**TESTIMONY SUBMITTED TO \
THE SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES**

**\
BY LAWRENCE E. BENGAL, DIRECTOR, ARKANSAS OIL AND GAS COMMISSION AND
CHAIRMAN OF THE INTERSTATE OIL AND GAS COMPACT COMMISSION TASK FORCE ON
CARBON CAPTURE AND GEOLOGIC STORAGE**

**\
JANUARY 31, 2008**

Good afternoon. My name is Lawrence Bengal. I am the Director of the
Arkansas Oil and Gas Commission and I'm appearing here today in my
capacity as Chairman of the Interstate Oil and Gas Compact Commission's
Task Force on Carbon Capture and Geologic Storage (CCGS). The Task Force
was comprised of representatives from IOGCC member state and provincial
oil and gas agencies, U.S. Department of Energy sponsored Regional
Carbon Sequestration Partnerships, the Association of American State
Geologists, industry experts, as well as representatives from the U.S.
Environmental Protection Agency (EPA), the U.S. Bureau of Land
Management (BLM) and the environmental group, Environmental Defense, who
attended as observers.

The member states of the Interstate Oil and Gas Compact Commission
(IOGCC) produce more than 99% of the oil and natural gas produced
onshore in the United States. Formed by Governors in 1935, the IOGCC is
a congressionally ratified interstate compact. The organization, the
nation's leading advocate for conservation and wise development of
domestic petroleum resources, includes 30 member states, 8 associate
states, and 4 international affiliate provinces. The mission of the
IOGCC is two-fold: to conserve our nation's oil and gas resources and to
protect human health and the environment during the production process.
Our current chairman is Governor Sarah Palin of Alaska.

I am here today to share with the Committee the experience and
conclusions of IOGCC's CCGS Task Force and to offer our comments on S.
2144, the "Carbon Dioxide Pipeline Study Act of 2007", and S. 2323, the
"Carbon Capture and Storage Technology Act of 2007".

Funded by the U.S. Department of Energy (DOE) and its National Energy
Technology Laboratory (NETL), the Task Force has been engaged since 2003
in a two-phase effort relating to the regulation of the geologic storage
of carbon. In Phase I, the Task Force undertook a thorough review of the
technology of geologic storage and in Phase II developed a model statute
and model rules and regulations for the states and provinces to
administer regulatory oversight of geologic storage of carbon dioxide
(CO~2~).

A major conclusion of the Task Force in Phase I was that the geologic
storage of CO~2~, in addition to conservation, is among the most
immediate and viable strategies available for mitigating the release of
CO~2~ into the atmosphere. It was readily apparent to the Task Force
that carbon storage was also not something entirely new and mysterious
-- but the technological outgrowth of four analogues. These four
analogues, in the opinion of the Task Force, provide the technological
and regulatory basis for storage of CO~2~ in geologic media:
1) naturally occurring CO~2~ contained in geologic reservoirs, including
natural gas reservoirs; 2) the large number of projects where CO~2~ has
been injected into underground formations for Enhanced Oil Recovery
(EOR) operations; 3) storage of natural gas in geologic reservoirs; and
4) injection of acid gas (a combination of H~2~S and CO~2~), into
underground formations, with its long history of safe operations.

It was the opinion of the Task Force that given the jurisdiction,
experience, and expertise of the states and provinces in the regulation
of oil and natural gas production as well in regulating the analogues
identified above, the states and provinces would not only be well able
to regulate, but would be the most logical and experienced regulators of
CO~2~ geologic storage. Additionally and importantly, the oil and
natural gas producing states and provinces are strategically and
geologically well-situated for the geologic storage of CO~2~.
Regulations already exist in most oil and natural gas producing states
and provinces covering many of the same issues that need to be addressed
in the regulation of CO~2~ geologic storage, and consequently serve as
adaptable frameworks.

