This comment letter response contains two parts:

(1) The original submittal from the commenter. (2) A data base printout of EPA’s response to each point raised by the commenter.

Notes about the response letters:

• The response letters were generated by a data base used to track the content of all public

comment submittals and ensure that the Agency responds to each. Each comment letter

was assigned a Letter ID that corresponds to the last four digits of the docket number of the
original comment (as posted on www.regulations.gov).

• Each response letter includes: comment text; an EPA

‐ assigned comment code; and an
individual response. These are described and explained below.

• The data base contains Comment text from the letters submitted by commenters.
Many hard copy letters were scanned into electronic format for inclusion in the data

base. As a result, there may be some typographical errors attributable to optical

character recognition issues. However, all original submittals were reviewed in the

process of drafting responses to ensure that the comment content was understood and
appropriately addressed.

• The content of each comment letter was divided into topic areas and assigned a unique

Comment ID. Additionally, one or more Comment Codes (i.e., unique topic area ID) was assigned to each discrete point raised by a commenter. This information was added to

the data base. To inform final rulemaking decisions, all comments and information

received on a given topic were reviewed by technical experts in each rule area (e.g., on

construction requirements).

• Following decisions on the final rule requirements, Individual responses were drafted
by topic area to ensure completeness and consistency of the responses with the final

rule and other responses to similar comments. Each discrete point made by a

commenter was given a unique response.

• Upon completion of comment responses, all information was entered into the data base.

Each letter response is a compilation of each comment and its individual response, compiled in the order of the original comment letter. As a result of this process, there is
repetition in the response text. The Agency believes this approach ensures completeness

and attention to each comment letter that was submitted.

• All comments in a topic area were reviewed, evaluated, and responded to concurrently.

Responses on each topic area are compiled and are also available in the rulemaking docket.December 19, 2008

VIA USPS AND ELECTRONIC SUBMISSION

EPA Docket Center

Docket ID No. EPA

- HQ

- OW

- 2008

- 0390 Environmental Protection Agency, Mail Code 2822T

1200 Penn sylvania Avenue, N. W.

Wa shington, DC 20460

Dear Sir or Madam:

San Miguel Electric Cooperative, Inc. submits the attached comments on the proposed Underground Injection Control (UIC) Program, published by the Environmental Protection Agency at 73 Fed. Re g. 43492 (July 25, 2008).

San Miguel Electric Cooperative, Inc appreciates the opportunity to offer comments concerning the U.S. Environmental Protection Agency’s (EPA) proposed rulemaking referenced above. The principal business of San Miguel

Electric C ooperative, Inc (hereinafter referred to as San Miguel) is the production of electric energy in South Central Texas. Production includes one (1) coal

- fired power plant and one (1) lignite mine in South Central Texas. The lignite mine supplies fuel only f or the San Miguel Generating Station and produces on average 3.3 million tons of lignite. The generating unit fires only lignite provided by this mine. This one lignite

- fired unit comprises 100% of San Miguel’s generating capacity; average yearly output is 3.2 million megawatt hours.

San Miguel appreciates EPA’s efforts to develop regulations that will help insure CO2 GS activities can move forward in an orderly manner. Please consider the attached comments that are intended to help promote final GS

reg ulations that will aid the development of full scale, commercial GS activities while remaining protective of the environment. If you have any questions or if you would like to discuss these comments, please contact Joe Euitizi at

830.784.3411 ext. 226.

Si ncerely;

Joseph G. Eutizi

Engineering Manager

San Miguel Electric Cooperative, Inc.

P.O. Box 280 Jourdanton, TX 78026Federal Requirements Under the Underground Injection Control Program for Carbon Dioxide Geologic Sequestration Wells

Docket No. EPA

- HQ

- OW

- 2008

- 0390 73 Fed. Reg. 43492 (July 25, 2008)

Comments of San Miguel Electric Cooperative, Inc

.

San Miguel Electric Cooperative, Inc submits these comments on the Proposal of the Environmental Protection Agency ("EPA" or "the Agency ") to establish the regulatory framework for geologic sequestration (“GS”) of carbon dioxide (“CO2”) under the Underground Injection Control (“UIC”) Program pursuant to the Safe Drinking Water Act ("SDWA"). 73 Fed. Reg. 43492 (July 25, 2008).

