 
Injection Control programs have historically had only minimal support. 
Even if states developed fee programs for permitting and maintaining 
storage facilities, resources are needed to begin the programs before 
there is anyone to charge fees.
                              authorities
    Each state has its own statutes regulating water quality. Those 
statutes would define the circumstances in which delegation of a 
federal program could move forward. Some states are moving forward with 
legislation and rulemaking to establish a program for carbon 
sequestration. Montana is studying the possibilities, but has not 
completed any specific legal framework. Montana would evaluate the 
eventual EPA program established under the Safe Drinking Water Act 
Underground Injection Control program to determine whether or not to 
seek delegation.
                             split estates
    Mineral ownership issues have yet to be resolved in many locations. 
Questions of who owns the pore space into which carbon could be 
injected has yet to be determined. Where the mineral and surface 
estates are separately owned, the solution to ownership and 
responsibilities is likely to be resolved in the courts unless 
communitization agreements are established ahead of development. A 
dispute could occur if a location has been developed for gas, some is 
left in the body, but is not currently being mined, then the site is 
wanted for sequestration. A significant amount of cooperation will be 
needed to resolve these kinds of issues.
    Members of the Committee, I appreciate the invitation to offer 
testimony on this important issue. Thank you for working hard on this 
significant issue. Close attention to these developments is necessary 
to guarantee that our nation's water supply is protected in a clean 
state and to maintain the progress we have made in cleaning up 
contaminated sites. After decades of significant water quality work, it 
would be a national embarrassment to be creating new Superfund sites 
today simply by not developing a robust regulatory program to manage 
carbon sequestration.

    Senator Dorgan. Ms. Lovelace, thank you very much.
    A couple of questions. Mr. Spisak, when we had recent 
testimony by Assistant Secretary Allred from the Department of 
the Interior, he indicated that they are interested in a large-
scale carbon capture and storage project on public lands.
    Do you know what the status of that is? Has there been 
follow-up on that between the Department of the Interior and 
the Department of Energy?
    Mr. Spisak. Yes. Actually the Farnum Dome in Utah, which is 
part of the southwest regional partnership with DOE--and I am 
sure Scott will be able to talk to you a little bit more about 
that--but there were some questions--you know, it is a project 
that DOE is overseeing, and it is primarily on Federal lands 
with a little bit of State land. We were made aware of it here 
not too long ago, and there was a question about whether 
royalties would be due at the time that the CO2 was 
produced. It was going to be produced and then reinjected into 
a different zone. There was some question about whether 
royalties would be due at that point.
    We got engaged and we figured out what we need to do is to 
unitize the zone that they will be injecting the gas back into, 
and that will allows us to, in effect, keep it within the unit 
which would not trigger royalty payments. As I understand, the 
royalties over the life of this project would be about $4 
million. If the commodity was not being sold yet, in deference 
of trying to get the technology developed and through this 
project, we felt, by unitizing it, it has not really left the 
property and would defer any royalty payments until after the 
project, when it might be produced at that time.
    So, by figuring out that roadblock, it looks like we are 
able to keep the project moving forward and working with DOE.
    Senator Dorgan. Mr. Klara, what kind of focus exists on 
this issue of carbon capture? You have about a half billion 
dollars to do a lot of things with. Are you starting to provide 
some focus, or are you just broadcasting seeds out there and 
hoping something grows?
    Mr. Klara. Absolutely, we are providing focus. I think 
years ago, at the start of any new initiative--this 
sequestration program was started in 1997--that it does start 
out--there is a bit of a shotgun blast looking for research 
ideas. Now the research ideas are starting to get very focused, 
and we have very stringent goals within the program, anywhere 
from years 2012 to 2020. Those goals all have significant 
metrics on the cost of technology, how much permanence could be 
assured, et cetera.
    So definitely, we have a very focused program to try to 
obtain and reach these goals, and we track those on a yearly 
basis. So, indeed, I think the program is very focused as it 
currently stands.
    Senator Dorgan. When will you finish the next technology 
road map?
    Mr. Klara. On an annual basis, we put out a sequestration 
technology road map. The purpose of that is several-fold. One 
purpose is to just update on the developments that have accrued 
in the past year. The other is to reevaluate tracking toward 
the milestone goals in the 2012 to 2020 timeframe where we have 
different markers and to update status of progress toward that.
    We would anticipate that probably toward the end of the 
summer this year we will have our next road map available. The 
last one was from May of last year.
    Senator Dorgan. Is it your assessment that we are making 
great progress with the expenditure of this money? We are 
spending a lot of money in pursuit of these projects, and we 
need to spend more. But are we making progress?
    Mr. Klara. I believe we are. I think if you look at the 
track record of initiatives that we have in the Department--and 
more importantly, the people that are performing the 
initiatives--you heard of just one small example that Tim 
mentioned about taking one of the projects and putting it on 
public land and the uses associated with getting across all the 
issues and hurdles needed to put that project in place.
    We also have a portfolio capture technologies, all that 
have been going from a pilot scale up to commercial 
demonstration. Some of the ones you mentioned, for example, the 
algae project, a key project within our portfolio, thanks in 
large part to the appropriations language. The baking soda 
project we have been looking and analyzing that. Those are key 
examples of where right now I would estimate that there could 
be maybe upwards of 20 key capture projects that are in various 
stages of development that we believe could be ready in the 
2012, 2015, 2020 timeframe for commercialization.
    I think it is important to note, too, that capture 
technologies exist now, but they are expensive. So what we are 
trying to do within the program is try to get the cost of 
capture to some reasonable levels where wide-scale deployment 
could make the most sense.
    Senator Dorgan. Ms. Lovelace, is the current EPA rulemaking 
efforts--is it an approach that will address most of the 
shortcomings you describe?
    Ms. Lovelace. Senator Dorgan, I believe that they will 
address most of them.
    A real question that we will be left with that effort is 
whether or not the States have the authorities to do all of 
those items. Most of the States' water quality statutes do not 
have the authorities to look forward with a lot of that.
    Senator Dorgan. Senator Tester.
    Senator Tester. Thank you, Senator Dorgan.
    You might as well just keep the mike, Bonnie, and we will 
go from there.
    You listed several components to an overall regulatory 
scheme. In your view, do you see these components--analysis of 
the site, long-term monitoring assurances--the list goes on and 
on and on. Do you see this as being a Federal issue or a State 
issue? Do you think that regulations should come out of the 
Feds or the State? I am just asking your opinion.
    Ms. Lovelace. I think it would be a good idea, if we are 
going to do this and do it well, that we do it consistently. So 
some Federal guidance would certainly be useful. But I don't 
think that the States should be operating these programs and 
have the ability as a Federal program to be delegated, as many 
of our programs are today.
    Senator Tester. I do not know where you are from the State 
legislature standpoint, but the split estate issue is always a 
big issue, and this for a different reason. Does the Department 
have an opinion as to whether the CO2 belongs to the 
mineral owner or the landowner?
    Ms. Lovelace. No, they do not. We believe very strongly 
that this will get resolved in the courts because it has not 
been tested. Here is an example. If someone were to be out 
there taking a gas out of--as a mineral, you know, out of the 
site, and now along comes carbon sequestration. There may still 
be some gas in there, and they might like to go get it some 
day. Now, all of a sudden, somebody wants to sequestering that 
site, there is the problem. We would still have the mineral 
ownership, but the pores above it may be owned by the surface 
owner, and that is going to be where the rub is going to come. 
That is where the courts are probably going to come into play.
    Now, I want you to understand, Senator Tester, that the 
Department of Environmental Quality in Montana does not oversee 
this kind of thing. So I am speaking from experience, but I do 
not regulate this.
    Senator Tester. Does anybody?
    Ms. Lovelace. The only place where anybody regulates it 
would be State-owned land.
    Senator Tester. Thanks, Bonnie.
    I will just go ahead. Scott, you spoke of goals for 2012 to 
2020. I was asked a question previously by my good friend--when 
carbon sequestration was going to happen. Can you give me an 
idea on a large-scale basis?
    Mr. Klara. Our goal within the Department's program is by 
the year 2020 if the technology base will be sound enough and 
costs driven down substantially, that the technology could be 
ready for wide-scale deployment in and around that time.
    But I would caution that even under the best circumstances, 
it is going to cost additional money to use carbon capture and 
storage. So additional incentives, whatever you want to call 
it--I have got to be careful on the technology side within the 
Department, but there has got to be some driver or some way to 
recoup the costs of CCS, I think, to really make it widely 
deployable.
    But from a technology standpoint, we feel pretty confident 
that the program will obtain some major, major goals in the 
technology-readiness in pretty good shape around the year 2020.
    Senator Tester. This June, July, sometime this summer, we 
are going to be dealing with a climate change bill, Lieberman-
Warner. I do not know if it is going to pass or not. I do not 
know what the final form of it is going to look like.
    Have you had an opportunity to take a look at that bill? 
Has the Department had an opportunity to take a look at that 
bill to see if your goals match up with those goals, if it were 
to pass?
    Mr. Klara. We are currently internally taking a look at 
that, and we could get you some comments as our analysis gets 
more complete over the course of the next month or so.
    Senator Tester. I would love that.
    Now, my final question is, what would it take to move it 
up, to move up the technology standpoint, from a capture 
standpoint, a transportation standpoint, and a storage 
standpoint? What would it take to move those years up? Let us 
say we want set the goal at 2015. Is it simply unattainable, or 
what would it take to do that?
    Mr. Klara. I cannot speak to a specific funding number 
without us doing some more detailed analysis back within the 
Department. But certainly some opportunities for acceleration 
do exist, and those opportunities would be to look at more 
CO2 capture technology options in parallel because 
not all of them will succeed, and we need more than one in the 
portfolio.
    The other thing would be to actually demonstrate these at 
commercial scale and provide more opportunity for commercial 
scale testing.
    Senator Tester. Now, you have got seven partnerships 
throughout the United States that takes in almost a 100 percent 
land mass. What has been the private sector's response as far 
as--is it truly a partnership with the private sector, and if 
so, to what extent?
    Mr. Klara. I think the best way to address that question is 
to look simply at the cost share provided for those 
initiatives. We are getting cost share around the 40 percent 
range amongst all partnerships.
    Senator Tester. About 60 public, 40 private?
    Mr. Klara. Correct. As you might imagine, most of that 
comes from industry sources, commercial entities. So I think 
that is a very key indicator of the interest and significance 
that companies and organizations are placing on initiatives 
like the regional partnerships, to be able to put that much 
skin in the game to make that occur.
    Senator Tester. Thank you.
    Tim, you talked about BLM has been working on data, oil 
field injectionsites. That is what I heard. Is that correct? 
They have got some data as far as where the CO2 can 
go. Is that correct as far as the----
    Mr. Spisak. Where the CO2 could go?
    Senator Tester. Yes.
    Mr. Spisak. We track more where there has been injection 
for enhanced recovery; and there are about 42 wells on Federal 
lands where that has occurred.
    Senator Tester. Is that inventory complete, though?
    Mr. Spisak. We are in the process of identifying that. MMS 
has in their systems codes for CO2 and 
CO2 injection. We are querying them now about what 
data they have. We are also looking at some third party sources 
for that data to identify where the best and most cost 
effective means of getting that.
    Senator Tester. Does the process you are going to use to 
account for that? Is that process complete?
    Mr. Spisak. It is like any other accounting for oil and 
gas. The CO2 is another component of that.
    Senator Tester. OK. So it's not complete?
    Mr. Spisak. The actual data acquisition is not complete.
    Senator Tester. When do you anticipate when it will be 
complete?
    Mr. Spisak. The end of this year.
    Senator Tester. I want to talk a little bit about split 
estates, too.
    Mr. Spisak. Sure.
    Senator Tester. I visited with Bonnie. You heard the 
question. The question I have for you, Tim, is how do you see 
split estates? Who owns it? Is it the mineral owner's 
responsibility? Whose responsibility is it? Or is it the 
landowner's?
    Mr. Spisak. You mentioned CO2 in your question. 
Let me take both. The CO2, we believe, is a leasable 
mineral like a natural gas, but the pore space for storage of 
CO2 we see as--our general opinion is that it is 
invested in the surface owner.
    Senator Tester. OK.
    Mr. Spisak. So the conflicts that she mentioned I think are 
very real.
    Senator Tester. All right. There is no Federal law on this; 
right, on who owns this?
    Mr. Spisak. Not to my knowledge.
    Senator Tester. Would it be recommendational to let it be 
litigated or be proactive?
    Mr. Spisak. I think anytime we could be proactive and kind 
of set down some kind of a base foundation, I think we will be 
better off in the long run.
    Senator Tester. OK. The last question I had dealt with 
rights-of-way for transportation. Right now is there in the 
code anything for right-of-way for CO2 lines 
comparable to gas lines or----
    Mr. Spisak. Rights-of-way for any kind of pipeline on 
Federal land we do not really see being very much different 
than any other oil and gas pipeline. There are some little 
differences in the properties of CO2 that you need 
to be careful of. It is heavier than air. So in low spots, it 
is going to accumulate, if there was a leak. Other than that, 
it is pretty much like any other commodity that we are putting 
through a pipeline.
    Senator Tester. Sounds good.
    I think that is it. Thank you very much.
    Senator Dorgan. Senator Tester, thank you.
    Mr. Klara, let me also ask the question that Senator Tester 
asked in a different way. You talked about the year 2020, and 
that is 12 years away. Our concern is, as we move forward with 
climate change legislation, that we have targets that are 
somewhat compatible with the capability to be able to capture 
carbon and do so in a way that meets the targets in the 
legislation. It may well be that we are not able to wait 12 
years, and it seems to me if we provide increasing funding for 
the Department of Energy and the laboratories and so on, that 
there needs to be more aggressive targets for finding 
commercial-scale technologies.
    Your reaction?
    Mr. Klara. Again, certainly there are opportunities we have 
to accelerate our timeframes, and you can decide through 
appropriations, et cetera, the best way for us to manage 
through that.
    I would also indicate, too, that do not mistake the 2020 
timeframe as the first day you get deployed. There are many 
opportunities, say, in the course of the next 5 to 10 years 
where some more immediate sequestration can occur away from 
power plants, for example. There are sources of CO2 
from natural gas production. There are acid gas sources from 
natural gas production, et cetera, where we could start to 
sequester sooner and start to get some additional lessons 
learned, as well as starting to get our feet wet in 
sequestration.
    So, I would believe that when I say 2020, I believe that 
the technology there would be ready for us to go full blazes.
    Senator Dorgan. Let me ask. The Secretary of Energy's 
Office called yesterday and is setting up a phone conversation 
with me today. I am going to be on the road today, but we are 
going to have a phone conversation, I guess by my cell phone. 
But I think he wants to talk about FutureGen.
    The cancellation of the FutureGen project by the Secretary 
and the conversion of FutureGen into probably two or three 
other projects, is that going to set back the timeframe? 
Because FutureGen was kind of the big bang approach that the 
administration was using to try to demonstrate some commercial 
technology in this area.
    Mr. Klara. I am sure the Secretary will give you the 
departmental comments on that and the path forward.
    Senator Dorgan. What is your opinion?
    Mr. Klara. My opinion is that the FutureGen project was 
deemed to be a project with costs spiraling very high year 
after year and that it was deemed necessary to take an 
additional look at maybe different paths forward. Right now we 
are trying to pursue a different path forward, and for example, 
we are still getting comments from industry and potential 
participants to try to set that path.
    Senator Dorgan. My concern is, though, that we have wasted 
a lot of time. I do not necessarily quarrel with the 
Secretary's decision, and I will be anxious to visit with him 
again today about it. I have asked him to come down and testify 
at a hearing before our subcommittee, and we are trying to do 
that at end of April.
    But I am afraid we have lost a lot of time here, moving 
down one road and then taking a U-turn and trying to find 
another road because the search for this technology at 
commercial scale is an urgent search, in my judgment.
    Ultimately, my interest and I expect the Department of 
Energy's interest is to find a way to create zero-emission 
coal-fired generating plants. I believe that we should be 
capable of that using advanced technology in the years ahead, 
but it requires us to be on an urgent path to get it done.
    It is going to require more funding than the President is 
requesting, and that is why I increased his funding request by 
$70 million this year. I will have to do more in the coming 
year, given his current budget request, which is far short of 
what is necessary. It is one thing to talk about the urgency of 
it. It is quite another thing to represent that in the budget 
request, and the President has fallen far short. So we are 
going to have to pump some additional funding in if we are 
going to find the answers to these questions.
    Let me thank all three of the witnesses for being with us 
today and coming to Bismarck and presenting testimony. Thank 
you very much.
    The next panel that we will have includes those from the 
production side of these issues talking about the challenges 
they see and they face. Sandi Tabor will represent the Lignite 
Energy Council. She is the general counsel. You may come 
forward, if you would. The Lignite Energy Council is from 
Bismarck, North Dakota.
    Lee Spangler is the Director of Big Sky Carbon 
Sequestration Partnership in Bozeman, Montana. Gary Loop is the 
Chief Operating Officer and Senior Vice President of Dakota 
Gasification Company in Bismarck. Gordon Criswell is the 
Manager of PPL in Billings, Montana. John Harju, the Associate 
Director of Research, PCOR Project in Grand Forks, North 
Dakota.
    Let me thank all of you for being here. I am going to call 
on you first, Sandi Tabor, and I would like to ask if we can 
pass the microphone down.
    All of your statements will be included as a part of the 
permanent record. We would ask that you summarize.