Given these Phase I conclusions, the Task Force, in Phase II, began work
and in September of 2007 produced, for the first time, a clear and
comprehensive model legal and regulatory regime for the geologic storage
of CO~2~. Utilizing these model regulatory frameworks, states and
provinces, and indeed other nations, can begin immediately the process
of developing and enacting legislation and promulgating rules and
regulations enabling CO~2~ geologic storage projects. California, New
Mexico, North Dakota, Texas, and Wyoming are, among other states, in
various stages of developing such a legal and regulatory framework.

I anticipate that by 2010 there will be at least 5-15 states,
encompassing much of the country best suited for carbon geologic
storage, with legal and regulatory systems in place for the regulation
of geologic storage of CO~2~. I would also anticipate that in this same
general timeframe that EPA will likewise have in place regulations
governing geologic storage of CO~2~ under the Safe Drinking Water Act
and the implementing Underground Injection Control (UIC) Program.

It is appropriate that I now briefly address how the IOGCC anticipates
the EPA's CO~2~ geologic storage regulations will interface with the
regulatory systems being developed by the states. Given the
incorporation of UIC-like regulatory requirements into the proposed
IOGCC model regulatory frameworks, there is every reason to anticipate
that the IOGCC and EPA frameworks will fit like hand in glove. This is
largely because of the role that states play in the administration of
UIC programs under EPA primacy authority.

In this regard, as you are no doubt aware, the EPA is in the process of
developing regulations for geologic sequestration under the Safe
Drinking Water Act with the goal of having draft regulations for public
comment by the summer of 2008. The IOGCC at the invitation of EPA has
two representatives, Berry "Nick" Tew of Alabama and myself, actively
participating in the process as state co-regulators. States with primacy
already play an integral role in administering the UIC program and under
future rules governing geologic storage, are likely to do so again.
Having representatives from states involved in the process helps insure
compatibility between the state and federal components of geologic
storage regulatory oversight.

What is clear to me, especially given my involvement with the current
EPA workgroup, is that the state regulatory system for carbon storage
proposed by the IOGCC Task Force will in all likelihood work seamlessly
with the regulations likely to emerge out of the EPA regulatory
development process.

Having made this observation let me now offer brief comment on the two
bills which are the subject of this hearing today.

The legal and regulatory framework proposed by the Task Force, which I
will discuss in more detail subsequently, does not require, in order to
work effectively, broader over-arching federal regulation such as that
apparently contemplated by S. 2323. The Task Force strongly believed
that what it was proposing was comprehensive and given the number of
aspects that are solely functions of state and not federal law (for
example ownership of storage rights and means for amalgamating those
rights through some type of condemnation proceeding) that there was no
need or in some respects even the possibility of a broader federal role.
It is suggested that there will be ample time over the coming years to
see how the state-administered CO~2~ storage frameworks function in
tandem with the EPA UIC storage regulations thereby alleviating the need
to rush to create a potentially unnecessary federal regulatory framework
at this time. If there is need for additional federal regulatory
authority, it can be addressed legislatively then. I fully anticipate
that what will exist during this interim period will be a flexible,
responsive, and environmentally sound combination of state and EPA UIC
regulatory systems, which will be more than adequate to get the first
projects planned and off of the ground. Experience with these projects
will show us rather quickly if weaknesses or problems with the existing
frameworks manifest. We have absolutely no expectations at this time
that they will.

As concerns S. 2144 and the requirement of a study of feasibility
relating to construction and operation of pipelines and CO~2~
sequestration facilities, I would note first that the Task Force's
proposed legal and regulatory infrastructure encompasses construction
and operation of CO~2~ sequestration facilities. Second, I would suggest
that given this, that the federal government departments and agencies
designated in the bill to conduct the study at a minimum be required to
conduct the study in close cooperation and consultation with states,
including representatives of the IOGCC Task Force.

It is now appropriate to supply a little more detail about the legal and
regulatory system which the IOGCC Task Force has proposed for the
geologic storage of CO~2~ and how, precisely, the proposed EPA
regulatory system for CO~2~ storage would likely fit into this system.
This diagram will be helpful:

![](media/image1.png){width="4.05in" height="2.74375in"}

The diagram represents the "cradle to grave" regulatory model which the
Task Force has recommended to states. There are three phases.