San Miguel greatl y appreciates EPA's work toward developing a regulatory framework for underground injection of CO2. EPA's decision to develop regulat ions under the UIC program and to develop a new Class VI for CO2 GS well is appropriate. San Miguel also appreciates EPA's recognition that while the new regulations at hand must be within the scope of the SDWA, there are a number of very important issues (such as long term liability ) that are outside the scope of the act but are highl y p ertinent to developing a viable GS program and we are glad that EPA is willing to discuss these issues as part of this regulatory proposal.

It appears that GS of CO2 fr om fossil

- fueled power plants will be a necessary part of an y national strategy to control green house gas emissions. San Miguel, operates coal

- fired power plants and these plants are likel y t o be directly affected by new GS regulations. The regulations could have significant financial and operational impacts on San Miguel and we ask EPA to carefully consider our comments because of the significant stake we have in the outcome of this important rulemaking. San Miguel is a member of the

National Rural Elec tric Cooperative Association (“NRECA”). NRECA will also be submitting comments on the proposed UIC rules. San Miguel supports NRECA’s comments, and incorporates them here b y r eference.

SUMMARY

San Miguel applauds the efforts EPA has taken thus far to i nstill "certainty" and "transparency " into the future Class VI CO2 regulatory regime, 73 Fed. Reg. at 43496. The challenge EPA faces is to craft a Final Rule for commercial CO2 injection appropriate for activities that will largel y b e conducted in the fu ture. EPA has had to

confront man y t echnical uncertainties regarding the establishment and operation of GS

wells. Because man y o f the technical aspects are unknown, it is also very difficult to develop a clear understanding of project risks and liabilitie s. As long as risks and liabilities are largel y unknown and open

- ended, private companies will not step forward to offer insurance and other risk management products, and it will not be possible to obtain the level of financing needed to undertake a costl y GS operation. We hope the pilot carbon capture and sequestration (CCS) projects conducted b y DOE and other entities will help resolve some of these uncertainties.EPA needs to establish clear, reasonable regulations that are environmentally protective

and cover a range of operations for which the technology will not be commerciall y deploy ed for a number of years. To the extent practicable, EPA needs to establish a single, clear, reasonable and protective liability regime for an activity where the natu re of the risks are different from many other industrial activities and the full extent of possible risks from full scale CSS operations are presently unknown.

Comments Regarding UIC Regulations

1. Because of the difficult y of regulating future activities , we urge EPA to continue to use a "performance based" approach in developing the requirements for Class

VI UI C wells. This way , rules can be readily adjusted and fine

- tuned as industry and regulators alike gain experience with large

- scale CO2 sequestrati on. 2. Because information and technology related to carbon sequestration will evolve as industry and regulators gain experience with CCS, San Miguel urges EPA to resist placing blanket prohibitions or detailed operational specifications in the

Final Rule.

3. E PA should not automatically exclude placement of wells in particular geologic structures. The Final Rule should leave the door open for a range of injection sites and methods provided the owner or operator can show that the injection and storage will be p rotective of Underground Sources of Drinking Water (USDWs).

4. San Miguel believes that the states will have the best knowledge of regional geology , existing projects, areas in need of special protection, etc. and that states should be allowed to assume prima cy for administration of the UIC Class VI well

program.
5. EPA should be careful not to stigmatize GS operations and to take positive measures to build public acceptance. EPA should avoid characterizing stored

CO2 as a waste.

6. EPA must settle the way GS activ ities will relate to RCRA and CERCL A. RCRA is simply the wrong tool to use to regulate GS of CO2 and EPA needs to find a

way to insure that the onerous requirements of CERCL A, (never intended for GS of CO2), are not applied to this highly specialized gas storage operation.

7. Dealing with these last two hazardous waste issues appears to San Miguel to be one of the most difficult hurdles standing in the way of commercial deplo yment of full scale GS projects and we recognize that Congressional action may be

nee ded.