   STATEMENT OF SANDI TABOR, GENERAL COUNSEL, LIGNITE ENERGY 
                     COUNCIL, BISMARCK, ND

    Ms. Tabor. I will. Thank you, Senator. Good morning to you, 
Senator Dorgan, and you, Senator Tester.
    My name is Sandi Tabor. I am the General Counsel of the 
Lignite Energy Council, and I think I am here today because I 
also chair a CO2 storage workgroup that has been 
formed by the industry. It includes representatives from all 
the key agencies in the State of North Dakota, including the 
Department of Health, the Attorney General's Office, and the 
Oil and Gas Division of the North Dakota Industrial Commission. 
It also includes the North Dakota Petroleum Council and 
representatives from the lignite industry.
    Our group's mission is to look at the issues surrounding 
CO2 storage and sequestration from a State 
perspective and what we need to do in order to be prepared to 
help our industry move forward on this most important issue.
    I am going to summarize just a few key points from my 
testimony. The first of which is that CO2 
sequestration is a key element for existing plants attempting 
to survive in a carbon-constrained world, and as such, 
flexibility in regulation is key. Back in March 2007, the EPA 
issued a guidance document that said that the pilot projects on 
sequestration should use a class V well under the Underground 
Injection Control Program.
    In their comments in that guidance, they recognized the 
importance of a balanced approach. That we have some 
flexibility in regulation that recognizes the differences in 
the country in geologic formations, recognizes the differences 
and the different demands that sequestration might require, 
while at the same time making sure that there is protection of 
public health and water quality.
    What we now just want to emphasize is that it is very 
important, as EPA moves forward on the final regs, that they 
remember that flexibility is important.
    We also want to urge the Federal Government to rely on the 
expertise developed by the Department of Energy's regional 
partnerships like the Big Sky Partnership and the PCOR 
Partnership. They have years of experience. They have developed 
and gathered many, many, many volumes of data, and they are the 
ones who are in the fields working with the industry. We hope 
the EPA will rely on the expertise that they have developed and 
work in partnership with them as they move forward on the new 
regs.
    We also want to urge that the Federal Government, the EPA 
in particular, look at the rules, the model rules that were 
developed by the Interstate Oil and Gas Compact Commission. 
Again, those rules were developed by people from industry and 
State regulators who have expertise in the area dealing with 
CO2 and what happens when you inject CO2 
into the ground, particularly as it is used with the oil and 
gas industry. It may not provide the EPA with every answer, but 
it certainly should serve as a good basis for moving forward. 
We just think it is imperative that those model rules be looked 
at and considered.
    We also want you to understand--and I think the lady from 
Montana probably addressed this--that there are some issues 
regarding sequestration that are simply State issues, and one 
of them is property rights. Who owns the pore space and eminent 
domain issues and--issues. That is one of the key things that 
our group is going to be working on. What do we do and how do 
we manage property rights and who owns the pore space?
    We think in North Dakota that the surface owners do. We 
think that is the common law in many of the States across the 
country. Our real challenge is deciding whether we want to 
introduce legislation to finalize that, much like what Wyoming 
did not so long ago.
    Another key element is liability. It does not take much of 
a rocket scientist to understand that even as Gary Loop will 
tell you with the CO2 sequestration and capture 
project that they are doing at the Valley Station here in North 
Dakota, it is going to cost millions of dollars, hundreds of 
millions of dollars just to do that project. To actually build 
a new plant is going to cost billions of dollars.
    Guess what? When you are planning a new plant, you need to 
know all the liabilities. You need to be able to plan that and 
do your risk assessments. We think it is pretty important that 
the Federal Government, the State government, and the industry 
work together on trying to decide how we are going to deal with 
long-term liability of CO2 sequestration.
    Finally, two other quick things. Let us remember that 
CO2 that is being injected as part of enhanced oil 
recovery should be considered a commodity, and the old adage of 
``if it's not broken, don't try to fix'' should apply to how 
you deal with EOR. That has been going on for many years in 
several States, and we are very concerned that we not worry 
about trying to regulate and put more impediments on how we use 
EOR for beneficial uses.
    Finally, this is another key issue for us in that in some 
message we hope EPA takes to heart. CO2 should not 
be regulated as a hazardous waste. There are all types of 
implications on that. We really encourage the EPA to try and 
again work with industry, look at the data that is being 
collected now through EOR. You know, a lot of that 
CO2 that is pumped out into the ground through EOR 
stays there. So there are some resources that are available for 
the purposes of trying to decide what happens in the long term 
already existing and just looking at what is happening with 
EOR.
    With that, thank you for your kind attention and I am sure, 
when the time comes, I will know what the right answers are.
    [The prepared statement of Ms. Tabor follows:]
  Prepared Statement of Sandi Tabor, General Counsel, Lignite Energy 
                         Council, Bismarck, ND
    Thank you for the opportunity to submit written comments and to 
address the Subcommittee on the challenges associated with the large-
scale capture and storage of carbon dioxide. I chair a workgroup 
consisting of state agencies and industry representatives examining 
CO2 sequestration regulation in North Dakota. My testimony 
will focus on the issues facing the federal government and states, like 
North Dakota, as we move forward to establish a regulatory framework 
for the transportation and storage of CO2.
                  overview of the nd lignite industry
    The North Dakota lignite industry mines approximately 30 million 
tons of lignite every year. At present production levels, North Dakota 
has more than an 800-year supply of lignite. Seventy-nine percent of 
the coal we mine is used to generate electricity for more than two 
million people in the region. North Dakota produces approximately 4,000 
megawatts of power, over half of which is exported to neighboring 
states.
    The North Dakota lignite industry is responsible for 25,000 direct 
and indirect jobs in the state. We generate personal income of $700 
million and over $2.2 billion of business volume annually. We also pay 
over $80 million in state taxes each year. The lignite industry is a 
significant part of the State's overall economy, and is especially 
important to western North Dakota.
    The primary objective of the Lignite Energy Council is to maintain 
a viable lignite coal industry and enhance development of the region's 
lignite coal resources. Our membership of over 300 members located 
across the Upper Great Plains includes mining companies; major 
producers that use lignite to generate electricity, synthetic natural 
gas and other valuable byproducts; and businesses that provide goods 
and services to the lignite industry.
                               background
    The Lignite Energy Council's message to you today is simple . . . 
in order for coal to remain a viable energy resource in a carbon-
constrained world we must develop flexible regulations to accommodate 
the geologic storage of CO2. This mission will be 
accomplished if the federal government works with states and quasi-
state entities, like the Interstate Oil and Gas Compact Commission 
(IOGCC), to develop regulations that take into account the unique 
aspects of individual projects. Regulation of CO2 
sequestration should provide opportunities for regulators to make use 
of the information gained from each project and recognize the evolution 
of best practices. Finally, the rules must provide the regulated 
community with the certainty needed to make investment decisions.
    The need for a regulatory framework for the geologic storage of 
CO2 was recognized by the U.S. Department of Energy (DOE) 
and its National Energy Technology Laboratory (NETL) in 2003 when DOE 
funded an effort to develop model rules spearheaded by the Interstate 
Oil and Gas Compact Commission's CCGS Task Force (Task Force). The Task 
Force reviewed the technology of geologic storage and developed a model 
statue and model rules for states to use when developing their own 
regulatory oversight of geologic storage of CO2. The Task 
Force model rules provide detailed guidance on a variety of topics 
including licensure, operations, bonding, project development, and 
closure.
    The EPA also began a process for developing regulations for 
geologic sequestration utilizing as its platform the Underground 
Injection Control (UIC) program of the Safe Drinking Water Act. The 
timeline for the process includes distributing draft regulations in 
June 2008 and issuing final rules in 2011. The EPA is examining a 
number of issues, many of which are addressed in one fashion or another 
in the Task Force rules. In particular, the EPA is considering strict 
well-construction standards to prevent corrosion; strict secondary 
containment requirements such as extra cap-rock to prevent leakage into 
groundwater aquifers; periodic evaluation of the geologic area around 
the well; and earlier and more frequent public participation 
provisions. One of the issues they have not attempted to address deals 
with property rights, such as who owns the pore space into which the 
CO2 will be injected.
                         north dakota's efforts
    On August 2, 2007, the Oil and Gas Division of the Mineral 
Resources Department of the ND Industrial Commission (NDIC) published 
proposed rules dealing with the storage of carbon dioxide. The rules 
dealt with not only enhanced oil recovery (EOR) efforts, but also the 
long-term storage of CO2. The rules addressed permitting 
requirements, site access, eminent domain, permit transferring, 
amalgamation of subsurface property rights, operational standards, 
safety plans, monitoring requirements, closure requirements and long-
term liability.
    The Lignite Energy Council presented testimony at a hearing on 
September 4th raising concerns over the statutory authority for some of 
the provisions contained in the proposal. In particular, our comments 
discussed eminent domain, cooperative agreements between North Dakota 
and government entities outside the state, subsurface property rights, 
closure of storage facilities, long-term liability for storage 
facilities and jurisdiction over long-term CO2 storage. We 
also asked the Oil and Gas Division to consider streamlining the 
permitting process and to eliminate the requirement for obtaining more 
than one permit.
    In light of the comments received on the proposed rules, the Oil 
and Gas Division agreed to pull the proposal from further consideration 
and to join a workgroup consisting of representatives from the ND 
Attorney General's office, the ND Department of Health, the ND 
Petroleum Council, and representatives from the lignite industry. The 
North Dakota CO2 Storage Workgroup (Workgroup) will consider 
not only the development of regulations, but also identify statutory 
changes needed to address state specific issues, like property rights.
    Presently, the Workgroup is reviewing legal issues associated with 
certain provisions of the proposed rules. Of particular interest are a 
number of potential legislative issues including:

   Who should regulate the storage of CO2;
   Who owns the pore space and how should property interests be 
        addressed for purposes of storing CO2; and
   Should the State of North Dakota assume post closure 
        liability for the CO2 project and if so, should the 
        state implement a long-term liability funding mechanism?

    The first issue involves which government entity should serve as 
the agency responsible for administering CO2 storage 
regulations. In North Dakota, the NDIC has broad authority over 
developing and producing oil and gas. This authority extends to the 
unitized or collective management of oil and gas resources for enhanced 
oil recovery. The NDIC also oversees the regulation of the long-term 
presence of CO2 once tertiary recovery has ended.
    Current North Dakota law does not authorize the NDIC to regulate 
the storage of CO2 not associated with enhanced oil recovery 
(EOR). Under the UIC program, the ND Department of Health regulates 
Class 1, 4 and 5 wells, while the NDIC (through the Oil and Gas 
Division) regulates Class 2 and 3 wells. The EPA issued a guidance 
document in March 2007 instructing State and EPA Regions to use Class V 
(experimental technology wells) when permitting pilot projects designed 
to evaluate the technical issues associated with CO2 
injection projects. Thus, for purposes of pilot projects in North 
Dakota, it would appear that the ND Department of Health would handle a 
CO2 sequestration pilot project using a Class V permit 
application. Unfortunately, the EPA guidance addresses the immediate 
concern of pilot projects, but it does not address the larger issue of 
commercial scale demonstration storage projects. In light of the fact 
that Basin Electric Power Cooperative and the Energy and Environmental 
Research Center (EERC) plan to conduct a CO2 capture and 
sequestration project in North Dakota in the near future, providing 
guidance regarding regulations is imperative.
    The second issue involves the ownership of the pore space into 
which the CO2 would be injected. The majority view among 
states is that the pore space and the subsurface geologic formation 
belong to the surface owner. This view is based on the proposition that 
a landowner owns everything above and below her land. In fact, it is a 
view recognized in North Dakota law. N.D.C.C. Sec.  47-01-12. The 
question, however, is whether this North Dakota statute contemplated 
ownership of the pore space. While it is an unanswered question in 
North Dakota, other states have addressed the issue. For instance, in 
Wyoming, the state legislature recently enacted legislation confirming 
the majority view (H.B. 89, 2008). While we believe that pore space is 
owned by the surface owner, the Workgroup is contemplating the merits 
of following Wyoming's lead and drafting legislation for consideration 
by the 2009 North Dakota Legislative Assembly.
    A more difficult issue is how to deal with a number of surface 
owners who may be affected by CO2 storage projects. Getting 
consent from everyone with an interest is unlikely and questions 
involving eminent domain and constitutional protections for private 
property must be considered as the regulatory program for long-term 
storage is developed. The Workgroup is also considering how best to 
address this sensitive issue.
    The third issue involves post closure liability or financial 
assurance measures for well closure, post-closure monitoring and 
remediation practices. Two states have addressed the issue, taking 
opposite positions on the solution. For instance, the state of Texas 
addressed the ownership and liability issues by statute in May 2006. 
The law focused on transferring the right, title and interest in 
CO2 captured by a clean coal project to the Railroad 
Commission of Texas on behalf of the state. The transfer must occur at 
no cost to the state (other than administrative and legal costs 
associated with the transfer). The transfer does not relieve the owner 
or operator of a clean coal project of liability for any act or 
omission regarding the generation of CO2 performed before 
the CO2 was captured, but does alleviate any potential 
liability for the storage of the CO2. The law allows the 
commission to sell CO2 that is captured by a clean coal 
project and not injected for permanent storage in a geologic formation.
    On the other hand, the state of Washington placed full liability on 
project developers to ensure that CO2 is safely stored for 
the long term under proposed regulations scheduled to be finalized by 
the end of June.
    Another state that has considered CO2 sequestration 
issues is Wyoming. The Wyoming legislature recently enacted two bills 
establishing the framework for a regulatory program and addressing 
property rights. Neither bill, however, addressed the liability issue, 
deferring the issue for more debate later in the year.
    The EPA has also struggled with the issue of financial assurance 
measures. For example, they wonder whether they should require post-
closure well monitoring, and if so, for how long after closure. They 
question what standards should be used to determine whether monitoring 
is required. Another issue involves financial assurances to cover 
monitoring costs and remediation costs in the event of contamination. 
There is some discussion that the monitoring period could last as long 
as 300 years. With this in mind it is no wonder that the federal 
government and states alike are skittish when it comes to addressing 
the issue.
    The Task Force rules provide a framework to address the long-term 
liability during the post-closure period. The major issue with post-
closure is how to deal with long-term monitoring and liability issues. 
Under the Task Force model rules the operational bond is released at 
the conclusion of the closure period. Regulatory liability for ensuring 
that the site remains a secure storage site is transferred to a trust 
fund administered by the state or a state-contracted entity. Future 
monitoring, verification and remediation activities are paid for by a 
state administered trust fund. Revenues generated from a per ton 
injection fee assessed to the site operator provide the operating 
capital for the trust fund.
    As the North Dakota Workgroup tackles the long-term liability 
issue, we will look to the Task Force model rules for guidance. Our 
concern is that stored CO2 not be treated as a hazardous 
waste with the associated tentacles of liability which stretch far into 
the future (perhaps 300 years or more).
                               conclusion
    In summary, we applaud the EPA's efforts to involve many groups and 
individuals in the regulatory process. There are simply too many issues 
that require joint cooperation between the federal government, state 
governments and industry, in particular resolving long-term liability 
questions and establishing a mechanism to fund long-term monitoring 
requirements. It is important, however, to recognize that certain 
issues, like eminent domain and property rights, fall within the 
preview of the state. Although the efforts of the Department of 
Interior as it evaluates how to handle pore space issues on federal 
lands may prove instructive. Unfortunately, the demand for guidance 
from companies ready to begin CO2 demonstration projects may 
force states like North Dakota to develop regulations earlier than 
present federal timelines.
    We should also remember to capitalize on the experiences of 
entities like the EERC and the Weyburn project in Canada regarding the 
injection of CO2 for EOR. The storage of CO2 
during EOR sheds light on many of the questions being raised about what 
will happen to CO2 during geologic storage.
    And finally, there are three points from the Lignite Energy 
Council's position on global climate change that merit consideration. 
First, CO2 must not be treated as a hazardous waste. Second, 
CO2 used for EOR must be treated as a commodity. And 
finally, the federal government must work with state governments and 
industry to resolve issues surrounding long-term liability for 
CO2 sequestration. We are hopeful that as the development of 
regulations continues, open doors and open minds will prevail, and that 
reasonably flexible regulations will be developed.
    Thank you for your consideration.

    Senator Dorgan. Ms. Tabor, thank you very much. I 
appreciate your testimony.
    Next, we will hear from Gordon Criswell, Environmental 
Manager, and Colstrip Steam Electric Station in Montana. Mr. 
Criswell, thank you for being with us.

   STATEMENT OF GORDON CRISWELL, ENVIRONMENTAL MANAGER, PPL 
                     MONTANA, BILLINGS, MT

    Mr. Criswell. Thank you, Chairman Dorgan, Senator Tester. I 
am pleased to be here today to discuss the challenges 
associated with the rapid deployment of large-scale carbon 
capture and storage technologies.
    PPL owns generating plants in six States. In Montana, PPL 
is part owner and operator of the Colstrip Plant, which is one 
of the largest coal-fired power plants in the West. It also 
owns and operates the Corette coal-fired power plant in 
Billings, along with 11 hydroelectric facilities across 
Montana.
    As a major energy producer, PPL recognizes its 
responsibility to address climate change in a reasoned and 
informed way. Our climate change response strategy includes 
increasing the efficiency of existing plants, pursuing the 
expansion of existing generating facilities that do not emit 
greenhouse gases, for example, hydro plants and nuclear plants, 
as well as development of renewable energy projects.
    We were one of the first companies to join the Big Sky 
Carbon Sequestration Partnership, which is exploring carbon 
capture and sequestration technologies and geologic reservoirs. 
We also participated in the Montana Governor's Climate Change 
Advisory Committee.
    As an early member of the FutureGen Industrial Alliance, 
PPL spent time and resources in the alliance to build a near-
zero-emissions coal-fired power plant. This type of project is 
needed to assess the true potential of carbon capture and 
storage, and the cost is too large for private industry to do 
alone.
    In my remarks to you, I would like to focus on three areas 
of concern that we have with the deployment of large-scale 
carbon capture and storage technologies. These concerns are 
feasibility, liability, and transport.
    Feasibility is a major issue. Carbon capture and storage 
technologies may not be ready in time to comply with early 
emission reduction requirements of the Lieberman-Warner bill 
that the Senate will be expected to consider this summer. No 
technology has been tested on a commercial scale, as has been 
discussed here. Feasibility claims are based on small-scale 
pilot plant studies. Most of the technologies have big energy 
bounties. Installing carbon capture equipment on existing 
plants could consume from 10 to 30 percent of the electricity 
they generate.
    A second concern is liability. Before deploying any carbon 
capture and storage technology on a large scale, we should have 
assurances that carbon dioxide could not find its way back to 
the surface or contaminate other resources.
    A basic question must be resolved for carbon capture and 
storage to gain acceptance. Who is responsible for carbon 
dioxide stored underground? As Congress considers a national 
policy, we believe that Illinois could be viewed as a potential 
model. In their efforts to be selected for the FutureGen site, 
Illinois policymakers took a step in the right direction by 
accepting responsibility for stored carbon dioxide.
    Government should encourage private industry to make the 
major capital investment that carbon capture technology will 
require. However, industry will be reluctant to make that 
investment if it also faces potential unlimited liability 
issues related to carbon dioxide stored underground.
    A complicating factor in the liability issue is property 
rights. States and the Federal Government have no statutes or 
legal precedent designating ownership of geologic reservoirs or 
regulatory authority for geologic sequestration. This situation 
makes it impossible for companies to move forward with 
sequestration plans.
    The third major concern is transport. Large, pressurized 
pipelines would have to be built to move carbon dioxide from 
where it is produced to where it will be sequestered. In 
addition to the cost of the pipeline construction, this raises 
issues of common carrier status, siting authority, and eminent 
domain.
    Until the issues of feasibility, liability, and transport 
are addressed, progress on carbon capture and sequestration in 
Montana and elsewhere will be slow. Congress has an opportunity 
to provide leadership by working with the States to identify 
challenges to carbon capture and storage and develop a 
feasible, cost-effective national solution. National standards 
are needed to address these issues to provide consistency and 
regulatory price certainty for energy companies and uniform 
environmental protection for the public.
    In closing, I would like to stress that PPL Montana 
believes coal has an important role in securing Montana's and 
the Nation's energy future. If the technology can be 
successfully developed and deployed and the issues noted above 
are adequately addressed, carbon capture options for existing 
and developing power plants would help address our Nation's 
significant energy and environmental challenges while providing 
a clean, reliable source of electricity for Montana and the 
Nation.
    Thank you for this opportunity to testify.
    [The prepared statement of Mr. Criswell follows:]
   Prepared Statement of Gordon Criswell, Environmental Manager, PPL 
                         Montana, Billings, MT
    Chairman Dorgan and Senator Tester, I am pleased to appear at your 
subcommittee field hearing to discuss the challenges associated with 
the rapid deployment of large-scale carbon capture and storage 
technologies. My name is Gordon Criswell from PPL Montana LLC, a 
subsidiary of PPL Corporation. I am the Environmental Manager of the 
Colstrip Steam Electric Station in eastern Montana. PPL owns generating 
plants in six states, including 4,200 megawatts of coal-fired 
generation in Montana and Pennsylvania. PPL generated 53.6 billion 
kilowatt-hours of electricity in 2007, of which 8.4 billion kilowatt-
hours were generated in Montana.
    PPL Montana is part owner and operator of the Colstrip plant. 
Colstrip is one of the largest coal-fired plants in the West, a four-
unit, 2,200-megawatt plant with 365 employees. PPL Montana operates the 
Colstrip plant on behalf of five other co-owners, including Avista 
Corp, NorthWestern Energy, PacifiCorp, Portland General Electric and 
Puget Sound Energy. Colstrip recently was awarded Voluntary Protection 
Program ``Star'' status from OSHA--its highest honor--meaning the 
agency recognized we go beyond compliance to protect worker health and 
safety. PPL Montana is also owner/operator of the Corette coal-fired 
plant in Billings, Montana, and 11 hydroelectric generating facilities 
throughout the state.
    We are proud to report that Colstrip meets all state and federal 
emissions standards. As part of the way we do business, we are 
continually searching for ways to improve our environmental 
performance. One of the most serious global environmental challenges we 
face is climate change, and we have been studying its ramifications and 
how to address it for some time. As a major energy producer, PPL 
recognizes the responsibility to address climate change in a reasoned 
and informed way. PPL is active in the search for new technologies that 
can lower greenhouse gas emissions and allow for the continued use of 
coal, which generates about 50 percent of the nation's electricity. We 
believe coal should continue to have an important role in the country's 
energy future.
    PPL has participated in a number of efforts that have helped us 
better understand how to respond to potential state and federal climate 
change policies that will require reductions in carbon emissions. We 
also have taken specific steps that will help us reduce carbon 
emissions over time:

