From Eor to Ccs: The Evolving Legal and Regulatory Framework for Carbon Capture and Storage

Abstract

Synopsis: Carbon and storage has been proposed around the world as a potentially key technology for reducing dioxide (CO2) emissions. The United States oil and gas industry has a long experience in transporting, injecting, and effectively storing CO2 in tertiary oil recovery operations usually known as Enhanced Oil Recovery. As a result, there already exists a legal and regulatory framework that addresses many - but not all - of the issues that will need to be addressed if and storage is to be adopted by policymakers as part of a regulation regime. A review of that existing framework allows identification of those aspects that appear adequate to govern the sale, transport, and injection of CO2 for and storage purposes as well as those that do not. Building on this analysis, the authors conclude that the current legal framework will be largely adequate from a transactional and interim standpoint to allow parties to structure a relatively seamless transition from CO2 storage that is an incidental result of oil production operations to those incremental injections of CO2 intended solely for permanent underground storage. The authors also suggest some possible approaches for crafting new rules to fill potentially remaining legal or regulatory gaps. I. INTRODUCTION In recent years, an increasing number of governments around the world have begun to regulate atmospheric emissions of dioxide (CO2) in one fashion or another. Others, including the United States, are actively debating whether to implement regulation,1 and if so, under what terms and conditions. One potentially important tool for reducing CO2 emissions is the separation and capture of the CO2 produced in the generation of electricity from coal; piping it to storage sites where it would be injected for permanent storage in underground geological formations. This process is known as and storage or (sometimes also referred to as carbon and sequestration or carbon and disposal). While interest in CCS is relatively new, the underground injection and effective storage of large quantities of CO2 is not. As explained below, the United States' oil and gas industry has been transporting CO2 by pipeline for injection as a tertiary, or enhanced oil recovery (EOR) technique, for nearly forty years.2 In addition, significant quantities of CO2 have been piped to industrial facilities for use in various processes as well as for distribution by rail or truck to large numbers of CO2 end users nationwide. As a result, there is already in place a CO2 industry infrastructure comprising over approximately 13,000 permitted CO2 injections wells (over 6,000 of which are active) and thousands of miles of CO2 pipeline with associated CO2 handling facilities, all of which represents a major investment of private financial and intellectual capital. Estimates of the amount of CO2 injected each year in American EOR activities are in excess of fifty million metric tonnes,3 with cumulative injections since 1972 estimated at over 600 million metric tonnes.4 The current annual injection quantity is thus roughly equivalent to the amount of CO2 that might be captured from the first twenty newly constructed 500 MW coal-fired power plants that eighty percent of their CO2 output.5 This CO2 is currently being injected through over 6,100 active injection wells6 and makes possible daily oil production of about 245,000 barrels.7 While the majority of current CO2 supply comes from naturally-occurring geologic formations that have been developed much like an oil or gas field, the C02-based EOR business originated in the 1970s with anthropogenic sources of CO2 and even today some CO2 supply remains anthropogenic in origin, captured by separation from natural gas production or from certain industrial facilities. Moreover, while EOR operations strive to recycle and reuse the maximum amount possible of the initially-injected CO2, a large percentage of the injected CO2 - on the order of fifty percent or more8 - cannot be recovered for reuse under current technology and remains stored in the underground formation as an incident of the oil production operation. …

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