Comments Regarding Liability and Risk Management

San Miguel supports the comments of the Carbon Capture and Sequestration Alliance ( CCS, or the Alliance) on the proposed UIC regulations. The CCS Alliance is a coalition of entities, spanning a numb er of economic sectors, that share a common interest in removing impediments to investment in and development of carbon capture and storage (“CCS”), as well as mitigating the potential risks associated with the deplo yment of thistechnology .( 1 ) Its purpos e is to promote development of policy by the states and the

federal government to appropriatel y address risks and potential liabilities, thereb y enabling the further development and increased deploy ment of CCS. The CCS Alliance believes these technologies can be developed while protecting underground water resources, significantl y r educing global and U.S. greenhouse gas (“GHG”) emissions, and enhancing U.S. energy security . The Alliance’s purpose is to consider ways of promoting the development and use of CCS technologies and to support efforts b y t he private sector, states, the federal government, non

- governmental organizations and others, to help ensure that these technologies can be developed and widely , efficiently and cost

- effectivel y deploy ed.

We support the comments of the Alliance and incorporate them here b y reference. San Miguel is rel yi ng on NRECA and the Alliance to provide EPA with specific comments on the Financial Assurance and Long Term Liability issues discussed in the proposal.

We are not experts on these matters, however we ask EPA to consider the following general comments for managing risk and liability associated with GS:

1. It appears to San Miguel that a tiered approach with a government back

- stop as
used in the framework of th e Price

- Anderson Act for nuclear faculties could be a rational way of structuring liability management for GS of CO2. This is discussed further in the comments NRECA is submitting on this rulemaking.

2. EPA should consider a broad array of financial mechani sms owners or operators can use to meet financial responsibility requirements specified in the regulations.

3. While Self I nsurance mechanisms belong on EPA's menu of Financial Assurance options, San Miguel is a small business and we have a relatively small

c apitalization so Corporate Guarantees or Self Insurance may not be available options for us.

**************************************

1 MidAmerican Energy Holdings Company, National Mining Association, National Rural Electric Cooperative Association, NRG En ergy, Inc., PacifiCorp and Zurich North America.Letter ID: 0161 Commenter: Joseph Eutizi Organization: San Miguel El ectric Cooperative, Inc

Letter ID: 0161 Comment ID: 21280 Letter Lines: 69 to 72

Comment Code: 1420 1.2.1.1 Support the GS rulemaking

Comment Code: 2020 1.5.1 Support Class VI designation

Comment: San Miguel greatly appreciates EPA's wo rk toward developing a regulatory framework for underground injection of CO2. EPA's decision to develop regulations under the UIC program and to de velop a new Class VI for CO2 GS well is appropriate. San Miguel also apprecia tes EPA's recognition that while the new

Individual Response: EPA acknowledges the comment and agrees that tailored requirements for Class VI wells are necessary to address the unique nature of injecting large volumes of CO2 and to ensure that USDWs are protected from e ndangerment. The Class VI requirements are appropriate because of the unique nature and ri sks of CO2 injection for long-term storage (e.g., large injection volumes, long proj ect duration, and reservoir pressure conditions). The GS rule contains tailored requirements for the perm itting, geologic site ch aracterization, AoR and corrective action, well construc tion, operation, mechanical integr ity testing, monitoring, well plugging, post-injection site care, an d site closure of GS wells that directly address issues unique to the nature of large-scale CO2 injection for GS.

Letter ID: 0161 Comment ID: 21281 Letter Lines: 72 to 77

Comment Code: 1310 1.1.2.4 Comments on other "out of scope" issues, e.g., pore space ownership

Comment: is appropriate. San Miguel also apprecia tes EPA's recognition that while the new regulations at hand must be within the sc ope of the SDWA, ther e are a number of very important issues (such as long term liability) that are outside the scope of the act but are highly pert inent to developing a viable GS program and we are glad that EPA is willing to discuss thes e issues as part of this regulatory proposal.

Individual Response: EPA clarifies that the purpose of th e Class VI GS rule is to ensure consistency in permitting underground injection of CO2 at GS operations across the United States and provide requirement s to prevent endangerment of USDWs in anticipation of the

eventual use of GS to reduce CO2 emissions. EP A recognizes the importance of providing clear, flexible, scalable, and appropriate regulations. EP A believes that the Class VI GS regulation will provide certainty to industry and the public by providing consiste ncy in requirements across the U.S. and transparency about what requi rements apply to owners or operators.