   We were one of the first companies to join the U.S. 
        Department of Energy's Big Sky Carbon Sequestration Partnership 
        at Montana State University in Bozeman. Our participation in 
        the Partnership has provided us crucial information about 
        carbon capture and sequestration technologies and geologic 
        reservoirs.
   Although the proposed FutureGen plant has been the subject 
        of considerable debate and ultimately may not be built, PPL 
        spent considerable time and resources participating in the 
        FutureGen Industrial Alliance. FutureGen was a public-private 
        partnership to design, build, and operate the world's first 
        coal-fueled, near-zero emissions power plant. We are 
        disappointed that the Department of Energy has decided to end 
        funding for this project. This type of project is needed to 
        assess the true potential of carbon capture and sequestration, 
        and it requires too large an investment for private industry to 
        do alone. Government funding and incentives are essential to 
        this type of technology development.
   PPL continues to make improvements to its coal-fired power 
        plants to increase efficiency and reduce carbon intensity, the 
        amount of carbon dioxide they emit per megawatt generated. For 
        example, over the next 12 months, we plan turbine upgrades at 
        the Colstrip plant in Montana and the Montour and Brunner 
        Island plants in Pennsylvania.
   About 40 percent of the electricity generated by PPL in 2007 
        came from non-carbon-emitting sources. PPL is pursuing the 
        expansion of existing generating facilities that do not emit 
        greenhouse gases. We have approval from the Nuclear Regulatory 
        Commission to increase generation at the Susquehanna nuclear 
        power plant in Pennsylvania. We have installed more efficient 
        equipment that allows us to generate more electricity at the 
        Kerr hydroelectric project in Montana. We are redeveloping the 
        Rainbow hydroelectric facility near Great Falls, Montana. We 
        have asked the Federal Energy Regulatory Commission for 
        approval to expand the Holtwood hydroelectric facility in 
        Pennsylvania for additional low-impact hydro generation. We 
        plan to repower the Orono hydroelectric facility in Maine as 
        part of an agreement with private and government agencies and 
        the Penobscot Indian Nation to open hundreds of miles of the 
        Penobscot River to Atlantic salmon migration.
   A subsidiary of PPL develops, owns and operates renewable 
        energy projects with a generating capacity of 23 megawatts. 
        These projects generated 44 million kilowatt-hours of 
        electricity in 2007. We have developed four landfill methane 
        recovery projects and have three others under construction. We 
        have developed solar energy projects capable of generating 3.3 
        megawatts and have another 480 kilowatts in planning.
   PPL's CEO, Jim Miller, appeared with Senators Jeff Bingaman 
        and Arlen Specter last July to introduce S. 1766, the Low-
        Carbon Economy Act of 2007, which would create a market-based 
        cap-and-trade system to reduce carbon dioxide emissions. PPL 
        believes the Bingaman-Specter legislation conforms most closely 
        with PPL's climate change principles, particularly with respect 
        to how the bill aligns emission targets and timetables with the 
        expected pace of technology development.
   In Montana, we participated as a member of the Governor's 
        Climate Change Advisory Committee and helped develop 54 
        recommendations for reducing greenhouse gas emissions in the 
        state.
   In Pennsylvania, PPL recently retired two older coal-fired 
        generating units that emitted about 1.3 million tons of 
        greenhouse gases per year and has participated in a statewide 
        effort to create a climate change ``roadmap'' of actions that 
        can be taken by all sectors of the economy to address climate 
        change. PPL also participated in a Carbon Management Action 
        Advisory Committee that identified opportunities to use state 
        resources in support of climate change response.

    Our participation in these efforts and our investigation of 
technologies has led us to the following conclusion: the United States 
most likely will have a national cap on carbon emissions from coal-
fired power plants sometime in the near future, but technologies to 
achieve the cap may not be commercially available, at least in time to 
use as a compliance strategy with the early phases of required 
reductions under the Lieberman-Warner bill that the U.S. Senate is 
expected to consider this summer.
    Many are viewing carbon capture and geologic sequestration of 
carbon dioxide as a viable means of achieving emissions limits under 
federal legislation. Our primary concerns about carbon capture and 
geologic storage are related to feasibility, liability and transport.
    None of the capture and sequestration technologies being tested 
right now have been proven on a commercial basis and any claims about 
their feasibility are based on pilot plant studies. All of the 
technologies include significant energy penalties. Extensive testing of 
these technologies will reveal whether or not they will represent 
significant challenges to the ``balance of plant'' operations. Will 
installation of these technologies affect other systems at the plant? 
Will they increase other emissions? The technologies currently being 
tested--at very small scale--at other plants could consume at least 10 
to 30 percent of the energy produced at coal plants just to run the 
capture equipment. That represents a huge economic challenge, and would 
necessitate additional energy production from other sources in order to 
meet customer power demand.
    Beyond technical feasibility, liability is perhaps the most 
significant challenge to overcome in geologic sequestration. We do not 
know at this time whether or not pumping large volumes of compressed 
carbon dioxide thousands of feet below the surface of the Earth into 
geologic reservoirs will itself become an environmental liability. With 
any such technology solution we would have to be assured that the 
carbon dioxide could not find its way back to the surface or cause 
other unintended consequences, such as contaminating other resources.
    Significant unresolved issues remain about who will be responsible 
for carbon dioxide stored deep underground. Illinois has taken a step 
in the right direction by accepting state responsibility for stored 
carbon dioxide. PPL believes that federal policy makers could view the 
Illinois approach as a potential model for addressing liability issues, 
as it shapes a national policy. Government should encourage private 
industry to make the major capital investment that carbon capture 
technology will require. However, industry will be reluctant to commit 
to these large capital costs if it also faces potential unlimited 
liability costs related to carbon dioxide stored underground.
    Property rights issues are another hurdle to geologic 
sequestration. Montana has split estates--meaning one piece of property 
may have different surface rights and mineral rights owners. Montana, 
and, for that matter, the federal government, also have no statutes or 
legal precedent designating ownership of geologic reservoirs or 
regulatory authority for geologic sequestration. This situation makes 
it impossible for an energy company to move forward with any plans to 
sequester carbon dioxide underground even if it was technologically 
possible.
    However, Montana is moving forward with answers to these questions. 
An interim committee of the Montana Legislature is evaluating a draft 
rule developed by the Interstate Oil and Gas Compact Commission. The 
draft rule would assign ownership of the pore space of a geologic 
reservoir to the surface rights owner and liability for stored carbon 
dioxide with the injector. Regulatory authority for carbon 
sequestration would be assigned to a state Oil and Gas Authority.
    The remaining issue of significance regarding geologic 
sequestration of carbon dioxide is transport. Large pressurized 
pipelines would need to be constructed to transport captured carbon 
dioxide from power plants to depleted oil reserves for enhanced oil 
recovery or to deep geologic reservoirs for sequestration. Efforts in 
the 2007 Montana Legislative Session to assign common carrier and 
eminent domain status for carbon dioxide pipelines were unsuccessful.
    Until the issues of liability, regulation and transport are 
addressed by the federal government and the states, progress on carbon 
capture and storage in Montana and elsewhere will be slow. Congress has 
an opportunity to help provide leadership by working with states to 
identify challenges to carbon capture and storage and develop a 
feasible, cost-effective national solution. National standards are 
needed to address these issues to provide consistency and regulatory 
certainty for energy companies and uniform environmental protection for 
the public. Forums like today's hearing are a good start to the 
dialogue that is necessary between Congress, state and federal agencies 
and energy companies.
    I would like to stress that PPL Montana believes coal has an 
important role in securing Montana's--and the nation's--energy future. 
Montana is the sixth largest producer of coal in the nation and has 
more recoverable coal reserves than any other state. As noted earlier, 
coal generates just over 50 percent of America's electricity. If the 
technology can be successfully developed and deployed, and the issues 
noted above are adequately addressed, carbon storage options for 
existing and developing power plants would help address our nation's 
significant energy and environmental challenges, while providing a 
clean, reliable source of electricity for Montana--and the nation. 
Thank you for this opportunity to testify.

    Senator Dorgan. Mr. Criswell, thank you very much.
    Next, we will hear from Lee Spangler. Dr. Lee Spangler is 
the Associate Vice President of Research at Montana State 
University and is the current director of two research efforts. 
One is a PCOR project, the Big Sky Carbon Sequestration 
Project, and Dr. Spangler is also coordinating the development 
of a facility to test CO2 soil and surface detection 
technologies. Dr. Spangler, thank you for being with us.

      STATEMENT OF LEE SPANGLER, DIRECTOR, BIG SKY CARBON 
             SEQUESTRATION PARTNERSHIP, BOZEMAN, MT

    Mr. Spangler. Thank you. I am also Director of the Zero 
Emission Research and Technology Center, which is a 
collaborative involving five DOE national labs and two 
universities that is focused on basic science on sequestration.
    The country and the States in this region, in particular, 
face a dilemma. We have enormous coal reserves that can make a 
major contribution to the Nation's economic development and 
energy security, but we face the need to utilize these 
resources in a climate-friendly fashion. Carbon capture and 
storage, CCS, holds promise as a method of climate-neutral coal 
use by capturing the produced carbon dioxide and storing it 
safely underground.
    North Dakota and the State of Montana--and Montana with 25 
percent of the Nation's coal reserves and with MSU as the lead 
institution in the Big Sky Partnership--both of these States 
are poised to help address the issue of national energy 
security and of climate change mitigation.
    There are many challenges to the deployment of large-scale 
CCS technologies, and they can probably be categorized as 
technological, logistical, economic, and regulatory. Current 
regulatory challenges include defining ownership of pore space, 
as has been discussed previously, underground injection control 
and the classification of CO2, and liability, 
especially given the long-term storage requirements to effect 
climate change mitigation. I address these issues in a little 
more detail in the written testimony.
    Right now I would like to emphasize the need for some 
flexibility in the regulatory environment. Enhanced oil 
recovery, natural analogs, other underground injection and 
storage programs all provide confidence that CCS is viable, but 
there are still differences between these cases and long-term 
CO2 storage. In certain cases where there are proven 
seals and extensive knowledge of the geology, we can have a 
higher degree of confidence and can pursue sequestration on an 
industrial scale. But there are other cases where laboratory or 
small-scale tests are very promising, but we really need to 
answer additional technical questions before we go to the 
large-scale.
    Given the varying degrees of knowledge about different 
geological cases, research, development, demonstration, and the 
deployment can take place simultaneously instead of 
sequentially for these different cases. However, this would 
require flexibility in the regulatory environment so that 
permitting more experimental studies at smaller pilot scales is 
not overly burdensome.
    Another potential barrier to deployment is public 
acceptance. There is a widely recognized need for 
CO2 detectors near the surface for health, safety, 
and environmental reasons and to provide public assurance. Such 
sensors have been deployed at current sequestration pilot 
sites, but these sites have been properly characterized and 
chosen to meet the goal of storing the injected CO2 
without seepage. As a result, the surface detection methods 
have not really been tested at these sites, so it is difficult 
to determine efficacy of and detection limits for the 
measurement methods.
    The Nation via DOE is addressing this in the ZERT program 
where we have created a first-of-its-kind field laboratory with 
a controlled release of CO2 through a shallow, 
perforated, horizontal well. The system is designed to be on a 
realistic scale with a low flow of CO2. The amounts 
released are small, equivalent to about six cars idling. But 
since the CO2 flux is known, it allows us to 
investigate the detection limits and verify that the 
technologies can perform as needed.
    In concluding, I would like to remark that the DOE 
partnership program is providing critical technical knowledge 
concerning the behavior of CO2 in the subsurface, 
but just as important, it is exposing the private sector, the 
general public, government, and regulatory agencies to the 
challenges and issues relevant to CCS.
    Because there are significant geologic, cultural, economic, 
and regulatory differences across our Nation, the regional 
design of the partnership program was extremely well founded, 
and I would consider the seven large-scale demonstrations 
really at a minimum. All through this program, valuable 
exposure I will experience, with all aspects of CCS, is made 
available to all the sectors, public and private, in the 
regions. I certainly encourage your continued support of this 
program.
    [The prepared statement of Mr. Spangler follows:]
     Prepared Statement of Lee Spangler, Director, Big Sky Carbon 
                 Sequestration Partnership, Bozeman, MT
    Energy and energy security are critical to the economic well being 
of any state or nation. Fossil energy resources have proven to be an 
abundant and relatively inexpensive source of energy to the developed 
world, but there is compelling evidence that the carbon dioxide that is 
necessarily produced in the process of generating energy from fossil 
sources is contributing to global climate change. While ultimately the 
solution to global climate change may be renewable energy, existing 
technologies cannot meet current energy demands. The country, and 
states in this region in particular, face a dilemma; they have enormous 
coal reserves that can make a major contribution to their nation's 
economic development and energy security, but they face a need to 
utilize these resources in a climate friendly fashion. Carbon Capture 
and Storage (CCS), holds promise as a method of climate-neutral coal 
use by capturing produced carbon dioxide and storing it safely in 
underground geologic formations instead of releasing it to the 
atmosphere. Given that the populous developing countries of China and 
India also have large coal reserves, the importance of developing this 
technology is even more critical. I direct two efforts that address 
CCS. The Big Sky Regional Carbon Sequestration Partnership; one of 
seven DOE funded regional partnerships focused on validating and 
demonstrating geologic sequestration. And the Zero Emission Research 
and Technology Center, ZERT, a collaborative with five DOE national 
labs and two universities focused and basic science and technology 
issues relevant to CCS.
                         partnership background
    The overarching objective of the Big Sky Carbon Sequestration 
Partnership (BSCSP) is to promote the development of a regional 
framework and infrastructure required to validate and deploy 
sequestration technologies. To achieve this objective, Phase II focuses 
on the most promising geologic and terrestrial field validation tests 
coupled with market assessments, economic analysis and regulatory and 
public outreach. This project benefits the United States by providing a 
comprehensive assessment of the sources and potential sinks for carbon 
dioxide (CO2) in the Big Sky region. This information on 
sources and sinks is being integrated with the data from other 
partnerships to provide a comprehensive database covering the entire 
nation. This effort also provides information to evaluate potential 
pilot sequestration projects in the Big Sky region with respect to the 
effectiveness, efficiency and permanence of the sequestrated carbon.
    Within the Big Sky region, including Montana, Idaho, South Dakota, 
Wyoming and the Pacific Northwest, industry is developing new coal-
fired power plants using the abundant coal and other fossil-based 
resources. Of crucial importance to future development programs are 
robust carbon mitigation plans that include a technical and economic 
assessment of regional carbon sequestration opportunities and 
participation in the BSCSP's field validation tests. Therefore, BSCSP 
is working closely with industry and national and international 
collaborators to design Phase II geologic and terrestrial field tests 
to be effective, relevant to commercial development needs and broadly 
transferable. More information regarding the Phase II objectives can be 
found at the BSCSP website: http://www.bigskyco2.org.
    The target areas and key highlights for the Phase II activities 
include:

          1. Conduct a geologic demonstration project in a prominent 
        geological formation located throughout the region mafic rocks 
        or basalts. This project involves a small volume injection into 
        the Grande Ronde to establish the potential of this formation 
        for permanent sequestration. Since the last reporting period, 
        geologic efforts have been proposed to conduct two new saline 
        aquifer projects that involve evaluating naturally occurring 
        CO2 reservoirs as potential CO2 storage/
        sequestration sites. The first project seeks to evaluate 
        existing cores from the Madison Formation that have had prior 
        exposure to naturally occurring CO2 for millions of 
        years and to compare those cores from the same formation 
        without naturally occurring CO2. Secondly, BSCSP 
        will evaluate the potential of using naturally occurring 
        CO2 reservoirs in geologic domes as potential 
        CO2 storage sites for enhanced oil recovery (EOR) 
        and as long term permanent sequestration alternatives.
          2. Conduct pilot projects to demonstrate and validate the 
        technical and economic feasibility of the major terrestrial 
        carbon sinks, implement monitoring and verification protocols, 
        and assess the impacts to existing ecosystems. The terrestrial 
        sinks provide a near-term solution to partially offset 
        industrial CO2 emissions and enhance the production 
        of the agricultural land base.
          3. Develop a national mafic rock atlas and assess the 
        regional and national long-term sequestration potential of 
        these geological formations through modeling studies, 
        laboratory testing, and insights developed from mafic rock 
        pilot projects.
          4. Address both the technical and economic potential for 
        carbon sequestration and assess the economic implications of 
        carbon sequestration in the region.
          5. Establish the Big Sky Energy Future Coalition or similar 
        venues that annually bring together industry, academia, 
        environmental non-governmental organizations and regulatory and 
        governmental officials to build dialogue on the role carbon 
        sequestration can play in providing a technology solution to 
        the region's energy requirements.

    During Phase III (beginning in late 2009) the Partnership will 
begin preparations for a large volume sequestration test in the 
Jurassic/Triassic Nugget Sandstone Formation on the Moxa Arch of 
southwestern Wyoming. The test has the potential to inject three 
million tons of carbon dioxide (CO2) into the saline 
formation at depths of 12,000 over three years. The Nugget sandstone is 
similar to the Tensleep, Weber, and Navajo formations, which have been 
identified as regionally extensive sequestration targets in the western 
US. The CO2 will be supplied by Cimarex Energy from their 
gas plant in the Riley Ridge Field. The Cimarex plant, scheduled for 
completion in late 2008 or early 2009, will extract methane and helium 
from gas produced from the Madison Limestone at 18,000 feet. The 
produced gas is 75% CO2 with accompanying methane, hydrogen 
sulfide and helium. The non-economic portion of the gas will be re-
injected into the Madison Limestone. The plant will produce 
approximately 1.5 million tons of high pressure CO2 per 
year. The CO2 for the project (92% CO2 and 8% 
H2S) will be diverted in a short lateral pipeline for injection into 
the Nugget Formation on Wyoming State Trust lands. Information from the 
project will be used by Cimarex to evaluate the potential to establish 
a commercial sequestration facility.
    The overarching objective of the Phase III Large Volume Injection 
is to demonstrate the long-term safe operation of large injection 
volume into a regionally significant sink. The primary research 
objectives in support of this goal are to:

          1) Evaluate the Nugget Sandstone saline aquifer responses to 
        injection of commercial scale volumes of supercritical 
        CO2 and derive the relevant economic information for 
        future projects.
          2) Track the post-injection migration and containment of the 
        CO2 in the Nugget Sandstone to compare with pre-
        injection reservoir model predictions and use the data to 
        refine multiphase flow reactive-transport modeling of 
        CO2 sequestration in saline formations.
          3) Evaluate the various MMV procedures used for their 
        performance during deep sequestration. The depths in this 
        project represent the upper limits of those proposed for Phase 
        III projects, and may be used to help establish economic 
        criteria for deep sequestration.

     zero emission research and technology center (zert) background
    The Zero Emissions Research and Technology (ZERT) Center, is a 
collaborative involving five DOE National labs (Los Alamos National 
Lab, Lawrence Berkeley National Lab, the National Energy Technology 
Lab, Pacific Northwest National Lab, Lawrence Livermore National Lab) 
and two academic institutions (Montana State University and West 
Virginia University) and is focused on the basic science issues behind 
geologic carbon sequestration. The major objectives of ZERT are to:

          1. Improve computational tools for simulation of 
        CO2 behavior in the subsurface. This includes adding 
        algorithms to address CO2 specific behavior such as 
        reactive transport, development of coupled models to include 
        geomechanics, inclusion of hysteretic effects, parallelization, 
        etc.
          2. Test efficacy of near-surface detection techniques, help 
        establish detection limits for those techniques, and provide 
        data to assist in development of transport models in the near-
        surface region. A field test site to help accomplish this 
        objective.
          3. Develop a comprehensive risk assessment framework that 
        will allow flexible coupling of multiple computational models 
        for different components/processes of the system. The tool 
        developed, CO2-PENS, is the first-ever performance 
        and decision analysis tool specifically developed for 
        CO2 sequestration.
          4. Perform gap analysis to determine critical missing data 
        for CO2 properties in the subsurface including 
        thermodynamic properties of CO2-brine mixtures, 
        reaction rates, relative permeabilities, etc. We perform 
        laboratory based experiments to generate that key data using 
        pressurized batch and flow-through vessels to reproduce sub-
        surface conditions.