**[1. Licensing including amalgamation of Storage Rights]{.underline}**

The first phase is the licensing phase which includes the critical
requirement that the project operator control the storage rights.

The Task Force concluded that as a part of the initial licensing of a
storage project that the operator of the project must control the
reservoir and associated pore space to be used for CO~2~ storage. The
operator would need to acquire these rights from the owners or assume
those rights by means of eminent domain, unitization or some other
vehicle that either exists in a state or would be created by the state
uniquely for this purpose. This step is necessary because in the U.S.,
the right to use reservoirs and associated pore space is considered a
private property right and must be acquired from the owner. It was the
conclusion of a Task Force legal subgroup that in most U.S. states, for
non EOR-related storage, the owner of these rights would likely be the
owner of the surface estate. It may be prudent, however, depending upon
the specific property right ownership framework in a given state, for an
operator to also control the relevant subsurface mineral rights.

Additionally, as part of the initial licensing of a project the operator
would be required to submit for State Regulatory Authority (SRA)
approval, detailed engineering and geological data along with a CO~2~
injection plan that includes a description of mechanisms of geologic
confinement that would prevent horizontal or vertical migration of CO~2~
beyond the proposed storage reservoir. The operator would also be
required to submit for approval by the SRA a public health and safety
and emergency response plan, worker safety plan, corrosion monitoring
and prevention plan and a facility and storage reservoir leak detection
and monitoring plan.

The rules also include requirements for an operational bond that would
be sufficient to cover all operational aspects of the storage facility
excluding wells which would be separately bonded.

Site licensing and amalgamation of storage rights is generally believed
to be outside the scope of the current UIC Program, and given that
regulatory involvement with property rights is a state issue, this phase
is best addressed at the state level. In addition, given the likely
competition for acceptable storage sites, it is in a state's interest to
manage these sites to maximize storage capacity and resolve any operator
conflicts over the right to use storage resources, thereby maximizing
the state's best economic interest in providing storage sites for that
state's generators.

**[2. The Storage and Closure Phase]{.underline}**

In this second phase we are talking about the phase, following initial
licensing, when the storage project is developed, operated, and closed.
This includes a short time period following plugging of the wells during
which time the project is monitored to ensure stability of the injected
CO~2~.

During the storage component of this phase the model rules specify the
procedures for permitting and operating the project injection wells to
safeguard life, health, property and the environment. The operator would
be required to post individual well bonds sufficient to cover well
plugging and abandonment, CO~2~ injection and/or subsurface observation
well remediation. The rules also specify design standards to ensure that
injection wells are constructed to prevent the migration of CO~2~ into
other than the intended injection zone. Provisions in the rules also
ensure that all project operational standards and plans submitted during
the licensing phase would be adhered to and that the project and wells
are operated in accordance with all required operating parameters and
procedures. Quarterly and annual reports would be required throughout
the operational life of the project. The rules also ensure that the
wells are properly plugged and the site restored. The individual well
bonds, maintained during the operational phase of the project would be
released as the wells are plugged.

The closure component of this phase is defined as that period of time
when the plugging of the injection wells has been completed and
continuing for a defined period of time (10 years unless otherwise
designated by the State Regulatory Authority) after injection activities
cease and the injections wells are plugged. During this closure period,
the operator of the storage site would be responsible for providing the
required data to ensure the injected CO~2~ has not migrated beyond the
project boundaries and the injected CO~2~ plume has been stabilized.
During this time the operator is required to maintain an overall project
operational bond.

This phase is primarily where EPA is developing proposed rules to ensure
the operation and plugging of the wells are protective of the
groundwater resources under the UIC Program.