EPA notes that long-term liabil ity is outside of the scope of the GS rulemaking and is not

1addressed in the GS rule. SDWA does not contai n any express provisions addressing liability. An owner or operator will be held liable for any permit violations under SDWA §1423.

Under the final GS rule, once an owner or ope rator has met all regulatory requirements under

Part 146 for Class VI wells and th e Director has approved site cl osure pursuant to requirements at §146.93, the owner or operator will generally no longer be subject to enforcement for regulatory noncompliance. Furthermore, thei r financial instrument as required under §146.85 will be released if it was not used. However, ev en if a site closure is approved under §146.93, an owner or operator may be held liable for re gulatory noncompliance (inc luding violation of 40 CFR 144.12) in certain circumstances. For example, an owner or operator may be held liable for regulatory noncompliance even after site clos ure was approved if the Director relied on erroneous information (e.g., erroneous modeling data) provided by the owner or operator when approving site closure.

Separate from EPA’s authority to enforce regul atory compliance, an owner or operator may be subject to a §1431 response orde r even after proper site cl osure is approved under §146.93. Under §1431 the Administrator may require an ow ner or operator to take necessary response

measures if he or she receives information that a contaminant is present or is likely to enter a public water system or an USDW, which may pres ent an imminent and s ubstantial endangerment to the health of persons, and the appropriate Stat e and local authorities ha ve not acted to protect the health of such persons. Th e action may include issuing admi nistrative orders or commencing a civil action for appropriate relief against the ow ner or operator of a Class VI well. If the owner or operator fails to comply with the order, they may be subject to a civil penalty for each day in

which such violation occurs or failure to comply continues.

Furthermore, after site closure an owner or ope rator may remain liable under tort and other remedies, or under other federal statutes includi ng, but not limited to, Clean Air Act, 42 U.S.C. §§ 7401-7671; CERCLA, 42 U.S.C. § 9601-9675; and RCRA, 42 U.S.C. § 6901-6992. EPA does not have authority to transfer SDWA or other legal liability for Class VI wells to the State or federal government or a third-party fund. See the final rule preamble for further discussion of EPA's final approach to financial responsibility for Class VI wells.

Letter ID: 0161 Comment ID: 21282 Letter Lines: 79 to 88

Comment Code: 1000 1. General and Administrative Comments

Comment: It appears that GS of CO2 from fossil-fueled power plants will be a necessary part of any national strategy to control green house gas emissions. San Miguel, operates coal-fired power plants and thes e plants are likely to be directly affected by new GS regulations. The regula tions could have significant financial and operational impacts on San Miguel and we ask EPA to carefully consider our comments because of the significant stake we have in the outcome of this important rulemaking. San Miguel is a memb er of the National Rural Electric Cooperative Association ("NRECA"). NRECA will also be submitting comments on the proposed UIC rules. San Miguel supports NR ECA’s comments, and in corporates them here by reference.

2Individual Response: EPA acknowledges the comment. Pleas e see the remainder of EPA's responses to this comment and NRECA’s comme nts for further details. For additional information on EPA's final regulatory approach, pl ease see the final rule and preamble as well as the rulemaking docket.

EPA agrees that GS is one technology in a portfolio of options, including solar, wind, biomass, and geothermal, that could be deployed to re duce CO2 emissions; howev er these technologies are outside the scope of the UIC GS rulemaking. The Class VI GS requirements are designed to ensure consistency in permitting underground inje ction of CO2 at GS operations across the United States and provide requirements to prev ent endangerment of USDWs in anticipation of

the eventual use of GS to reduce CO2 emissions.

Letter ID: 0161 Comment ID: 21283 Letter Lines: 90 to 104

Comment Code: 1200 1.1 General comments about the rulemaking

Comment Code: 5400 2.9 Proposed Financial Respons ibility and Long-Term Care Requirements

Comment: SUMMARY

San Miguel applauds the efforts EPA has taken thus far to instill "certainty" and "transparency" into the future Cla ss VI CO2 regulatory regime, 73 Fed. Reg. at 43496. The challenge EPA faces is to cr aft a Final Rule for commercial CO2 injection appropriate for activities that will larg ely be conducted in the future. EPA has had to confront many technical uncertainties regarding the establishment and operation of GS wells. Because many of the technical aspects are unknown, it is also very difficult to develop a clear understanding of project risks and liabilitie s. As long as risks and liabilities ar e largely unknown and open-ended, private companies will not step forward to offer insurance and other risk management pr oducts, and it will not be possible to obtain the level of financing needed to undertake a costly GS operation. We hope the pilot carbon capture and sequestration (CCS) projects conducted by DOE and other entities will help resolve some of these uncertainties.