    We have developed a unique field site for verification / testing of 
near surface detection technologies and transport codes. This site 
consists of a shallow horizontal well with a 70 m screened section 
divided into zones via a packer system that allows individualized 
control of flow rate. Five Department of Energy (DOE) National Labs and 
two universities tested detection technologies including eddy 
covariance, free space LIDAR, hyperspectral imaging, two soil gas flux 
measurement systems, resistivity, water chemistry, LIDAR measurements 
of the soil gas in the shallow subsurface, tracer studies, and stable 
isotope studies.
                        challenges to deployment
    There are many challenges to deployment of large scale carbon 
capture and storage technologies. These can be characterized as 
follows: 1) technological; 2) logistical; 3) economic; and 4) 
regulatory.
    Technological.--Oil and gas companies that have provided us with 
mature technology to understand and safely operate successful 
underground natural gas storage. Similarly, the use of CO2 
for enhanced oil recovery (EOR) has been in place for over 30 years in 
various oil and gas fields throughout the United States, Canada and 
abroad. CO2 injection for permanent sequestration is an 
excellent analogue to both natural gas storage and EOR but it has not 
been done at an equivalent scale. Consequently, our understanding of 
the geochemical, geophysical and other technical advantages or 
disadvantages of various geologic sinks requires testing at a scale 
that is commensurate with the operation of a commercial sequestration 
facility. Currently, DOE funding is being made available to the Big Sky 
Carbon Sequestration Partnership and the other six regional 
partnerships to begin to examine this volume of sequestration as part 
of the Phase III projects.
    Currently, one of the biggest challenges to testing commercial 
scale geologic sequestration is the lack of availability of 
CO2. While our experience with sequestration has been 
advanced by the technologies described above, capture of large volumes 
of CO2 from fossil fuel plants is extremely limited to 
sources such as that currently available from the syngas plant operated 
by Basin Electric in North Dakota, the Exxon Mobil gas stripping 
facility in southwestern Wyoming, or non-anthropogenic sources from 
naturally occurring CO2 reservoirs. Capture technologies, 
while advancing quickly, remain largely as voluntary collaborations 
between emitters and capture plant builders to evaluate the 
technological advantages of a range of competing approaches. Because 
the deployment of these technologies remains experimental and largely 
voluntary the actual costs and opportunity costs of deploying these 
systems remains costly and with unavoidable risks to the power producer 
in terms of operational downtime or capture and compression process 
failures.
    Logistical.--As mentioned previously, much remains to be done to 
adequately characterize potential geologic sinks on a site specific 
basis to allow sequestration to proceed safely and with a high 
probability of permanent storage. Currently, areas where extensive site 
characterization work has been completed such as areas with extensive 
oil and gas exploration and production, are not necessarily proximal to 
large sources of CO2 emission. Assuming that technology 
emerges that effectively and economically captures CO2, 
transporting the CO2 to areas suitable for permanent storage 
or for EOR could prove extremely costly. Some have argued that the 
pipeline infrastructure required for transportation of CO2 
could approach that of the current natural gas infrastructure that was 
put in place over the past 50--60 years.
    Pipelines are becoming increasingly difficult to build due to 
skyrocketing costs of obtaining rights-of-way. For interstate 
pipelines, questions remain as to how CO2 pipelines will be 
classified; will these pipelines receive common carrier status and 
therefore be granted eminent domain powers? Some states have begun to 
address this issue but most have not.
    Economic.--In the absence of a price signal or command and control 
instruments that limit CO2 emissions, there is little 
incentive for capital investment in capture, transportation and 
sequestration facilities. Recent regulatory decisions by individual 
states or consortia of states and Canadian provinces have created 
performance standards or capped GHG emissions at historical levels. 
This has created market incentives to begin to reduce emissions or to 
begin to contemplate electrical generating facilities that incorporate 
capture as a means to take advantage of clean markets. However, a lack 
of capture technologies designed to scale, the anticipated cost of 
capture, transportation, and sequestration continues to reduce interest 
in new clean coal plants, retrofitting existing plants, and promoting 
sequestration. This is particularly problematic for those entities that 
must secure financing from outside sources or for facilities that have 
not negotiated a market for the produced CO2 such as EOR. 
Conversely, new builds that do not plan to sequester CO2 are 
having difficulty securing financing and obtaining permits because of 
current regulatory uncertainty.
    Public Acceptance/Assurance.--New approaches and technologies 
inherently raise public concern. In an area with technical issues such 
as CCS, engaging the public and clearly articulating current relevant 
experience with underground injection, EOR, and natural analogs as well 
as safeguards that can be put in place is critical.
    Development and testing of those safeguards is critical as well. 
There is a widely recognized need for detecting the CO2 near 
the surface for Health, Safety and Environmental reasons and to provide 
public assurance. Such sensors have been deployed at sequestration 
pilot sites, but these sites have been properly characterized and 
chosen and meet the goal of storing the injected CO2 without 
seepage. As a result, the surface detection methods have not really 
been tested at these sites, so it is difficult to determine efficacy of 
and detection limits for the measurement methods. DOE is addressing 
this in the ZERT program where we have created a first of its kind 
field laboratory with a controlled release of CO2 through a 
shallow, perforated, horizontal well. The system is designed to be on a 
realistic scale (10% to 1% of the physical extent of some known natural 
CO2 leaks) and the amounts of CO2 released are 
low (less than the CO2 emissions from 6 idling cars), but 
since the CO2 flux is known, it allows us to investigate the 
detection limits and ``footprints'' of a variety of technologies to 
verify that they can perform as necessary.
    Regulatory.--Perhaps the most daunting challenge for large scale 
deployment of CO2 sequestration is the uncertainty 
surrounding the regulatory environment. These challenges can be 
categorized as follows:

          Ownership of pore space.--Most state and federal mineral law 
        addresses the extraction of minerals and prescribes ownership. 
        The law is much less clear on the ownership of the remaining 
        pore space--does it belong to the mineral right holder or the 
        surface owner? Obviously, for sequestration to occur on a large 
        scale that has the potential to affect numerous surface or 
        mineral owners, this question must be addressed for the process 
        to proceed.
          Underground Injection Control.--Current EPA guidance would 
        suggest that sequestration pilots can occur under Class V 
        experimental well designations. However, it remains unclear 
        whether projects at the scale of Phase III DOE large volume 
        tests would be a ``pilot.'' Secondly, moving to commercial 
        scale sequestration may involve the need for additional 
        clarification at both the state and federal level. Finally, as 
        additional research requires the need for more pilot scale 
        activities to adequately characterize potential geologic sinks, 
        sufficient flexibility must remain within the UIC program to 
        accommodate conducting this research.
          Measuring, Monitoring and Verification.--As geologic 
        sequestration becomes increasingly technologically feasible and 
        if capture and transportation costs can be economically 
        reasonable, it will be important to maintain MMV requirements 
        that are economically and technologically feasible as well. The 
        ``precautionary principle'' should not preclude the assumption 
        of reasonable risk to ensure that CO2 remains safely 
        and securely stored for the long term. For CCS to remain a 
        viable alternative to GHG emissions, the regulatory environment 
        should recognize that cost containment for MMV is as important 
        for successful sequestration as capture and transportation.
          Liability.--Perhaps the biggest concern for those entities 
        considering geologic sequestration is the long term liability 
        for the CO2 once injection operations cease. The 
        intention for most sequestration operations is to sequester the 
        CO2 over the life of the facility and then based on 
        operational experience over that time period, being able to 
        state with some certainty that the CO2 will remain 
        in the formation where it is stored permanently. Assuming this 
        liability in perpetuity is obviously beyond the capability of 
        most operations given the changing nature of corporate 
        structures, dissolution of corporations, etc.
            Our experience with geologic sequestration over the next 5-
        10 years may demonstrate that assumption of this liability is 
        reasonable and that underwriters, based on this experience, 
        will be willing to offer liability protection at a reasonable 
        cost. However, in the interim period while we carry this 
        research forward and attempt to commercialize the technology, 
        the possibility of indemnification from reasonable liability 
        would expedite the deployment of both capture and sequestration 
        technologies.

    The DOE partnership program is providing valuable technical 
knowledge concerning the behavior of CO2 in the sub-surface. 
Just as important, it is exposing the private sector, the general 
public, government, and regulatory agencies to the challenges and 
issues relevant to CCS.

    Senator Dorgan. Dr. Spangler, thank you very much. We 
appreciate your testimony as well.
    Next, Mr. John Harju, Associate Director for Research at 
the EERC in Grand Forks, North Dakota, and is involved in the 
PCOR project, a regional CO2 reduction partnership. 
Mr. Harju, thank you. You may proceed.

  STATEMENT OF JOHN A. HARJU, ASSOCIATE DIRECTOR OF RESEARCH, 
  PLAINS CO2 REDUCTION PARTNERSHIP, GRAND FORKS, ND

    Mr. Harju. Thank you, Senator Dorgan and Senator Tester.
    It is in my current capacity at the EERC I oversee this 
PCOR Partnership. The PCOR Partnership encompasses all or part 
of nine States and four Canadian provinces, and the four 
Canadian provinces really provide additional experience and 
knowledge and an international framework to advance CCS 
technology.
    Within this partnership, we have approximately 80 public 
and private sector partners contributing either financially or 
with time or equipment or other experiences to the advancement 
of CCS. At present, we have most of the region's electrical 
generating capacity involved, many of the region's engineering 
firms, all of the region's regulatory bodies, and many of the 
region's oil and gas companies.
    We have four modest-scale field tests underway at present, 
and we have two large-scale tests on the order of a million 
tons a year each designated for implementation in the near 
term.
    Our region generates about 600 million tons of 
CO2 annually, and to give you some perspective on 
what that might mean in the context of enhanced recovery 
opportunities, we have on the order of tens of billions of tons 
of storage capacity simply in depleting or depleted oil and gas 
reservoirs in the region. So it is a very, very significant 
opportunity, and it is an opportunity upon which an incredible 
experience base can be drawn. More than 30 years of experience 
has been generated through enhanced recovery. Approximately 6 
to 7 trillion cubic feet of CO2 has been put into 
long-term geologic storage already over the course of that 
effort, largely in west Texas and New Mexico.
    Currently about 2.5 billion cubic feet a day of 
CO2 is transported via pipeline and injected through 
these enhanced oil recovery operations. That equates to about 
40 million tons a year of CO2 that are put into 
long-term geologic storage.
    In turn, very well established regulatory regimes already 
exist. The IRGCC guidelines that have been mentioned earlier, 
of which I am a co-author to, recognize that that experience 
base and do go into such issues as unitization, a well-
established oil and gas procedure for delineating subsurface 
ownership, well-established U.S. DOT guidelines for the 
pipeline transport of CO2. Two very significant 
experience bases that cannot be ignored, one being natural gas 
storage and the Natural Gas Storage Act as promulgated by 
Congress many years ago now, do provide very consistent 
regulatory analogs for implementing CCS.
    Another more recent, but also very useful analog from the 
regulatory side of the equation is that of acid gas injection. 
It is my contention that only modest adaptation of these rules 
is necessary.
    I also want to focus in a little bit on a term that we have 
heard a little bit--well, we have heard consistently through 
most of the other folks on the panels today, and that being 
``liability.'' I think a better term to start with is that of 
``custody.'' Liability infers a damage, and it is my contention 
that that--in well-chosen locations, that liability will be the 
exception rather than the rule, and that custody is what we 
really need to focus in on.
    Within oil and gas-producing States around the Nation, what 
we already have are very well-established programs where fees 
are levied on the operations, bonds are issued on operations. 
Those fees and/or bonds are utilized in the event of any 
liability that may occur as a function of that long-term 
custody. I think those are the programs to look to as we 
attempt to provide financial assurances to the private sector 
as they look at deploying CCS on a wide scale.
    Finally, in this regulatory regime, it is certainly my 
belief that the States are best equipped. They understand the 
geology of their States. They understand the socioeconomic 
implications of any of these actions within their own States.
    Regulatory regimes need to have the flexibility to 
accommodate the excellent sites with very minimal monitoring, 
and they also need the flexibility of ruling out sites where 
CO2 probably should not be in place.
    I will close at that point. I see my time is up, and I 
thank you for the opportunity.
    [The prepared statement of Mr. Harju follows:]
 Prepared Statement of John A. Harju, Associate Director of Research, 
      Plains CO2 Reduction Partnership, Grand Forks, ND
                  carbon management and global warming
    Carbon dioxide (CO2) is a gas composed of one atom of 
carbon and two atoms of oxygen. CO2 occurs naturally in the 
atmosphere, is essential to plant life and, as a greenhouse gas (GHG), 
helps create the greenhouse effect that keeps our planet livable. 
CO2 is exhaled by humans and is used to put the bubbles in 
soft drinks, as a coolant (dry ice), and in fire extinguishers.
    GHGs, including CO2, trap a portion of the sun's energy 
in the Earth's atmosphere and make our planet warm enough to support 
life. Human (anthropogenic) activity, including the use of fossil fuel, 
generates a significant volume of GHGs like CO2. There is 
concern that the anthropogenic GHG entering the atmosphere is causing 
increased warming and that this warming will affect climate on a global 
scale. CO2 sequestration--the capture and long-term storage 
of CO2--is one of several carbon management actions that 
helps to control anthropogenic CO2 emissions to the 
atmosphere.
                          the pcor partnership
    The PCOR Partnership, led by the University of North Dakota Energy 
& Environmental Research Center, is one of seven regional partnerships 
established by the U.S. Department of Energy National Energy Technology 
Laboratory to assess carbon sequestration opportunities that exist 
nationwide. The PCOR Partnership covers an area of over 1.4 million 
square miles in the central interior of North America and includes all 
or part of nine states and four Canadian provinces. The central 
interior of North America contains several seismically stable geologic 
basins that are ideal sinks for geologic CO2 sequestration. 
These basins have been well characterized because of commercial oil and 
gas activities. The geologic characteristics of the oil and gas 
reservoirs offer significant opportunities for developing the expertise 
and infrastructure required to make geologic CO2 
sequestration a commercial reality while maintaining, and even 
enhancing, the regional economy.
    The coal-fired electrical utilities in the region produce over 60% 
of the CO2 emissions from stationary sources. With the 
distinct possibility of carbon management becoming more important in 
the future, industries that rely on fossil fuels are looking to 
CO2 sequestration as a strategy for carbon management. 
Further, many of the region's oil fields could develop CO2-
based enhanced oil recovery (EOR) projects with the increased 
availability of CO2. The PCOR Partnership has developed a 
regional vision for the widespread commercial development of 
CO2 sequestration. The vision includes several key elements: 
1) targeting tertiary EOR opportunities; 2) employing the existing oil 
and gas regulatory structure and agencies for oversight; 3) developing 
a protocol for the establishment of geologic sequestration units that 
is based on the standard oil field practice of unitization; 4) 
developing rigorous site selection criteria that will allow for the 
adoption of commercially viable measuring, monitoring, and verification 
(MMV) procedures; and 5) developing the information needed to monetize 
carbon credits to reduce the costs of industrial projects. The 
realization of this vision will result in the development of EOR-based 
opportunities, to be followed by non-resource-recovery-based 
sequestration when the EOR opportunities have been exhausted.
                      the pcor partnership region
    The variable nature of the sources and sinks reflects the 
geographic and socioeconomic diversity of the PCOR Partnership region. 
In the upper Mississippi River Valley and along the western shores of 
the Great Lakes, large coal-fired electrical generators power the 
manufacturing plants and breweries of St. Louis, Minneapolis--St. Paul, 
and Milwaukee. To the west, the prairies and badlands of the north-
central U.S. and central Canada are home to coal-fired power plants, 
natural gas-processing plants, ethanol plants, and refineries that 
further fuel the industrial and domestic needs of cities throughout 
North America.
    Geological formations deep beneath the surface of the region hold 
incredible potential to store CO2. Oil fields already 
considered to be capable of sequestering CO2 can be found in 
five states and all of the provinces of the region. Saline formations 
and coalfields exist in basins that, in some cases, extend unbroken 
over thousands of square miles. Many large sources in the region are 
proximally located to large-capacity sinks. In some cases, the 
infrastructure necessary for CO2 sequestration is already 
largely in place. CO2-based EOR and enhanced coalbed methane 
(ECBM) are value-added sequestration technologies that have the 
potential for future large-scale deployment in the region.
    The economic viability of near-term sequestration will require a 
value-added component, and EOR and/or ECBM are likely to provide the 
needed impetus for large-scale injection of CO2 into 
geologic formations. EOR and ECBM then become vehicles to help pay for 
the additional characterization and infrastructure required for future 
storage in nearby formations.
    Bountiful oil fields in the PCOR Partnership region have a 
potential capacity to store over 10 billion tons of CO2. The 
U.S. portion of the Williston Basin includes over 20 large oil fields 
that are suitable for large-scale CO2-flood EOR operations. 
One of the PCOR Partnership's Phase III demonstration projects involves 
capturing CO2 from a coal-fired power plant and transporting 
it via pipeline to an oil field in the U.S. portion of the Williston 
Basin, where it will be injected for simultaneous EOR and 
sequestration. It is anticipated that a minimum of 1 million tons of 
CO2 will be injected annually through this effort.
   co2, eor and sequestration--the case for policies that 
                        facilitate collaboration
    Events currently unfolding at national and state levels have strong 
implications with regard to the pace of deployment of technologies and 
strategies to reduce CO2 emissions. CO2 
sequestration policies are under rapid development. This factor, along 
with an urgency of implementing emission reductions because of 
heightened public awareness, shows we are at a critical policy juncture 
with respect to carbon management.
    One serious concern has to do with any policy that might 
marginalize EOR as a sequestration tool. The emission reduction 
potential and sequestration associated with EOR is immense, and 
revenues from oil produced will offset the cost to the economy and 
will, ultimately, accelerate more widespread deployment. With the 
growing energy concerns in the United States, the contributions of 
CO2 EOR in the advancement of carbon capture and 
sequestration need to be placed front-and-center in the policy debate.
                    the case for co2, eor
    EOR involves injecting substances into a reservoir through thermal, 
chemical, and gas-miscible processes. One example of a gas-miscible 
process is that of a CO2 flood. CO2 is injected 
into an oil reservoir via pipeline whereupon it expands and thereby 
pushes additional oil into production. EOR can recover an average of 
35% of the remaining oil; some of the injected CO2 returns 
with the recovered oil and can then be reinjected into the reservoir to 
minimize operating costs while maximizing economical and environmental 
benefits.
    The era of CO2 EOR effectively began with two large-
scale floods in west Texas 35 years ago. The industry has grown since 
then to become a major factor in the industry in Texas, Wyoming, New 
Mexico, and Mississippi and produces over 90 million barrels of oil a 
year for the U.S. economy. The chief limiting factor of growth in other 
areas with oil properties has been a ready source of CO2.
    Industry estimates from the Permian Basin region of west Texas and 
New Mexico suggest 6 to 7 mcf of CO2 is permanently stored 
per barrel of oil recovered. Since over a billion barrels have been 
recovered there, that represents 6 to 7 tcf (340-400 gigatons) of 
stored CO2.
    So what does all of this mean for CO2 sequestration? 
First, an existing industry has evolved that possesses the operational 
practices to handle large volumes of CO2 safely and 
effectively. The industry's best practices can be extended into the 
field of CO2 sequestration with almost seamless ease. 
Surface CO2 handling (including gas processing, compression, 
and transportation), well designs, injection practices, and 
surveillance of emplaced CO2 are all directly applicable. 
Assurance of long-term storage is the key feature that needs to be 
demonstrated.
    Second, the EOR industry is seriously constrained by availability 
of CO2. With coal plants and other industrial facilities 
seeking to find a home for their CO2, it becomes only a 
matter of economics, CO2 capture technology improvements, 
and mutual trust to develop joint ventures between these two industries 
that are so critical to America's future.
    Third, the domestically produced oil from EOR has been the sole 
revenue stream to fund EOR projects--from the source of CO2, 
to the pipelines, to move it to the injection site, to produce the oil. 
Should EOR qualify as sequestration, the oil revenue will act as a 
critical resource to offset the huge infrastructure costs that, 
otherwise, will need to be funded by the public through higher energy 
costs. Storing the CO2 and funding the infrastructure from 
the additional oil recovery would occur at the same time that important 
barrels of domestic oil contribute to U.S. energy security.
    Fourth, CO2-based EOR is important in that it extends 
the life of existing oil fields. Up to an additional 30 years of life 
can be gained by CO2-based EOR. This reduces the need to 
develop new fields and greatly enhances our domestic oil supply, while 
sustaining vital revenue streams to state and local governments from 
the attendant tax collections.
                                barriers
    Just as in nature with deep-sourced, natural CO2, there 
are low-risk sites that will permanently entrap CO2, and 
there are places where it may migrate, perhaps even to the surface. 
CO2 is a naturally occurring substance, and movement within 
the subsurface is very common. Rather than trying to fashion rules that 
protect against surface escape in all subsurface conditions, regulatory 
oversight needs to recognize the ubiquitous presence of the molecule 
while identifying low-risk sites for entrapment and provide flexibility 
in regulation to accommodate the attendant risk level.
    The CO2 EOR experience within the oil and gas industry 
can provide pathways to successful sequestration on a very large scale. 
The oil and gas industry can provide the tools of exploration, the 
science and experience to assess risks of site permanency and, most 
importantly, the tools and techniques to design and construct the wells 
for emplacement.
    One of the largest potential barriers to deployment of 
sequestration projects would be the specification of overly complex 
well design and monitoring of sites. Experience shows that exotic well 
designs add little benefit, while, on the other hand, judicious site 
selection adds greatly to the security of emplacement. For example, 
subsurface sequestration formations overlain by bedded salts provide 
optimal conditions for long-term storage. The focus of regulation 
should be performance criteria, not design criteria.
    The need for managing and mitigating any risks that may arise from 
the long-term custody of the emplaced CO2 is also a critical 
item. The Interstate Oil and Gas Compact Commission has developed 
guidelines that are based on current practice for handling long-term 
liability in the oil and gas industry. The financial assurances 
provided therein seem to be the most viable solution to long-term 
custody issues and any potential liabilities that may arise.
                 eor and sequestration: separate paths?
    Recent policy actions seem to be charting separate paths for 
CO2 EOR and sequestration. For reasons stated earlier, 
recognizing EOR as a CO2 storage event is critical. 
Advancements in using coal in such a way as to capture and sequester 
the by-product CO2 are important steps for America's energy 
future. Disqualifying CO2 stored during EOR as an offset to 
emissions will do nothing but delay the necessary commercial 
demonstrations of those technologies and further burden an already-
stressed energy infrastructure. One example of an action working 
against this progress is setting up separate well design requirements 
for sequestration as compared to the proven designs currently used in 
CO2 EOR.
                              conclusions
    Industry participation in the ongoing policy debates about 
CO2 injection projects is critical. Special contributions 
are needed in categorizing appropriate sequestration sites, well design 
requirements, and CO2 emplacement surveillance and 
monitoring. Regulations need to be developed in the context of a robust 
industrial knowledge base for carbon management issues. In most cases, 
existing oil and gas regulations can be applied with little or no 
modification to ensure that CO2 sequestration is a safe and 
practical method for carbon management. The need for managing and 
mitigating any risks that may arise associated with the long-term 
custody of the emplaced CO2 is also very important, and a 
Petroleum Insurance Fund-type approach may be an effective solution to 
any attendant issues related to excursions from the sequestration site. 
It is critical that EOR activities not be precluded or discounted as 
CO2 sequestration opportunities.