**[3. Long-Term "Care Taker" Phase (long-term monitoring and
liability)]{.underline}**

The last phase is the Long Term or Post-Closure Period and is referred
to as that period of time when the operator of the project is no longer
the responsible party and the long-term "care taker" role is assumed by
a government entity or government-administered entity. The major issue
faced by the Task Force was how to deal with long-term monitoring and
liability issues. The formula settled upon by the Task Force is the
following:

At the conclusion of the Closure Period, the operational bond would be
released and the regulatory liability for ensuring that the site remains
a secure storage site would transfer to a trust fund administered by the
state. During the Post-Closure Period, the financial resources necessary
for the state or a state-contracted entity to engage in future
monitoring, verification, and remediation activities would be provided
by this state-administered trust fund.

The Task Force concluded that such a state-administered trust fund would
be the most effective and responsive "care-taker" to provide the
necessary oversight during the Post-Closure Period. The trust fund would
be funded by an injection fee assessed to the site operator and
calculated on a per-ton basis.

In summary, the EPA Regulations under the SDWA and the UIC Program
primarily deal with the Storage and Closure Phase as illustrated by the
green box in the diagram, for it is only in the project areas within
that box that EPA has authority under the SDWA. In addition to EPA's
mandate to protect drinking water under the SDWA, the IOGCC regulations
cover other public health and safety issues that need to be a part of a
comprehensive regulatory framework. As previously stated, almost all of
the well operational standards proposed in the IOGCC model regulations
are already UIC requirements of one form or another.

What I anticipate is that the proposed EPA regulations, whatever they
end up being, will yield a set of uniform national standards, which
superimposed on whatever state regulations may be in place will result
in national consistency of application so as to ensure that drinking
water resources are protected. Again as previously stated, given most
states (those with primacy) already administer the existing UIC program,
they will continue to do so, conforming their state regulations as they
pertain to the geologic storage of carbon to the minimum standard set by
the new EPA regulations.

Unless the EPA regulations end up being unnecessarily proscriptive and
onerous, the systems should work together perfectly and as I've already
stated, "seamlessly". Certainly this is the hope and current full
expectation of the IOGCC.

I will note that with regard to federal lands (surface and/or mineral
interests), that federal regulations emanating out of the BLM will
undoubtedly be necessary. However, what emanates out of BLM would in all
likelihood be more akin to what the states have done with regard to
state and private lands rather than an overarching and broader national
regulatory scheme.

Additionally, our model regulatory system does not address the
regulatory issues involving CO~2~ emissions trading and accreditation
for the purpose of securing carbon credits. The Task Force concluded
that the issue of CO~2~ emissions trading and accreditation would likely
best be addressed in the marketplace and/or at the federal government
level and was beyond the scope of the Task Force's mandate. In any
event, the Task Force strongly believes that development of any future
CO~2~ emissions trading and accreditation regulatory frameworks should
utilize the experiences of the states.

As concerns long term "care taker" liability, what the Task Force has
proposed will have to be addressed by each state and province as they
develop their own framework. It remains to be seen if states will agree
with the Task Force or propose something new. There may indeed be a need
for a federal role here at some point in the future but it is suggested
that federal action in this area await a clear need manifesting itself
in the years ahead.

Additionally and very importantly, states and provinces are likely to
continue to regard CO~2~ geologic storage reservoirs as a valuable
resource that should be managed using resource management frameworks,
therefore avoiding the treatment of CO~2~ storage as waste disposal. The
Task Force strongly believes that treatment of CO~2~ as a waste under
waste management regulatory frameworks will diminish significantly the
potential of carbon storage technology to meaningfully mitigate the
impact of CO~2~ emissions on the global climate. The energy consuming
public and the industry which produces that energy share a common goal
in coming up with a workable solution.

Let me close by noting the obvious \-- that public support for carbon
storage as a strategy for mitigating the impact of global climate change
will be crucial. It will be important to educate the public about this
technology including CO~2~'s long history of being transported, handled,
and used in a variety of applications. It will also be vitally important
to include the public in every step of the regulatory development
process, state and federal. State open meeting laws will ensure public
notice and participation in the state process at both legislation and
regulation development stages.

Thank you for the opportunity to appear here today. If I can provide any
additional information, please do not hesitate to ask.