Individual Response: To address concerns about certain ty, EPA has specified acceptable financial responsibility instruments and requi rements in the final regulation at §146.85. Additionally, EPA is deve loping guidance (available on EPA's website at http://water.epa.gov/type/groundwat er/uic/wells_sequest ration.cfm) that describes the types of financial instruments that owners or operato rs can use to meet financial responsibility requirements for GS wells.

EPA adds that it anticipates that, as GS is deployed, particularly if there are early successful uses of these financial instruments, owners or operato rs will demand and carriers will offer third-party GS financial instruments in greater numbers. See the final rule and preamble for further discussion of EPA's final approach to financial responsibility.

3Letter ID: 0161 Comment ID: 21284 Letter Lines: 106 to 112

Comment Code: 5400 2.9 Proposed Financial Respons ibility and Long-Term Care Requirements

Comment: EPA needs to establish clear, reasonable regulations that are environmentally protective and cover a range of operations for which the technology will not be commercially deployed for a number of years. To the extent practicable, EPA needs to establish a single, clear, reas onable and protective liability regime for an activity where the nature of th e risks are different from many other

industrial activities and the full extent of possible risks from full scale CSS operations are presently unknown.

Individual Response: EPA acknowledges commenter's concerns regarding the ap plicability of multiple statutes to GS projects and the need fo r a single clear liability regime for owners or operators. As a federal agency, EPA is working to create a nationally consistent financial responsibility regime within its authority whil e providing permitting author ities an appropriate level of flexibility for purposes of liability. EPA is finalizing financial responsibility requirements under authority of the SDWA. EPA be lieves that the genera l authorities provided under SDWA include the authority to set fe deral minimum requirements for financial responsibility to ensure that resources are available to pr otect USDWs from endangerment throughout the life of the GS project. Under current SDWA provisions, EPA does not have authority to transfer liability from one entity to another and it does not provide for the creation of a third party financial instrume nt where EPA is the trustee.

Under SDWA authority, owners or operators of injection well s must ensure protection of USDWs from endangerment and are subject to liability for enforcement under the Act.

The final rule requires that an owner or operator must conduct m onitoring as specified in the Director-approved PISC and site closure plan following the cessation of injection until the owner or operator can demonstrate to the Director th at the geologic sequestration project no longer poses an endangerment to USDWs. For additional information about the PISC and site closure requirements, see the preamble to the final GS rule.

Once an owner or operator has met all regulator y requirements under Part 146 for Class VI wells and the Director has approved site closure pursuant to requirements at §146.93, the owner or operator will generally no longer be subject to enforcement for regulatory noncompliance. Furthermore, their financial instrument as re quired under §146.85 will be released if it was not used. However, even if a site closure is a pproved under §146.93, an owner or operator may be held liable for regulatory noncompliance (inc luding violation of 40 CFR 144.12) in certain circumstances. For example, an owner or operator may be held liable for regulatory noncompliance even after site closure was a pproved if the Direct or relied on erroneous information (e.g., erroneous modeling data) provi ded by the owner or operator when approving

site closure.

4Additionally, an owner or operator may always be subject to any action the Administrator deems necessary to protect the health of persons under §1431 of the SD WA after site closure if there is unanticipated migration towards or into a US DW that causes or threatens imminent and substantial endangerment to public health. The action may include issuing administrative orders or commencing a civil action for appropriate relief. If the owner or operator fails to comply with the order, they may be subject to a civil penalt y for each day in which such violation occurs or failure to comply continues.

The Agency clarifies that Class VI well permits may be transferred to another owner or operator pursuant to §144.38 whereby generally all other regulatory re sponsibilities are transferred to that new owner and operator, which includes all poten tial liabilities associat ed with meeting the requirements of that permit. Please see further clar ification on the issue of long term liability in the preamble of the final rule.