    Senator Dorgan. Mr. Harju, thank you very much. We 
appreciate very much your testimony.
    Finally, we will hear from Gary Loop, Chief Operating 
Officer and Senior Vice President of the Dakota Gasification 
Company, a subsidiary of Basin Electric Power Cooperative. Gary 
has served in the refinery and the crude oil industry since 
1982, and 3 and-a-half years as chief executive officer of a 
privatized power company in Zambia, Africa. A Berkeley, 
California native, he joined the Dakota Gasification Company in 
May 2006.
    Mr. Loop, thank you very much. You may proceed.

 STATEMENT OF GARY G. LOOP, CHIEF OPERATING OFFICER AND SENIOR 
   VICE PRESIDENT, DAKOTA GASIFICATION COMPANY, BISMARCK, ND

    Mr. Loop. Thank you, Mr. Chairman and Senator Tester. I 
appreciate the opportunity to testify here this morning.
    We at Basin have about 3,500 megawatts of power, mostly 
coal-generated. So you can understand why we really have a 
clear interest in all the issues that have been discussed here 
today and share your sense of urgency to begin to find answers 
to go forward, because not only do we have to deal with these, 
but we need to build more power stations to meet the growing 
needs of our members.
    We also believe in the government and private partnership, 
and we want to take a leadership role in that where we can.
    We have the only coal-to-gas commercial-size operation in 
the United States, and we, as a part of that, remove 
CO2 from our products. So we have been capturing 
CO2 to the tune of 3 million to 4 million tons a 
year for 20 years. However, we have been simply releasing it 
back to the atmosphere until 2000 when we began to sell our 
CO2 after building a 200-mile pipeline into Canada, 
and it is used as EOR up there now in two fields.
    So we are currently sending 3 million tons a year up there 
and have already sequestered over 13 million tons, making us 
the largest carbon capture and sequestration project in the 
world.
    If one looks at what we are doing, though, we capture 
carbon from a stream that has a low gas volume, very high 
pressure, allowing us to use methanol. We can do this in a very 
proven technology--and, I mean $10 to $15 a ton.
    We are looking at a project next door. We are joined at the 
hip to a power plant next door that is burning pulverized coal, 
and they, of course, have higher gas volumes in a post-
combustion, low-pressure. So methanol will not work there. So 
we are looking at ammonia or a mean type systems. These are 
untested at any demonstration plant, let alone a commercial-
scale.
    We went out for bids for people who could come in and do a 
project on a slip-stream of our total, but it would be a large 
project, 120-megawatt equivalent of flue gas. We have got 
estimates ranging from $30 to $50 a ton to remove this carbon.
    What we do have what we think is a unique opportunity. We 
are in a place where there is existing CO2 transport 
and sequestration opportunities and infrastructure, along with 
operating and marketing expertise. We have an ammonia source 
right next door. At PGC we make ammonia. We have an ammonium 
sulfate manufacturing capability, and in these amine and 
ammonia systems, you must remove the sulfur down to very, very 
low levels, but those systems then must do something with that 
sulfur. We have excess capacity to turn that into a saleable 
product.
    Now we will look a little bit at the region we are in. If 
we look at Williston Basin, which is in South Dakota, Montana, 
and North Dakota, and just looking at the portion that is in 
the United States, we believe, using some very preliminary 
data, that if you took all the CO2 being emitted 
from electric power plants in that region and just use them for 
EOR in what we believe is out there, we could sequester for 50 
years.
    If you look at the saline aquifers--the data gets more 
sketchy here, but it is beginning to look like you could burn 
all the carbon--all the coal in the region and sequester the 
CO2 in the aquifers. Again, it has got a lot of 
legal issues and other issues, but physically the space appears 
to be there.
    But we are very interested in the 50-year number. Whether 
it is 40 or 50 or 60, that is a big number and could easily 
handle paying for the capital of projects. This is a good area, 
we think, to develop technologies because as you are developing 
them, they will cost more. Hopefully, over time, as you learn 
how to do it, the costs will come down. So we are very 
interested and see this as a good opportunity.
    If you look at a cost of $30 or $50 a ton to capture the 
CO2, we think pipeline and transportation costs are 
in the $15 to $30 a ton range and that the value of the 
CO2 as EOR ranges from $20 to $35. That would give 
you this huge range of anywhere, in the most optimistic case, 
of $10 a ton all the way up, in the most pessimistic, to $60 a 
ton. We refer the $60 a ton, it is kind of a hopeless case, but 
the $10 a ton, maybe this might work. That number is in the 
range of people who have talked about it, as incentive type 
numbers, to drive people to make this decision.
    The last area I would like to talk about--and I do not know 
how many of you have the slides we handed out, but the very 
last page shows a picture of some maps. Right now we have 
pipeline running from our plant and neighboring AVS, running up 
into Canada. But we are looking to build another 110-mile 
pipeline south down into a large number of oil fields, and are 
talking to potential customers down there where we could send 
our AVS production or even some of our existing production. 
Further, we could expand that as we look at plants we are 
building in Grand Forks or potentially trying to build out in 
South Dakota. These are 250- to 100-mile-long pipelines that 
could all be interconnected and give us a very large system.
    The reason this is important is one issue that has not been 
talked about today is that when you try to connect yourself to 
somebody else, if you are just one on one, then when either one 
has a problem, the other one has to go down, it increases the 
hidden costs of some of these things. But having a system with 
multiple sources and multiple customers using it, then when any 
one of them has a problem, you can distribute the flow of 
CO2 around and it protects everybody. Some of us 
like Basin in this area could build our own system, but there 
are issues for how you build a system where one source might 
participate.
    But those are kind of the major issues. We do seek, as you 
do, an aggressive program. We believe that projects like ours 
should get funding, whether it is ours or something similar to 
it, that are cheaper where you only have to buy the piece you 
are interested in. The other pieces of the infrastructure are 
already in place. It is a cheaper way to do it. We think we 
should be moving now because if you are going to finance it, it 
is a lot better if you know how much it is going to cost and 
whether it is even going to work. So that is kind of the gist 
of our whole presentation here today.
    Thank you.
    [The prepared statement of Mr. Loop follows:]
Prepared Statement of Gary G. Loop, Chief Operating Officer and Senior 
       Vice President, Dakota Gasification Company, Bismarck, ND
    Mr. Chairman and members of the committee, my name is Gary Loop and 
I serve as the COO and Senior Vice President of the Dakota Gasification 
Company. I appreciate the invitation to testify today, and I am here to 
provide you with Dakota Gasification's view on the challenges of large-
scale carbon capture and storage.
                experience with carbon capture & storage
    The Dakota Gasification Company (DGC) is a subsidiary of Basin 
Electric Power Cooperative. Basin Electric is an electrical generation 
and transmission cooperative with 125 member cooperatives located in 
nine states. Our generation resources include approximately 3,500 
megawatts of coal, gas, oil and wind, but we are primarily a coal-based 
utility. The question of what to do with the Carbon Dioxide 
(CO2) produced by these plants is casting a shadow over 
their viability. Coal produces approximately 50% of the nation's 
electricity and it is a vital part of our nation's energy security. The 
federal government should undertake an aggressive strategy to mitigate 
the risk of a carbon-constrained future. For its part, Basin Electric 
is taking a leading role in finding these answers.
    The best and largest example of Carbon Capture & Storage (CCS) is 
happening right here in North Dakota at DGC's Great Plains Synfuels 
Plant near Beulah. The Great Plains Synfuels Plant is the only 
commercial-scale coal gasification plant in the United States that 
manufactures natural gas. The synfuels plant gasifies lignite coal to 
produce 160 million standard cubic feet of synthetic natural gas daily. 
The $2.1 billion plant began operating in 1984. In 2000 DGC began 
capturing the CO2 produced at the plant, and shipping it 
through a 205-mile pipeline to Weyburn, Saskatchewan to be used for 
enhanced oil recovery (EOR) in an aging oil field. Today, DGC provides 
all the CO2 to the largest carbon sequestration project in 
the world located just across the border in Canada. Through 2006, 
Dakota Gasification has successfully captured and marketed over 10 
million tons of CO2 to two Canadian customers. Total 
CO2 demand is 152.7 million standard cubic feet per day. The 
CO2 is expected to be permanently sequestered in the oil 
reservoir and is being monitored by the International Energy Agency 
(IEA) Weyburn CO2 Monitoring and Storage Project.
             enhanced oil recovery; a bridge for technology
    The current effort to sequester carbon from coal based facilities 
requires massive amounts of capital. One of the important findings at 
the August 13, 2007, hearing of the Energy and Water Development 
Appropriations Subcommittee that Senator Dorgan held in Bismarck, ND, 
was that captured carbon might be used in increasing our oil 
production. Demonstrating carbon capture from coal-based generation and 
using it for enhanced oil recovery could prove to be extremely 
beneficial to North Dakota and the nation by increasing our oil 
production while at the same time sequestering CO2.
    However, even the potential for revenue from selling CO2 
does not fully support the business case of adding carbon capture to a 
coal fired electric plant. A combination of construction and production 
incentives is necessary to make such a system financially and 
commercially viable. To fully develop EOR opportunities we need 
incentives similar to those that the wind, ethanol and bio-diesel 
industries receive. EOR can provide the transitional path to fully 
develop carbon capture technologies and help produce the energy our 
nation desperately needs in an environmentally sound manner if long 
term incentives similar to the Production Tax Credits (PTC) and 
accelerated depreciation provided for wind are offered. However, even 
these incentives will not be adequate if CCS costs are as high as 
currently projected and EOR is not an option.
    There is great risk in being the first to commercialize the newest 
technology, whether it's using low-rank coals in an Integrated 
Gasification Combined Cycle (IGCC) plant for electricity generation or 
retrofitting pulverized coal power plants for carbon capture. For 
construction of either IGCC or Supercritical Pulverized coal, it takes 
7-8 years for permitting, front end engineering & design, procurement 
and construction, CCS could take up to 10 years or longer to achieve 
commercial deployment. The federal renewable production tax credit has 
greatly helped expand wind energy development in the United States. A 
similar effort could help make substantial progress with CCS from 
existing power plants. The right federal incentives could make 
investing in carbon capture technologies more attractive and 
potentially accelerate demonstration of carbon capture and EOR from 
existing powers plants.
                   potential for storage through ccs
    Our experience at the Great Plains Synfuels Plant makes clear the 
tremendous opportunity for the development of new technology through 
the use of EOR. Within the Williston Basin we can store 100% of the 
carbon emitted from all of the region's electrical generation for the 
next 50 years using EOR alone. For purposes of this discussion, we are 
defining region as all of North Dakota, South Dakota, Montana and the 
Northeast corner of Wyoming. After 50 years of EOR, should this storage 
capacity be exhausted, the capacity of saline aquifers within the 
region exceed the carbon content of all the known coal reserves within 
that region.
                             range of cost
    In a nutshell, the costs to capture and transport the carbon range 
from hopeless to maybe it might work. Our best estimate shows that it 
will cost from $30-50/ton to capture the CO2 and from $15-
30/ton to transport it to potential EOR sites. If we can recoup $20-35/
ton from the sale of the CO2, that provides us with a range 
of the total cost of between $10-60/ton for the total process. At $60/
ton this proposal is hopeless. However, if we diligently work to refine 
and reduce these associated costs, $10/ton it maybe might work. To give 
some idea of the scale of these projects, keep in mind that it takes 
about $1 MM/mile to construct a pipeline. It is 80 miles from the DGC 
plant to the Cedar Creek Fields, and it is 240 miles from the NextGen 
site near Selby to the Cedar Creek Fields.
                           development of eor
    One of the main considerations in the development of EOR is the 
surety of supply. Oil and gas companies need to be assured that once 
they have invested the massive amounts of capital to prepare oil fields 
for EOR that the CO2 continues to be available. Likewise, 
generators of CO2 need to be assured that once they have 
invested in the capture technologies, the plant, and the pipelines that 
the market for CO2 is not interrupted. To provide this 
assurance, each user needs multiple sources of CO2 and 
multiple sinks for EOR. The system will need the reliability of 
multiple CO2 sources to give it an uninterruptable supply. 
The generators need the assurance that they won't have to shut down 
power plants if something happens at the end of the CO2 
pipeline.
                            where from here
    As I mentioned earlier, incentives are the key. A targeted tax 
credit for the capture and storage of CO2 will help overcome 
the obstacles to demonstrating CCS technology. Senator Dorgan sponsored 
such a tax credit out of the Senate Finance Committee last fall, but it 
failed along with a variety of other energy incentives primarily due to 
its cost. To address these concerns, we propose altering the original 
proposal to limit the tax credit to three projects nationally. Since we 
are talking about demonstrating new, untested technology, we think this 
approach is appropriate. The attached legislation would provide a $15 
per ton of CO2 for each project, as long as the facility 
uses coal as a primary fuel sources and captures at least 1 million 
tons of CO2 annually for use in EOR or enhanced gas recovery 
projects. The credit would be capped at 10 million tons per project 
over a 10 year period, and would be available to a taxpayer that 
captures, treats, compresses and physically performs or contractually 
ensures the injection of the CO2. This ensures that the 
producer of the CO2 or the oil company that purchases the 
CO2 can benefit, bringing down the cost of CSS to a more 
manageable level.
    We believe these targeted changes will help reduce the overall 
costs of the bill to around $450 million dollars. However, when you 
factor in additional revenues the federal government would receive from 
increased oil production due to EOR, those costs could be even lower.
    Mr. Chairman, this proposal will go along way to advancing CCS 
technology in the United States, and we hope you and the committee will 
support it. Thank you again for the opportunity to speak with you. I am 
available to answer any questions you or the other committee members 
may have.
     carbon capture commercial deployment tax credit demonstration
Proposal
    Provide a $15 per ton tax credit (indexed for inflation) for the 
capture of carbon dioxide (CO2) for use in enhanced oil 
recovery (EOR) or Enhanced Coalbed Methane (ECBM).

   The credit would be limited to 3 projects nation-wide that 
        have a nameplate capacity to capture at least 1 million tons 
        per year of CO2 from an (industrial source) for EOR 
        or ECBM.
   Each project would be limited to receive a tax credit on 10 
        million tons over a ten year timeframe.
   Preference to be given to projects already involved in a DOE 
        Regional Partnership.
   Priority will be given to projects located geographic area 
        where CO2 can be utilized in qualified oil and gas 
        recovery.
   Priority will be given to a project with the existing 
        infrastructure and capability to effectively capture, 
        transport, and sequester CO2.
   Tax credits would be treated as a general business credit 
        under the Internal Revenue Code and indexed for inflation.
   The credit would be available to the taxpayer that captures, 
        treats, compresses and physically performs or contractually 
        ensures the injection of the CO2.
   Allow for accelerated depreciation of CO2 
        pipelines.
Need
    Carbon Capture and sequestration is an expensive proposition even 
when done under the most favorable conditions. We estimate the cost of 
carbon capture of $30-50 dollars a ton, and from $15-30 dollars a ton 
to transport it to potential EOR sites. Assuming a utility can sell the 
CO2 to an oil field operator for EOR or ECBM for $20-35/ton, 
the $15 tax credit described above would significantly reduce the net 
cost of carbon capture to the utility.
Benefits
    By limiting the cost of carbon capture, the technology can be more 
readily deployed. The added benefit of using the CO2 for EOR 
or ECBM would result in greater energy independence by using a domestic 
resource to enhance productivity of domestic oil and natural gas 
resources.
Cost
    Over 10-years the cost of this tax credit would be $150 million per 
project, for a total cost of $450 million. This cost would be 
eliminated or substantially reduced through the taxes resulting from 
the increased production, refining and ultimate sale of oil and gas 
products.

    Senator Dorgan. Mr. Loop, what prevents you from moving 
now? Is it that it is not commercially feasible to do so 
without incentives and tax credits and loan guarantees and so 
on?
    Mr. Loop. That is correct. In the best case, we would lose 
$10 a ton, and in the worst case, we might lose $60 a ton. So 
that is a huge risk, and so we would be looking for 
participation to help share that risk and to share all the data 
with.
    Senator Dorgan. Assume there is no--excuse me, assume there 
is no participation by any other interest and legislation comes 
along that says you must do this in order to use coal, then you 
do it and you pass the costs along to the consumers. I assume 
those are very significant costs at that point.
    Mr. Loop. They could be. It is at $10 to $60 a ton, and so 
that is right.
    Senator Dorgan. I mean, you say in your testimony, in a 
nutshell, the cost to capture and transfer carbon ranges from 
hopeless, to maybe it might work.
    Mr. Loop. That is correct.
    Senator Dorgan. That is not a very positive outlook.
    [Laughter.]
    Senator Dorgan. Do you have anything more positive to say 
than hopeless or maybe it might work?
    Mr. Loop. Maybe it might work, is out there. We feel very 
strongly. If we cannot build a great big FutureGen, then start 
taking some of these projects in various parts of the country, 
build them. Let us find out what it is going to cost and see if 
this is even a viable answer, or do we have to look for the 
longer range. Do we have to grow algae? What is the answer? 
Because we can pass laws, but if it does not work, it is not 
going to do any good.
    Senator Dorgan. Right.
    As I understand it, it is much easier to capture the carbon 
in your gasification plant than it is in a coal-fired electric 
generating plant because it is a different process.
    But I am trying to condense what I have heard from this 
panel. It is how we capture it, and I guess, to some extent, we 
kind of know how to capture it. The question is what it costs? 
What do we do with it once we capture it? Then other questions 
that people have not really thought much beyond that--I think 
this discussion in many ways revolves around a question of how 
do we capture it, what do we do with it.
    But the other issue is who owns it? Who is responsible for 
storing it? How long does that responsibility exist? How long 
will someone guarantee custody? Is it to be treated as a 
commodity or a pollutant? All of these are central to the 
question of even embarking on a project to capture and 
sequester or store or use. Right?
    Ms. Tabor. That is right.
    Senator Dorgan. So, Ms. Tabor, tell me what the 
consequences are you alluded to them but did not describe it, 
of how CO2 is classified as either a pollutant or a 
commodity. What are the consequences of each?
    Ms. Tabor. I think the biggest concern for the industry is 
classifying CO2 as a hazardous waste implies that 
there are much more stringent regulations that are going to be 
required. I think if you look at the rules that were passed by 
the--or that are proposed by the State of Washington, they say 
that they are going to use less restrictive well classification 
under the UIC. But, in fact, they are actually using many of 
the requirements from a class 1, which is a hazardous waste 
type structure.
    I think what John Harju mentioned, and from the--are 
suggesting that if you put it in the right geology and remain--
on the same type of regulation--and that's part of the issue. 
Automatically asserting as a hazardous waste implies much more 
stringency, and actually, I think, raises concerns with the 
industry and things like super----
    I think the other thing that comes up, there is some case 
law that suggests that you could actually have trespassed or 
some sort of issues, legal bases, when you define something as 
hazardous waste. The Circuit has a case that actually suggested 
that it was impossible cause of action. So again, you know 
there are unintended consequences of in any way of implying 
that this is a hazardous waste.
    The commodity angle is pretty simple. It is, in fact, a 
commodity, for EOR in particular. We just really strongly urge 
that we leave it that way because right now, EOR is our 
beneficial use, and it is our way to provide an option for 
industry to be able to move forward.
    Senator Dorgan. If we had held this hearing 10 years ago in 
this room, much of the discussion would be to deny that there 
is going to be a need to capture carbon because to do so would 
be not achievable. It would be sort of a ``pie in the sky'' 
idea that is way out of bounds in terms of cost. But now that 
we are at a point where because of climate change and other 
issues, we are going to have to find a way to do these things.
    So, Mr. Criswell and Mr. Spangler and Mr. Harju, you are 
all involved in these PCOR partnerships. I am curious whether 
we can see down the road very far. Is this an area of 
technology that might well be like other areas? I mean, would 
you have guessed 15 years ago that the Internet was going to 
exist as it exists today? Would you have guessed 15 years ago, 
when you were carrying around a cell phone the size of a shoe 
box, that at some point it will slip into your pocket and you 
will forget it is there?
    I mean, technology has just dramatically moved forward in 
ways that none of us predicted. Can the same hold true if we 
really put our shoulders to the wheel here and put a lot of 
resources and do a lot of work in research? Can the same hold 
true with respect to capturing carbon and building these plants 
as zero-emission plants? Are you optimistic about that, or are 
you, to quote a word I heard a while back from another witness, 
``hopeless''? Although to be fair to Mr. Loop, he said 
``hopeless'' or ``maybe it will work.''
    I am actually focusing on the ``maybe it will work'' 
approach, Mr. Loop.
    But tell me your assessment of all of this.
    Mr. Criswell. Sure, I will start on that. I guess I would 
consider myself cautiously optimistic. I have a lot of faith in 
what the United States can do with the people we have, the 
knowledge we have, and the technologies we can develop. There 
has been a lot of discussion about the amine and the ammonia 
processes and then ground sequestration. I am not sure that is 
the best approach. Recently we have been involved with some 
people that are looking at some things. We have talked with 
algae people that you talked about, and I think the way to go 
is to look at a beneficial use out of this whole process.
    Recently I was at an EERC's facility in Grand Forks here in 
North Dakota where an individual was testing a product to 
remove CO2. It looked very promising. The results 
were very promising at that scale. The next step then is we 
develop that, we research it, and can we apply it commercially 
at these plants?
    One of the bigger challenges I see is the magnitude of the 
material we are talking about. Anytime you burn a ton of coal, 
you are going to get about a ton of CO2 produced. So 
you can imagine the large facilities like at Colstrip, where we 
burn close to 10 million tons of coal a year, that is a lot of 
CO2 we got to handle. So scaling it up to commercial 
will be a challenge, but I am optimistic that we can get there. 
We need to encourage the research and push that to get it 
developed.
    Senator Dorgan. Dr. Spangler, are you optimistic?
    Mr. Spangler. Yes, I am, again, somewhat cautiously. The 
scale-up problem is challenging. I think we know enough about 
geology to say that there is a pretty high likelihood that we 
can find places where we can sequester safely. In terms of 
vicinity to the point sources of emission, cost of 
transportation, those are all issues.
    I do not think you are going to get necessarily a 
breakthrough technology on the sequestration end. I think the 
bigger challenge is to capture that or for things that can be 
done or there may be breakthroughs that can dramatically reduce 
the price of the capture, and there's a variety of technologies 
that have been looked at this small scale. The other issue 
there is can we scale them up to the types of operations that 
you have coal-fired power plants.
    Senator Dorgan. Mr. Harju.
    Mr. Harju. I am probably, even slightly more optimistic 
than my counterparts. If you look at the technologies that are, 
for the most part, being contemplated for commercial scale or 
just south of commercial scale demonstration today, what there 
are is incremental improvements to technology that has been 
used to remove CO2 from natural gas for about a half 
century, a very different application, but again, very much a 
proven technology in that prior application. No optimization 
really has been done today to adopt those technologies for 
post-combustion capture of CO2.
    I think that a solid set of incentives toward industries 
that are ready to step out and make--take major risks in the 
hope that incrementally, and maybe even monumentally improve 
these technologies is sensible. Of course, I think continuing 
robust investments in the R&D, if they continue to move that 
along, are prudent as well.
    Senator Dorgan. Mr. Loop, my understanding is that you are 
actually capturing about 50 percent of the CO2 from 
that plant, and then selling that. Is that correct?
    Mr. Loop. That is correct.
    Senator Dorgan. Are there substantial additional costs to 
capture more than the 50 percent? Do the costs increase as the 
percentage increases?
    Mr. Loop. Yes. Part of the CO2 coming out of our 
facility is coming from the ammonia plant. But we are actually 
now investigating the economics of capturing that and taking 
advantage of the EOR opportunities and the fact that we already 
have a pipeline. So we are looking for economic ways to capture 
even more.
    Senator Dorgan. Senator Tester.
    Senator Tester. Yes, thank you.
    We will continue with you, Mr. Loop. You said in 2000 you 
started pumping up to Canada for enhanced oil recovery. Who 
built that pipeline? Who paid for it?
    Mr. Loop. We did. The DGC paid for it.
    Senator Tester. What did it run a mile at that point?
    Mr. Loop. Probably the lower half a million dollars a mile.
    Senator Tester. OK. The CO2 you are pumping out 
for oil recovery, are there pollutants in it?
    Mr. Loop. There is H2S in it, less than about, 
what, 1.2 percent, I believe.
    Senator Tester. OK.
    Mr. Loop. That is the only one that I am aware of.
    Senator Tester. Alright. If you could pass the mike down to 
Mr. Harju and Mr. Spangler.
    I have a couple questions for both of you.
    I think in order to solve this problem, we need a public/
private partnership, which is what both of your partnerships, 
sort of--partnerships, I guess. The question I had is I ask the 
DOE what kind of cost share they--what kind of support they got 
from the private sector. They said about 60/40. Is that pretty 
equivalent to what you are receiving?
    Mr. Harju. Our phase 3 project, which was recently awarded 
last fall, was funded at greater than 50 percent by the private 
sector.
    Senator Tester. Is that set to go through the other phase?
    Mr. Harju. I think it--ours has ramped up toward that, but 
we have been well beyond minimum cost share standards 
throughout the effort.
    Senator Tester. Good.
    Lee Spangler.
    Mr. Spangler. Comparable. We are probably more at the 30 
percent level.
    Senator Tester. OK. Throughout the panel here, I have heard 
several folks--I will just direct it at you, Mr. Spangler, and 
you, Mr. Harju--about storage. Kind of like we know that if you 
put it there, it is going to stay there. Did I get a wrong 
impression here, or is that what you guys have found through 
your research? Has your research focused on it at all?
    Mr. Spangler. That is one of the primary goals of the 
research, to ensure that it stays where you plan to have it. 
That comes through careful characterization of the geology. 
There is a variety of trapping mechanisms to ensure it can stay 
underground and in the formation you place it in. But you do 
need to do the proper characterization. You need to ensure 
there is a quality cap rock that will not let it penetrate. So, 
yes, that is a major goal.
    Mr. Harju. I would certainly echo Lee's comments. 
Effectively, what you can say, at least in this region and I 
think in most regions, nature has very much pre-selected good 
geologic sinks for us. We now know a tremendous amount about 
existing oil and gas reservoirs and their ability to confine 
fluids for hundreds of millions of years. That we know.
    There are other formations in, and you have heard the term 
``saline aquifer'' which has incredible potential, but about 
which we know comparatively little about what kind of 
permanence we can expect from those types of geologic sinks. 
Therein is a key element of research that really needs to be 
done. I think that the partnership's program has done a 
monumental job of starting to advance that understanding.
    Senator Tester. So you are working with the saline 
aquifers?
    Mr. Harju. Yes. We have two phase 3 test anticipated or are 
at various stages implementation right now. One of which is on 
the order of a million tons a year into an existing oil and gas 
reservoir. The other of which is, will be considerably more--to 
than that into a saline reservoir.
    Senator Tester. Did you have a further comment, Lee?
    Mr. Spangler. Yes. Also within our region and within 
Montana and Wyoming in particular, there is a number of domal 
structures that have naturally occurring CO2 in 
them, and there is a significant additional capacity within 
those structures. Those, of course, you have a high degree of 
confidence because the CO2 is already contained 
there and has been for millions of years.
    Senator Tester. What is your take on the pollutant issue of 
CO2?
    Mr. Spangler. In terms of classification of CO2 
itself?
    Senator Tester. Yes.
    Mr. Spangler. If it were classified as a hazardous waste, I 
imagine it would be about the only one you could by food 
quality. So to me that is not necessarily a sensible route.
    Senator Tester. You can pass it or keep it to either John. 
One of your focuses, you said, was storage? What are your other 
focuses? If you have any other focuses, what are they? Go 
ahead.
    Mr. Harju. I think that the capture is--our greatest 
opportunity to really advance CCS technology is by ratcheting 
down the cost of capture. There is very significant opportunity 
therein, and I think investments on the part of the Federal 
Government toward that end are essential.
    Senator Tester. OK. Go ahead, Gordon. Thank you very much.
    Gordon, if I heard you correctly, you talked about another 
entity you were working with that is doing some work on carbon 
capture or sequestration or transport, or one of those. How 
long has that been going on and what are your results? Has it 
been positive? Yes, go ahead.
    Mr. Criswell. It has been very recent, it was in the last 
month or so that I was out at the EERC. It was an individual 
who was trying to develop carbon capture technology, on his 
own, he has got experience in the cement industry and he has 
found a byproduct of the cement industry that appears to be 
able to capture CO2 gas from power plants using some 
similar to a wet-scrubbing process that we currently have at 
Colstrip. So, of course, we were very interested.
    We signed a confidentiality agreement with him because of 
his initial stages, and you can imagine that he does not want a 
lot of that information to get out. But initial results of that 
testing at EERC were very promising. Of course, we did not 
determine a lot of materials needed. It was more a first 
research step to say, does this process truly capture 
CO2, and it appears that it does.
    So, we are interested in it from the standpoint that it may 
allow us to use existing equipment or expand on that existing 
equipment.
    As far as beneficial use goes, there may be some 
opportunities with that in this cement industry, but a lot of 
more work needs to be done on that. So, it's just real recent 
work.
    Senator Tester. You are in partnership--but I know for a 
fact in Colstrip with many, many different companies. Each owns 
a partial part of it. With that business structure, how do you 
see the advent of carbon capture happening?
    Let me get right to the point. Do you think it will happen 
without regulation?
    Mr. Criswell. I don't believe it will happen in regulation. 
That is my personal opinion. The other owners at the Colstrip 
facility are very proactive, and they are encouraging that 
Colstrip look at research work and potentially, possibly use 
Colstrip as a demonstration project. So we are evaluating a 
couple of research efforts that are underway. One is with EPRI, 
the Electric Power Research Institute has some carbon capture 
work they got going on. Just today the EERC has a--they have 
identified a proposal to evaluate carbon capture technologies. 
The owners of the Colstrip facility are encouraging that we 
participate among them.
    Senator Tester. Good. I would hope that you would do it 
without regulation, but I have heard that before. I appreciate 
your honesty.
    Mr. Criswell. I am being honest with you.
    Senator Tester. Yes, I appreciate your honesty.
    Sandi, real quick. At the beginning of your comments, you 
talked about working group outside--you talked about a working 
group. And I guess my question is, is it outside the seven 
partnerships or is it with----
    Ms. Tabor. Yes. The workgroup that I'm referring to 
actually was formed as a result of some issues that we raised 
when the State of North Dakota proposed some CO2 
regulations. We raised some concerns that were pretty legal in 
nature. As a result of that, the Oil and Gas Division of the 
North Dakota Industrial Commission pulled the rules and just 
said why do we not get a group together and work on this and 
come up with some answers.
    Senator Tester. It is a little different than Mr. 
Criswell's association with the cement folks, but do you share 
your information? Do you share it with the partnership?
    Ms. Tabor. Oh, sure. In fact, the lignite counsel in the 
industry, Lignite Industry in North Dakota and Minnesota, are 
power plants, were all members of PCOR.
    Senator Tester. Good.
    Ms. Tabor. We also have a State/industry partnership that 
funnels money into research and development called the Lignite 
Vision 21 program. So we are pretty involved in helping.
    Senator Tester. OK. You talked pretty extensively about an 
answer in your statements, and I agree with you it is 
beneficial use for CO2. Is your group, or the 
working group you are with, or anybody who you know of--or 
maybe this a question that goes to the sequestration groups 
too. Are they doing any monitoring to make sure it stays down?
    Ms. Tabor. I think that's best left to Lee and John to talk 
about, but my understanding is yes, they are. Of course, many 
of the proposed regulations monitoring this is pretty much a 
given.
    Senator Tester. Pass it down. Thank you very much.
    Mr. Loop. In the pilot project--Dakota Gasification setting 
the two up together to form it is being heavily monitored. In 
some past commercial operations it was not necessarily.
    Senator Tester. What are the findings that were monitored?
    Mr. Loop. So far it stays----
    Senator Tester. How long has it been----
    Mr. Loop. I am not sure how long the project has been going 
on.
    Mr. Loop. Commercial operations in--rock in Texas have been 
going on for 35 years.
    Senator Tester. OK. That is the all the questions I have. I 
just want to express my appreciation to the previous panel, 
too, for those folks that are here and to you guys. I really 
appreciate the information; appreciate your taking time out of 
your busy schedule to come today. Thank you.
    Senator Dorgan. Senator Tester, thank you very much.
    I did not introduce the staff of the Energy and Natural 
Resources Committee. They are here because the committee is 
taking a really hard look and close look at what we need to do, 
what kind of legislation, what kind of initiatives we need to 
be involved in with respect to this issue of sequestration and 
capture.
    Allison Anderson is with the professional staff of ENR, and 
Frank Macchiarola from the EC staff director on the minority 
side. Collin Hayes is with the professional staff of ENR. 
Rosemarie Calabro, a staff assistant, and Matt Jennings is with 
Senator Tester's office. Franz Wikinstober is with my office 
and also works on the Appropriations Subcommittee on Energy and 
Water.
    I want to conclude. First of all, I want to thank this 
panel. I want to say that in many ways, I think that all these 
inquiries that are going on by fascinating, interested 
researchers, some in the PCOR projects, some in research 
laboratories, some just out on their own, I am hopeful that 
they will find new ways, new approaches and unlock the mystery 
of how they solve this in a way that captures carbon, stores, 
sequesters, or uses it and protects our environment and allows 
us to continue to use coal. I mean, that is the goal here.
    I was thinking, Senator Tester, as I was sitting here. One 
day I was in Valley City, North Dakota, and a young man came 
into this place I was. He was wearing Levis and a T-shirt, kind 
of tussled hair, and he had just driven--he was a North Dakota 
kid from Valley City--just driven here from California.
    He was breathless to tell me about it because he was 
working in California--probably a 22-year-old guy--working in 
California on renewable energy. He said I went out there to 
work on renewable energy. He said I am working on different 
fuels for vehicles, and I just drove my pickup truck from 
California back home to Valley City on vegetable oil. He was 
just breathless about it.
    So I said, well, how did it go? He said, well, it worked 
really well until I got into Montana. It is a true story. I 
said, what happened? He said, then it got too cold and the 
viscosity of the vegetable oil just would not work in Montana.
    But my point about that, I think there are people like that 
all over this country who are really interested in solving 
problems and trying to think through what is the new idea here. 
We have not really put this up on the board to say, we need the 
new ideas. we need the new technology; we need to really push 
to unlock the mystery here of how we capture CO2, 
how we sequester and use it.
    I think finally the entire country is saying we are going 
to need to use coal. Fifty percent of all this light and 
electricity comes from coal. We need to use it. So we need to 
find a way to use it and protect our environment.
    That is the purpose of this hearing. It is the purpose of a 
number of hearings we have had and will continue to have in the 
Senate Energy Committee.
    As I have indicated previously, it looks like in June we 
will have climate change legislation, the Warner-Lieberman 
bill, on the floor of the Senate. It is very important that we 
have targets and timetables that have some ability to match as 
we move forward. We are going to protect this country's 
environment, but we are also going to find the ways to continue 
to use our resources in a way that is very responsible.
    So I want to thank everyone who came to this hearing, and 
we will keep open the ability for anyone who wishes to submit 
additional views or testimony. For those who wish to submit 
testimony who have not been part of this hearing, you are 
welcome to do that for 2 weeks after the end of this hearing, 
and we will include that as part of the permanent record of the 
hearing.
    This hearing is adjourned.
    [Whereupon, at 12:17 p.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

Responses of Scott M. Klara to Questions From Senators Dorgan, Tester, 
                              and Bingaman
           technology development & interagency coordination
    Question 1. Previously, the DOE's primarily laboratory, the 
National Energy Technology Laboratory (NETL), has produced an annual 
technology roadmap for deployment of carbon sequestration technologies. 
There is concern from several members of the Senate Energy Committee, 
including Chairman Bingaman, that there is not enough coordination 
between the Administrative agencies with respect to carbon capture and 
storage related issues--including technology deployment, regulatory 
development, management of facilities on public lands, and more. Rapid 
deployment of CCS will require a coordinated interagency effort if this 
is to be deployed in an efficient, cost-effective manner.
    When do you expect to finish the next technology roadmap?
    Answer. The next technology roadmap is schedule to be released in 
September 2008.
    Question 2. Will this lake into account the R&D efforts being 
conducted by the Office of Science at DOE?
    Answer. The Offices of Fossil Energy (FE) and Science (SC) are 
collaborating on many fronts to intearate our research and resources. 
Both oreanizations have worked to facilitate researchers on the large-
scale field projects to work with the investigators from SC to collect 
information and conduct complementary tests that would help to answer 
fundamental questions about the behavior of CO2 in the deep 
subsurface. FE and SC are jointly developing a peer-reviewed plan to be 
completed this spring that will identify the scientific and engineering 
test parameters to guide design and selection of large-scale tests. 
Items to be addressed include: rate of injection, duration of 
injection, and number and phasing of tests.
    The National Energy Technology (NETL) Sequestration Roadmap does 
not currently include the research and development efforts of SC 
because the Roadmap's purpose is to describe the ``applied'' research 
efforts that are funded by the FE to support the commercialization of 
carbon capture and storage (CCS) technologies. That said, ``basic'' 
research needs will continue to be identified by SC and supported in 
separate documentation. These basic research areas are very useful in 
augmenting the science, and although they arc not on a critical pathway 
to the development of CCS as a commercial technology, they can help 
inform and improve applied R&D. The field projects conducted in the FE 
program are open to any researcher that would like to participate so 
that maximum scientific and applied experience can be achieved by these 
tests.
    Question 3. Has there been any discussion about trying to make a 
bigger roadmap for CCS deployment that would be expanded beyond just 
the elements of technology deployment such as timelines for the 
rulemaking process, proposed rulemaking for public lands, and so on?
    Answer. The DOE is coordinating with other agencies on several 
aspects of its carbon sequestration program. This coordination is 
expected to increase in the corning months and years, as the research 
program moves forward with larger-scale experiments. The DOE's Office 
of Fossil Energy and EPA's Office of Air and Radiation and the Office 
of Water have been engaged over the past several years in regular staff 
and upper management briefings where information is shared on the field 
research and the regulatory development process. DOE has also been 
invited by EPA to participate in its interagency working group on the 
development of the draft underground injection control regulations for 
CO2 storage wells. The resulting proposed rule is scheduled 
for release this summer. DOE has also worked with the USGS on the 
development of the capacity methodology for sequestration sinks. DOE 
and the Bureau of Land Management have been working together over the 
past several months on the development of field projects through our 
Regional Carbon Sequestration Partnerships in several western states, 
including Utah. Moreover, the Climate Change Technology Program, led by 
DOE, has an interagency working group on carbon capture and storage 
technology development and deployment that is looking at some of these 
integrative issues.
    Question 4. For example, could it interface with the proposed 
rulemaking being conducted by the EPA for the Underground Injection 
Control (UIC) Program (as highlighted in Ms. Lovelace's testimony) or 
the efforts underway by the Interior Department that Mr. Spisak 
highlighted?
    Answer. The Department of Energy (DOE) has been and will continue 
to be engaged with other agencies and groups in moving carbon capture 
and storage (CCS) forward towards commercialization. DOE's Office of 
Fossil Energy and the Environmental Protection Agency's (EPA) Office of 
Air and Radiation and the Office of Water have effectively worked 
together over the past several years in sharing information and results 
of DOE'S field tests. The results of the collaborative effort resulted 
in EPA issuing guidance in March 2007, on permitting field projects of 
DOE as Class V experimental wells. EPA and DOE continue to meet 
regularly at both the staff and management level to discuss field 
results and the ongoing regulatory process. DOE has been requested by 
EPA to participate in the interagency working group on the development 
of the draft underground injection control UIC regulations for 
CO2 storage wells. DOE has also engaged the U.S. Geological 
Survey on the development of the capacity methodology for sequestration 
sinks, and we anticipate increased involvement over time. DOE and the 
Bureau of Land Management have been working together over the past 
several months on the development of field projects through our 
Regional Carbon Sequestration Partnerships in several western states.
                                 ______
                                 
Responses of Bonnie Lovelace to Questions From Senators Dorgan, Tester, 
                              and Bingaman
    related to epa's underground injection control (uic) regulations
    Question 1. Is there a good working relationship between the 
federal government and state EPA (or EPA-like) offices? Are the feds 
and states taking the right steps to provide clarity, direction, and 
appropriate regulation to industry or is it confusion?
    Answer. The issue of working relationships is generally very EPA 
Region-specific. At the general working level, relationships tend to be 
open and functional; at the policy level, working relationships often 
go awry, sometimes by specific issue. There is a lack of coordination 
between headquarters and the regions, with regions often developing 
their own initiatives and expectations contrary to commitments from 
headquarters. Most EPA offices and states have developed an 
understanding of their respective roles and authorities and have 
figured out when consultation between the offices is needed. As to 
whether or not the federal personnel and state personnel are taking the 
right steps to provide clarity, direction, and appropriate regulation 
to industry, the answer is a mixed bag. Some states are moving forward 
with independent regulation of CO2 geosequestration prior to 
implementation of a federal standard under the UIC program. In such 
cases it is possible and quite likely that adjustments to promulgated 
state regulation will have to be made once EPA has finalized its 
regulations. In other places, legislatures have enacted enabling 
legislation but the states have not yet begun the process of regulatory 
development. I believe the EPA is taking the rights steps at this time 
to provide clear guidance to states regarding how CO2 
geosequestration will be regulated under the UIC program. What is not 
clear is how the program will be delegated to the states. At present it 
appears EPA will designate CO2 geosequestration wells (other 
than EOR wells) under a new well class (Class VI). Under the current 
1422 delegation process states would still have to take Class I, III, 
IV and V well programs along with a new Class VI geosequestration well 
class. This could create serious problems as some states would have 
already chosen not to accept the other well classes. In this regard EPA 
could consider splitting out the Class VI program from the other well 
classes for the purpose of delegation. If this occurs it will be much 
easier for states to make a decision regarding primacy. The key is 
whether or not EPA would consider such a partial primacy delegation a 
precedent that would bleed over into the other well classes prompting 
states to seek primacy for other individual well classes. If they do, 
it is unlikely they would delegate the Class VI program separately to 
avoid this possibility.
    Question 2. In your written testimony, you state that the EPA's 
proposed UIC rulemaking ``needs to be rapid and separate from the 
historically slow processes.'' In your opinion, do you think the 
current timeline they are on is sufficient for rapid CCS deployment?
    Answer. EPA rulemaking has been notoriously slow for other 
subjects, so their timetable for developing draft regulations for 
carbon sequestration is amazingly swift. Although they have given 
themselves quite a bit of time to finalize the regulation after initial 
publication, they are scheduled to have a draft published in the 
federal register around July, 2008. Inasmuch as they did not begin 
actual regulatory development until the beginning of 2008 this is much 
faster than their normal rule making process. Whether or not it is 
sufficient for rapid CCS deployment will depend on many things 
including the following:

   When will the financial mechanisms be in place to make 
        geosequestration a paying proposition?
   How quickly can EPA regions and state agencies gear up to 
        implement the process?
   Will EOR absorb the brunt of the first larger scale projects 
        or will pure geosequestration in deep saline reservoirs be 
        first because they are generally better positioned 
        geographically with respect to power plants? If deep saline 
        implementation is delayed and EOR is handled by the oil and gas 
        agencies this may delay full implementation in saline zones.
   Will the global climate change issue become a less pressing 
        concern, putting geosequestration on the back burner?
   Will the public accept geosequestration from both an 
        environmental and personal cost perspective and if not, will 
        there be a program at all?

    Additionally, while the EPA rules are being drafted quickly, many 
questions remain about the delegation process. Delegation processes 
have typically been slow and that remains a major concern. During the 
delegation process, EPA and states need to define any functional EPA 
veto power. This usually takes the form of an item in the delegation 
that is kept by EPA for approval. In UIC such an item is an aquifer 
exemption that takes a long time for EPA to approve. ``Add-ons'' like 
this simply add time to processes. A system that involves oversight by 
EPA rather than separate approvals would allow more rapid deployment.
    Question 3a. You presented a rather lengthy laundry list of 
regulatory shortcomings related to CCS. Among them, you mention the 
identification of injected substances, site characterization, 
requirements for well construction, CO2 monitoring, and 
more.
    Do you feel that the current EPA rulemaking efforts will address 
most of these shortcomings?
    Answer. EPA has not released any early drafts for consideration. 
However, regulatory concepts have been shared. I expect the EPA 
regulatory language to be sufficient to implement an actual UIC program 
for geosequestration. This is necessary because the EPA regions will 
have to implement the program itself for direct implementation states 
so the language has to address all of the technical aspects of a 
program. It should be noted, however, that some of the issues raised, 
such as safety, do not fall within the purview of the UIC program. For 
these issues other regulatory authorities may come into play (OSHA etc 
. . .)
    Question 3b. Do you think they are the appropriate agency for 
developing regulations in all of the areas you mentioned?
    Answer. The arguments over whether or not EPA is the right agency 
to develop regulations for geosequestration is somewhat moot because 
the Energy Policy Act of 2007 identified underground injection of 
carbon dioxide as an activity governed by the Safe Drinking Water Act 
and thus the federal and state delegated UIC program. However, the 
issues and analyses needed to deploy CCS should be addressed by many 
interests with a strong role, if chosen, by states who know their 
terrain, geology, water, etc.
    Question 3c. If not--what other agencies do you feel should become 
involved?
    Answer. For the non-UIC aspects of regulation such as capture, 
transport, safety, etc . . . other federal agencies are already 
asserting jurisdiction. For example the Department of Transportation 
has jurisdiction over interstate pipelines and their regulations 
already deal with transport of supercritical CO2. As far as 
the UIC portion of regulations only the EPA and state agencies appear 
to have any specific jurisdiction. The USGS and/or state geologic 
offices should play a significant role in site evaluation and 
monitoring design to be sure the sites are appropriate and can hold the 
CO2 in place. The Department of Energy should play a role in 
verifying the practicality of energy proposals to improve the chances 
of success and consistency with national energy policies. As a land 
manager/owner, the BLM needs to play a role in land use decisions 
affecting federal land. Because federal actions are likely, a 
coordinated approach to the National Environmental Policy Act could be 
a part of the process, whether or not states like Montana with parallel 
statutes are involved.
    Question 4a. It is apparent that the EPA UIC program is chronically 
underfunded and understaffed. In a recent study conducted by the 
Argonne National Laboratory, they reviewed questionnaires from many 
state and regional EPA offices who indicated that the current UIC 
program is not funded at a level to support the people that will be 
needed to oversee and implement the program. Essentially, those offices 
are enforcing the UIC guidelines on a bootstrap budget.
    Does your office have the same issues with funding and staffing?
    Answer. Yes. The Argonne study mentioned above may be the one GWPC 
commissioned and states are well aware of the funding shortfalls that 
would occur if a robust CO2 geosequestration process were to 
be implemented nationwide. Frankly, states believe it is not likely 
that the necessary increases in federal funds for the UIC program will 
be forthcoming. Today, the entire program for all states is about $10 
million. States like Montana have implemented fee programs to pay up to 
about two-thirds the cost of the Class II program. Many states are 
looking towards individual fee structures as the preferred funding 
mechanism for a state geosequestration program. To develop a program 
from scratch would require program development grants as there is no 
one to charge fees to until sequestration has begun.
    Question 4b. Do you feel that you have the training, expertise, and 
funding at the present time to adequately implement the existing UIC 
program?
    Answer. No. There are many technical factors associated with 
deployment of CCS that will require analysis. Few specialists are 
actually doing this now. There is a general consensus among those in 
the states and in industry that if geosequestration takes off in a big 
way there will likely be an insufficient amount of available geologists 
and engineers to hire. Consider the fact that states will be competing 
with private industry which can pay more than the state and this could 
be a major problem.
    Question 4c. Do you anticipate that implementation of CCS programs 
will overtax your staff and budget?
    Answer. Yes. Program development costs with contain common elements 
that will cost each state to develop, adopt and implement. Some costs 
will depend a great deal on how big the program becomes in each state, 
how rapidly it grows and what personnel and financial resources are 
available. Some states have expressed serious concerns about the impact 
a geosequestration program may have on their current staff but as yet 
the full measure of how resource intensive geosequestration programs 
will be is not known. However, given that it appears the programs will 
be more intensive than typical Class II well programs this is a valid 
concern. For states without current UIC delegation, the costs could be 
excessive as it is possible that all UIC classes not delegated would 
need to be brought on line as discussed earlier. Without an existing 
industry to charge any fees to, new costs are all a large risk for a 
state.
                                 ______
                                 
Responses of Sandi Tabor to Questions From Senators Dorgan, Tester, and 
                                Bingaman
                    state ccs regulation development
    Question 1a. There are several examples of regulatory development 
efforts being conducted at the state level. Your testimony highlighted 
several of those including those being conducted in North Dakota by the 
North Dakota CO2 Storage Workgroup.
    How far along is the process?
    Answer. We will be reviewing draft legislation at our next meeting 
in April . . . we expect to have a package of statutes and regulations 
ready for presentation by the end of June.
    Question 1b. When do you anticipate your group will have regulatory 
recommendations completed?
    Answer. See above.
    Question 1c. Are you working closely with the Interstate Oil & Gas 
Compact Commission (IOGCC) on these regulations?
    Answer. We are using the IOGCC model rules as our guide and a 
gentleman involved in the IOGCC process serves on our committee.
    Question 1d. As states are developing rules and guidelines for the 
injection and storage of CO2, they are borrowing heavily 
from similar regimes from other programs such as oil and gas. Do you 
think that these are adequate to address the needs and characteristics 
of CO2 storage?
    Answer. We are looking at what other states are doing, but are also 
relying on advice from the ND Dept. of Health and the ND Oil and Gas 
Division.
    Question 2a. You express concern in your testimony that 
CO2 should not be treated as a waste, but instead as a 
commodity for fear that operational liability would be extended for 
several hundred years.
    With that in mind, what do you (and the other members of the panel) 
think is an appropriate length of time for responsible long-term 
storage of CO2?
    Answer. We are looking for advice from the research community. The 
DOE's regional partnerships have invested a great deal of research 
collecting data and evaluating potential geologic formations. We are 
fortunate to have a representative from the PCO2 project on 
our committee.
    Question 2b. What are the legal and practical implications of 
treating CO2 as a pollutant versus treating it as a 
commodity?
    Answer. Our point is that CO2 used in enhanced oil 
recovery should be considered as a commodity because it is in fact a 
commodity. As the gentleman from the Big Sky Partnership stated, ``If 
you classify CO2 as a hazardous waste, it will be the first 
hazardous waste used in soda pop.'' The practical implication is that 
CO2 is not a hazardous waste but rather a necessary element 
in our everyday lives. Before sequestered CO2 is classified 
as a hazardous waste, potential unintended consequences (or future 
causes of action) must be evaluated. For instance, we should consider 
the ramifications of existing case law suggesting that trespass by 
hazardous waste injection is a valid cause of action.
    Question 2c. You don't discuss leakage at all--are you concerned 
about possible leakage from storage sites? Do potential leakage depend 
on the type of geology in a given geologic strata or region of the 
country?
    Answer. We are aware that leakage may be an issue and will rely on 
the technical expertise of the committee members from the state 
regulatory agencies in conjunction with our members from the oil and 
gas industry and the PCO2 R partnership to help us address 
monitoring programs.
    Question 2d. What do you feel are appropriate ``acceptable'' 
leakage rates for long-term storage?
    Answer. This is a question which is best answered by those who have 
an expertise in the technical aspects of what monitoring requirements 
are necessary.
                                 ______
                                 
Responses of Gordon Criswell to Questions From Senators Dorgan, Tester, 
                              and Bingaman
              industry priorities and project development
    Question 1. You represent a utility that operates in Montana and 
several other states that are addressing these regulatory issues. In 
your testimony, you stress the need for regulators at the state and 
federal level to address the regulatory issues such as liability, 
transport of CO2, landowner rights and other `rules of the 
road' issues that will need to be in place for energy companies to make 
the necessary investment into CCS projects. We will have to consider 
all of these issues.
    From your perspective, which of the regulatory issues (liability, 
landowner, right-of-way, etc) need to be addressed first that would 
help companies like yours begin making investments into CCS in the 
near-term?
    Answer. The issues of liability and land-owner rights need to be 
addressed first. There are existing CO2 pipelines, and 
right-of-ways (ROWs) have been dealt with in some states and in Canada. 
In order to ensure regulatory certainty, ROWs undoubtedly will have to 
be addressed at the federal level in the context of CCS.
    The primary liability issue for CCS is ownership of the geologic 
reservoir pore space and ongoing liability for sequestered carbon 
dioxide (CO2) that may resurface or migrate to groundwater 
or reservoir pore space owned by other entities. Several states have 
addressed this issue in different ways. Texas and Illinois assigned 
long-term liability for stored CO2 to their respective 
states while Wyoming assigned ownership of pore space to surface rights 
owners. It remains unclear how Montana will address the issue, but the 
state indicated it may attempt to establish a bonding system similar to 
its mining reclamation program.
    The U.S. Environmental Protection Agency (EPA) recently announced 
it will issue a draft rule this summer establishing a nationwide 
permitting program under the Safe Drinking Water Act's (SDWA) 
Underground Injection Control program for storing carbon dioxide from 
fossil fuel power plants in underground geologic formations. However, 
the present scope of rulemaking does not resolve industry concerns over 
long-term environmental liability.
    Congress has a great opportunity at this time to approve a uniform 
approach to pore space ownership and long-term liability for 
sequestered CO2. The most logical approach is to assign 
ownership of the pore space to surface owners; assign liability in the 
near term for leakage and migration to the entity responsible for 
pumping CO2 into geologic reservoirs or for transporting it 
via pipeline; and then transfer long-term liability for leakage and 
migration to the states once the sequestration operation has been 
designated by the state to be safe after testing and monitoring. In 
effect, the title transfer should take place once the CO2 is 
in the ground during the life plant.
    Right-of-way is certainly an important issue, but it may be best 
addressed after national guidance has been established for long-term 
CO2 storage. In Montana, an attempt to pass legislation that 
would have applied common carrier and eminent domain status to 
CO2 pipelines failed. Many legislators recognized that 
CO2 pipelines should probably be treated like other existing 
pipelines in the state, but also understood that CO2 may 
represent a different public health and environmental hazard than 
petroleum resources.
    Question 2. Several states and the federal government are 
considering these regulatory issues. From your perspective, are there 
certain issues regarding CCS that should be addressed at a federal 
level and some at a state level? If so, which issues should the federal 
government address and which ones should be left to states?
    Answer. The federal government is certainly in the best position to 
handle long-term liability issues, given the uncertainty of the long-
term viability of geologic reservoirs and the possibility of interstate 
CO2 migration. However, the issue of ownership of the pore 
space is more complicated. States typically take the lead on 
designation of surface rights, water rights and mineral rights. 
However, Montana and many other states have no statutory authority or 
case law to assign pore space ownership. Federal guidance in this area 
may be well received by the states.
    Transporting CO2 via pipeline should be under the 
regulatory authority of the U.S. Department of Transportation--just as 
it is for petroleum resources. This would eliminate the problem of 
being subject to a variety of permitting and siting requirements by 
various states and municipalities. However, additional federal guidance 
may be necessary since the health and environmental issues associated 
with CO2 are different than for petroleum.
    Question 3. You state that the capture technology has not been 
proven to scale. At this time, does PPL have any plans to be an ``early 
mover'' in deploying CCS technology? Have you considered funding a 
project that could serve to prove the technology at scale?
    Answer. PPL was an early participant in the FutureGen project, a 
public-private partnership designed to construct and operate the 
world's first near-zero emissions coal-fired power plant that could 
capture and store CO2 at scale. PPL and its partner-owners 
of the Colstrip Steam Electric Station in Eastern Montana also recently 
agreed to fund a carbon capture research project at the Energy and 
Environment Research Center at the University of North Dakota. As 
partners in this project, we expect to be provided the latest research 
information about developing CO2 capture technologies.
                           project liability
    Question 4a. Presently, CO2 can be used for EOR 
projects. Thus far, there have been no reported known leakages from oil 
& gas fields employing CO2 for these projects. With three 
decades of experience with EOR, oilfield operators feel safe with 
assuming liability while the field is operating. You aren't specific as 
to what sort of liability you are concerned with.
    Are you referring to post-closure liability and the potential for 
property damage?
    Answer. Post-closure long-term liability is the primary issue, but 
the states or the federal government must also be willing to take the 
liability during the operating phase of the facility. Given the volume 
of CO2 to be stored it is not practical for energy companies 
to assume this liability.
    Question 4b. Or are you referring to the uncertainties around what 
long-term storage and `acceptable leakage' will be defined as--should a 
carbon emissions trading scheme be enacted by Congress?
    Answer. There are many uncertainties about long-term storage--
particularly the issues of migration, resource contamination and 
``acceptable leakage.'' It will be difficult for states to develop 
rules on these issues without federal guidance. Without federal 
guidance, it will be impossible to create the regulatory certainty and 
level playing field energy companies will need to invest in carbon 
capture and storage.
    PPL supports enactment of the carbon emissions trading program 
described in S. 1766, the Low Carbon Economy Act introduced by Senators 
Bingaman and Specter. This program sets annual targets and allows 
sources to buy, sell and trade credits to achieve significant emissions 
reductions without harming the U.S. economy.
                                 ______
                                 
 Responses of Lee Spangler to Questions From Senators Dorgan, Tester, 
                              and Bingaman
                   public awareness and participation
    Question 1a. You mention the point of public acceptance and 
awareness. I appreciate you mentioning this point. Carbon capture and 
storage is very important to the continued use of coal and other fossil 
resources. But what does that really mean to the average person? What 
comes to mind for the person in the local cafe or those owning land 
above a sequestration site? If you don't fully engage and involve local 
communities and other interests as these projects develop, they will be 
severely slowed down or halted. The `not in my back yard' mentality 
will flourish if we don't have this in mind as the technology develops. 
There are many elements to ensuring public support and engaging the 
public on these.
    Can you go into more detail as to what you believe needs to be done 
in this area?
    Answer. The public needs to be engaged and informed about the 
technology and its importance to carbon management. In my opinion, this 
process should draw heavily on existing experience with underground 
systems. There is experience with injection of large amounts of 
materials (e.g. wastewater) in the existing underground injection 
programs. These volumes compare to what sequestration would require. 
There is also CO2 specific experience with EOR and with 
naturally occurring CO2 reservoirs. There is also 
underground natural gas storage. These all indicate that buoyant fluids 
can be stored safely for geologically relevant periods of time. While 
these cases are not identical to sequestration, they do represent a 
very significant knowledge and experience base that we can build on. I 
believe we must also emphasize use of monitoring and modeling of the 
CO2 behavior to ensure public safety. If ``living models'' 
are developed, simulations that are updated as new monitoring data 
becomes available, the simulations can be dramatically improved as the 
sequestration site is being used resulting in a continual improvement 
of the predictive capability of the models. Finally, we have to have 
mitigation strategies planned for potential problems. How this is 
presented to the public is critical, we must let them know that for 
properly designed projects, no mitigation is needed or expected to be 
needed, but that we are being comprehensive in our approach and are 
designing extra safety precautions.
    Not surprisingly, there is a great deal of misinformation regarding 
sequestration. As with any new technology, it will take some time to 
adequately educate the public about the potential opportunities and 
risks of geologic sequestration. Our current approach in the Big Sky 
Partnership as well as a concerted effort by the other DOE funded 
Partnerships is making substantial progress. As Congress presses for 
legislation to limit GHGs or to fund expanded research and development 
approaches for CCS, media exposure will continue to aid the 
Partnership's efforts to engage the public in a meaningful dialogue to 
weigh the risks and opportunities of CCS.
    Question 1b. How are the regional partnerships carrying out public 
awareness and participation efforts?
    Answer. All the partnerships have outreach efforts as part of the 
program. It should be pointed out that DOE wisely made this a 
requirement. Most partnerships are providing general outreach in the 
form of brochures, websites, newsletters and public meetings. They are 
also providing more extensive outreach in the communities where pilot 
projects are being pursued which often includes multiple stakeholder 
meetings, involvement of local government, etc.
    Members of the regional partnerships are typically involved in 
publicly attended conferences, legislative or gubernatorial briefings, 
news programs, documentaries, and a myriad of public venues to discuss 
mitigation of climate change with a focus on CCS. Members of the 
partnerships routinely contribute to scholarly journals and 
professional magazines concerning research specific to CCS.
              pipeline development and logistical concerns
    Question 2a. You also raised the concern about the increasing 
difficulty of permitting and building pipelines. To make major CCS 
projects economically, technically, and logistically operable, industry 
interests will need to consider where to send the CO2 for 
enhanced oil recovery (EOR) or other purposes. Some companies may be 
able to build a facility that has a geologic sink for the 
CO2 nearby, but there may be cases when pipelines will need 
to be built over some distances.
    Are the challenges faced by CO2 pipelines the same as 
those related to oil and natural gas pipelines or are there differences 
for CO2 pipeline systems?
    Answer. There are differences. If there is water vapor present, 
this can condense and form carbonic acid which is corrosive. This can 
be handled by choice of pipeline materials (which can drive up costs) 
or by specifying allowable impurities in the CO2 (which can 
affect cost of separation and capture).
    Oil and gas pipelines are considered commodity pipelines or 
``common carriers'' that fall under a variety of state and federal 
regulations. These pipelines are also afforded the same rights as 
electrical transmission lines and railroads in as much as builders of 
these transportation systems can employ eminent domain to secure 
rights-of-way when landowner resistance may preclude outright purchase 
of fee title or long term leasing of the property. Conversely, 
CO2 pipelines have been granted status as commodity 
pipelines in some states and in some states the status remains unclear. 
Problems arise when the potential for these pipelines to cross state 
lines creates differing regulatory interpretations for siting and 
building the pipeline. Once a pipeline becomes an interstate pipeline, 
FERC becomes involved and the requisite NEPA compliance procedures come 
into play. If states classify CO2 pipelines differently, the 
addition of a third party (FERC) can generate a number of regulatory 
hurdles for permitting and siting.
    Because most of the pipelines built to date have occurred in the 
rural southwest or rural Rocky Mountain region, there has been no need 
to site these pipelines in areas with moderate or high population 
densities, thus reducing the amount of public resistance to the line. 
As CCS becomes more prevalent, particularly with fossil energy plants 
that are proximal to higher population densities, it is likely that 
public resistance will increase over HSE concerns. This is unfortunate 
since experience to date with CO2 pipelines in the 
southwest, Wyoming, North Dakota, and internationally, has shown the 
risk of a leak or catastrophic failure to be nominal if at all.
    Question 2b. We already have some CO2 pipeline systems 
in place for EOR efforts in the Southwest so are the regional 
partnerships trying to draw from these experiences?
    Answer. There are existing pipelines and the industry is drawing on 
this experience. However, from anecdotal experience, there is not 
agreement in terms of how low impurities should be specified. This may 
continue to be a problem because it probably affects which party has 
additional costs. Another impurity that may be produced CO2 
streams and that requires consideration because of acidity and toxicity 
is hydrogen sulfide gas.
    Question 2c. Which states have started to address these concerns 
and what have they done?
    Answer. In the Big Sky Partnership region, to my knowledge Wyoming 
is the only state with a significant pipeline expansion planned. 
Wyoming's legislation directs the Wyoming Oil and Gas Conservation 
Commission and the Wyoming Department of Environmental Quality to 
establish regulations concerning CCS. The Wyoming Pipeline Authority 
oversees pipeline permitting and construction and it is likely the 
regulations will be favorable to CO2 pipeline infrastructure 
development. The Montana legislature recently considered legislation to 
grant CO2 pipelines common carrier status and that 
legislation was tabled in favor of an interim committee to propose 
legislation in the 2010 session to adopt CCS statutory and regulatory 
frameworks that will promote carbon sequestration. Finally, the state 
of Washington passed legislation in 2007 that establishes a CCS 
statutory framework and regulations are currently undergoing public 
review prior to adoption in July. Draft regulations reviewed by our 
Partnership indicate that Washington will adopt standards proposed by 
the IOGCC for pipelines.
                         demonstration project
    Question 3a. The project you describe in your testimony, involving 
the Cimarex gas plant sounds like a very worthwhile demonstration 
project.
    Is the plant presently being built or retrofitted w/ CO2 
capture technology?
    Answer. This is a planned gas handling plant that takes a 
geologically naturally occurring gas and separates economic components 
(helium and natural gas) from CO2 and H2S, so in 
essence it does have separation and capture. It should be noted, 
however, that this process is different than the separation and capture 
process needed for power plants.
    Question 3b. Is that plant on schedule for its targeted late 2008/
early 2009 completion?
    Answer. It is on schedule for 2009 completion.
    Question 3c. Could you clarify what you mean by the ``non-
economic'' portion of the gas?
    Answer. Currently this means CO2 and CO H2S 
although Wyoming is considering treating CO2 used for EOR 
purposes as a commercial commodity. Although H2S is used to 
produce sulfur, there is currently a greater supply of sulfur than 
demand making sulfur production uneconomical at the current cost of 
production.
                                 ______
                                 
 Responses of John A. Harju to Questions From Senators Dorgan, Tester, 
                              and Bingaman
                  pcor project development and funding
    Question 1a. In early 2007, the DOE announced its intent to award 
funds through the Office of Fossil Energy at DOE for the Phase III 
Regional Partnerships. However, those funds languished until September 
of 2007 because internal reviews that the Office of Science demanded 
for the program. I had to push the Secretary of Energy to get those 
funds released, and one of the competitive awards for $67 million went 
to the PCOR Partnership.
    In your mind, have the internal issues within DOE been resolved?
    Answer. We cannot be sure if internal DOE issues have been 
resolved. In fact, it is my understanding that three of the seven 
Regional Partnerships have still not received their Phase III funding. 
This would indicate that there are still internal issues that remain 
unresolved.
    Question 1b. Have you been able to move forward with your work in 
Phase III or do you still have to respond to additional DOE 
requirements from the Office of Science?
    Answer. While we have been able to move forward with our work, we 
do spend considerable time responding to various questionnaires and 
review meetings. These activities seem to involve DOE's Office of 
Science to a much larger degree than any experienced over the courses 
of Phases I and II. It also seems that the Office of Management and 
Budget has an inordinate level of oversight and input as well.
    Question 1c. What is the working relationship like with DOE?
    Answer. The working relationship with DOE's National Energy 
Technology Laboratory (NETL) and Office of Fossil Energy (FE) staff has 
been very good over the entire course of the PCOR Partnership's 
activities. Any perturbations seem to be much more recent and do not 
seem to have originated from within NETL or FE.
                     implications for eor operators
    Question 1d. There are some clear implications for Wyoming EOR 
operators in the legislation recently passed into law by the Wyoming 
state legislature.
    What is your opinion of the legislation passed by the Wyoming State 
Legislature?
    Answer. Overall, it rates a grade of ``C.'' It does try to jump-
start the sequestration process and give new projects some clarity for 
moving forward but . . . .
    It creates a new and redundant organization within the state to 
provide oversight of CO2 activities. CO2 EOR 
projects will report to the Wyoming Oil and Gas Conservation Commission 
(WOGCC), while CO2 CCS projects will report to the Wyoming 
Department of Environmental Quality (WDEQ). A set of skills effectively 
duplicative of the WOGCC will have to be created in the WDEQ. This is 
no small matter as those WOGCC rules are lengthy, very involved (site 
permitting, wellbore construction, operational requirements, 
transportation of injectant, reporting) and have been worked out over 
many decades. It can be easily shown that significant volumes of 
CO2 are stored during the EOR process, and to qualify 
CO2 EOR as sequestration is as simple as requiring some 
monitoring and reporting that is currently not part of the requirements 
for EOR operations.
    An example herein is indicative of the complexity of the 
overlapping and redundant regulatory oversight: If CO2 were 
injected in one interval for EOR and, in the same wellbore(s), injected 
into a saline formation, the CO2 operator would be required 
to permit the well and project(s) with two state regulatory agencies. 
It is very conceivable that one agency might require activities in 
conflict with the other. EPA rules currently under construction for 
sequestration appear to be headed in that direction.
    Wyoming has said that an EOR process can be converted into a 
storage project after EOR is complete. What happens to the 
CO2 already stored? Is it disqualified? Since the storage of 
CO2 is an ongoing process, credit should be allowed as the 
project proceeds. But probably more importantly, the CO2 
source is not able to claim an emission offset (credit) for its 
captured, compressed, and stored CO2 until some hypothetical 
later date. The Wyoming approach disadvantages CO2 EOR as a 
storage event. It would be much simpler to require the monitoring and 
accounting of net storage during the EOR ongoing regulatory process and 
allow the company capturing the CO2 to receive its due 
credit.
    Question 1e. Do you think it will adversely affect EOR operators in 
Wyoming?
    Answer. Without a doubt, it will discourage EOR if a CO2 
source needs emission offsets to finance its projects. But probably, as 
a more likely scenario, it will discourage next-generation coal plants 
in Wyoming until the complexity of sequestration rules are worked out. 
And this is in a state that has superposition of CO2 EOR and 
coal and should be one of the best locations for next-generation coal-
fueled electricity, syngas, and/or other products.
    Question 1f. Would you recommend that other states follow Wyoming's 
lead in developing and passing this sort of legislation?
    Answer. They absolutely should develop their rules for CCS. 
Hopefully they can tailor their particular state conditions to move 
forward with CCS in a timely way. We fully expect that some states with 
poor or no sites to qualify for CCS may choose not to develop rules. We 
feel strongly however, that bifurcating EOR and CCS is 
counterproductive.
    Question 2. With your many decades of experience in EOR operations, 
do you feel that the CO2 that is derived from coal 
facilities poses a contamination risk, as compared to the 
CO2 that is mined from the ground? Are you concerned that 
there will be attempts to inject impure CO2 into geologic 
storage sites, as Ms. Lovelace alluded to in her testimony?
    Answer. We feel that this is less a technical/scientific issue than 
it is a regulatory issue. Any subsurface zones that we are 
contemplating for sequestration are not those that we would ever 
consider for water withdrawals. We also believe that with well-selected 
sites, injected CO2 will remain within those strata, as they 
will have competent confining seals. We also believe that any leakage 
from such sites would typically be into other overlying zones that are 
also typified by marginal-or poor-quality water.
    Question 3a. There is concern from some of the Members of the 
Energy Committee that if indemnification of storage sites is assumed by 
the states or Federal government, there may be less incentive for the 
CCS site operators to select a very robust storage site.
    You state in your testimony that the focus of regulation should be 
performance criteria, not design criteria--do you feel this will lead 
to better site selection?
    Answer. We strongly believe that this will lead to better site 
selection. We believe that there are extremely large capacities for the 
geologic storage of CO2 in such well selected sites and that 
exotic well designs will simply add cost and complexity to these 
efforts. The further concern is that rigid design criteria 
incorporating such designs may create a false sense of security 
regarding the integrity of less appropriate geologic storage sites. Put 
simply, we feel that some sites will require very little in the way of 
monitoring, mitigation, and verification (MMV) to assure us that 
injected CO2 is staying in zone, while in some other sites 
there is no suite of MMV technologies that can provide similar 
assurance.
    Question 3b. Has the EERC, in its participation in the IOGCC 
regulatory development, considered the role of private insurers in 
covering liability of the storage sites following the closure of each 
facility?
    Answer. The role of private insurers was a topic of considerable 
discussion and one that I believe is worthy of further consideration. 
In fact, there is a currently contemplated effort by IOGCC to address 
this and other related issues. IOGCC is currently seeking funding from 
DOE NETL to perform this type of work. If funded, we expect that the 
EERC, through its PCOR Partnership, will continue its significant 
involvement in this effort.
                                 ______
                                 
 Responses of Gary G. Loop to Questions From Senators Dorgan, Tester, 
                              and Bingaman
                    incentives for rapid deployment
    Question 1a. Sending a clear signal on long-term financing 
incentives of these types of projects is critical for their deployment. 
In your testimony you refer to development of a PTC credit and 
something akin to an accelerated depreciation program like those 
offered for wind projects. Over the years, I have worked with my 
colleagues on the Finance Committee, including Senator Conrad to 
develop financial incentives for rapid deployment for renewable such as 
wind through a PTC. I introduced my own ideas in a bill for a 10-year 
extension of a PTC. I suggested a tax credit and bond for the capture 
and storage of CO2 for EOR purposes and long-term storage. 
The Senate Finance Committee suggested an accelerated depreciation 
program, but this was ultimately not passed in a tax package.
    Would an accelerated depreciation program for CO2 
pipelines be helpful for companies such as Dakota Gasification in 
managing the high cost of infrastructure development?
    Question 1b. Would tax incentives or bonds for CO2 
capture and storage be beneficial to begin the early deployment of 
these projects and reduce the cost exposure?
    Answer. Yes to both questions. While the gasification process at 
the Great Plains Synfuels Plant made capture of carbon technically 
achievable, the compression and transportation of that CO2 
have significant capital costs. Those costs are much higher today than 
they were when Dakota Gasification built its pipeline and installed 
compressors. Accelerated depreciation would be helpful, but of limited 
value because if the equipment is depreciated quickly, then the company 
will have less depreciation in the future. This benefit is dependant on 
the time value of money and is of limited value.
    The technological hurdles and costs of capturing carbon dioxide at 
an existing coal-based power plant, like Antelope Valley Station, are 
much higher. We need to reduce cost exposure to utilities/technology 
companies that are willing to demonstrate carbon capture at existing 
power plants. Federal incentives, like production tax incentives, would 
help greatly mitigate the costs and risks of carbon capture 
implementation. As far as early deployment, we know that today the oil 
industry is ready for CO2 injection for Enhanced Oil 
Recovery, and would potentially purchase all we could offer. So the 
market exists today; we just need the technological and financial means 
to provide the CO2. Bonding would be helpful, but again of 
limited value, more like a lower interest loan that must be pay back. 
In our opinion, production tax credits for CO2 that are a 
permanent tax benefit would help the most to accomplish both goals.
    Question 2. From a regulatory standpoint, what sort of shortfalls 
do you see in the existing state regulations that exist for EOR, as 
they could relate to `permanent' CCS? Is your company concerned about 
post-closure site liability and long-term maintenance of the storage 
facility? Are you aware of a post-closure management plan for the 
Weyburn field?
    Answer. Our analysis suggests that CO2 injection for 
enhanced oil recovery is possible today with the rules and regulations 
in place in North Dakota. The state is in discussion with other states 
in the region to formulate regional rules and regulations that will 
address long-term liability, permitting, monitoring and verification 
protocols. Certainly these will need to be in place to address CCS in 
geological formations on a permanent basis.
    The International Energy Agency (IEA) is monitoring the Weyburn 
project and issued its phase I report, ``IEA GHG Weyburn CO2 
Monitoring and Storage'' in 2004. This was the world's first 
CO2 measuring, monitoring and verification initiative. The 
final stage (2005-2011) named, Weyburn-Midale CO2 project, 
is building on the successes of the first phase to develop the 
framework necessary to implement CO2 geological storage on a 
worldwide basis.
    Question 3. You have experience building a CO2 pipeline 
to Canada. How would you address the issue of landowner rights and 
other regulatory concerns?
    Answer. The construction of the pipeline was generally no different 
than any other pipeline or transmission line for which we would need 
easements. We mainly deal with the surface landowner, and have built a 
great relationship with landowners in the region based on past 
projects. We respect the landowner's rights and work closely with the 
landowner to correct any problems. The relationship would be the same 
whether it is a CO2 pipeline, water pipeline, or 
transmission line. We also work with residents in the area of our 
pipeline to advise them of the regulations governing our operation and 
our intent to be fully compliant with the regulations. This action 
shows the residents that proper steps are being taken to assure their 
safety.
    We received a permit from the Nation Energy Board to construct the 
CO2 pipeline in Canada. In North Dakota we received the 
necessary permits from the North Dakota Public Service Commission and 
other regulatory agencies. Because CO2 is considered an 
asphyxiant and the high pressures involved with the pipeline, the 
pipeline and its operation are regulated under the US Department of 
Transportaion's hazardous materials regulations. The US Department of 
Transportation, the ND Public Service Commission and Canada's National 
Energy Board oversee the operation of the pipeline and enforce the 
regulations.
                                 ______
                                 
    [Responses to the following questions were not received at 
the time the hearing went to press:]

  Questions for Tim Spisak From Senators Dorgan, Tester, and Bingaman
                        interagency coordination
    Question 1. In the legislative hearing held before the full Energy 
Committee on January 31, 2008, in Washington, D.C., Assistant Secretary 
Allred testified that the Department of the Interior is interested in 
conducting a large-scale CCS project on public lands.
    Has there been any follow up between the DOI, the DOE, or any other 
key federal agency in pursuing a large-scale project on public lands?
    What kind of coordination is occurring among the agencies to 
undertake these efforts?
    Question 2. In your testimony, you referred to the recently passed 
Energy Independence and Security Act of 2007 and the provisions related 
to conducting CCS and public lands. The EISA requires the DOI to submit 
a report containing a recommended policy framework for CCS on public 
lands by December 2008. It is critical that we address policy 
shortcomings in a timely manner to expedite commercial deployment of 
CCS projects, which is why the short turn around time was requested.
    Will less than one year be enough time to develop the policy 
recommendations that were requested in the EISA?

                                    

      
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