Furthermore, after site closure an owner or ope rator may remain liable under tort and other remedies, or under other federal statutes includi ng, but not limited to, Clean Air Act, 42 U.S.C. §§ 7401-7671; CERCLA, 42 U.S.C. § 9601-9675; and RCRA, 42 U.S.C. § 6901-6992. EPA does not have authority to transfer SDWA or other legal liability for Class VI wells to the State or federal government or a third-party fund. See the final rule preamble for further discussion of EPA's final approach.

Letter ID: 0161 Comment ID: 21285 Letter Lines: 114 to 125

Comment Code: 1250 1.1.1.4 Flexibility is needed (p erformance-based standards)

Comment: Comments Regarding UIC Regulations

1. Because of the difficulty of regulating future activities, we urge EPA to continue to use a "performance based" appr oach in developing the requirements for Class VI UIC wells. This way, rules can be readily adjusted and fine-tuned as industry and regulators alike gain experience with large-scale CO2 sequestration.

2. Because information and technology related to carbon sequestration will evolve as industry and regul ators gain experience with CCS, San Miguel urges EPA to resist placing blanket prohibitions or detailed operational specifications in

the Final Rule.

Individual Response: The Agency believes that the Class VI requirements balance site-specific flexibility with USDW protection. Rather than setting performance or technology-based standards for GS projects, EPA is adopting a flex ible approach, where operators of GS projects would develop and implement site-specific plans for delineating the AoR, testing and monitoring the site, performing corrective actio n, and post-injection site care . EPA believes that the plans— which would be reviewed and approved by the Director and periodical ly updated throughout the life of the project—promote an ongoing dialogue between the operato r and the Director that will encourage use of the most appropriate t echnologies for a particular project.

5To address the comment that the rule should accommodate future technological developments related to GS, EPA adds that it is using an ad aptive approach to regulating GS under the UIC Program. Even after finalization of the GS regulat ion, EPA plans, every six years, to collect and review project data on GS research projects to determine whether the appropriate amount and types of information and appropriate documenta tion are being collected, and to determine if modifications to the requirements are appropriate or necessary.

Letter ID: 0161 Comment ID: 21286 Letter Lines: 127 to 131

Comment Code: 2100 1.6 Target Geologic Formations for GS

Comment: 3. EPA should not automatically exclude placement of wells in particular geologic structures. The Fi nal Rule should leave the door open for a range of injection sites and methods provided the owner or operator ca n show that the injection and storage will be protective of Underground Sources of Drinking Water (USDWs).

Individual Response: EPA clarifies that the GS rule does not categorically prec lude injection of CO2 into any non-USDW formation types. The purpose of the GS rule is to ensure protection of USDWs from endangerment, and the rule requires that owners or operators demonstrate that wells are sited in suitable systems with geologic formations to receive and confine injected CO2, required at §146.83 of the GS rule. The Cla ss VI siting, well cons truction and operation, monitoring and testing, and post-inj ection site care and site closur e requirements are designed to ensure that injected CO2 remains within the target formation. If an owner or operator can

demonstrate to the Director's satisfaction that GS in coal seams, basalts, salt domes, or shales can be accomplished in a manner that protects USDWs a nd meets all of the requirements of the GS rule, the project may be permitted as a Class VI well.

Letter ID: 0161 Comment ID: 21287 Letter Lines: 133 to 136

Comment Code: 5600 2.11 Comments related to UIC Program primacy for Class VI wells

Comment: 4. San Miguel believes that the states w ill have the best knowledge of regional geology, existing projects, areas in need of special protection, etc. and that states should be allowed to assume prim acy for administration of the UIC Class VI well program.

Individual Response: EPA agrees with commenters on the importance of states having primacy for GS wells given the variety of geologic settin gs in which GS will be applied. EPA recognizes that State, Tribal, Territorial, a nd DI UIC Program Direct ors are in the best position to evaluate the unique issues related to well depth, geol ogy, and hydrogeology that are posed by a Class VI well. Some degree of flexibility is needed for Cl ass VI wells because each decision made will be site-specific and conditions will di ffer from state to state. The GS rule balances the need for these site-specific decisions with the need for mi nimum standards to ensure national consistency.

6The Agency believes that it is important for stat es to use their unique e fficiencies to promote adoption of this burgeoning and important tec hnology, while assuring that USDWs are protected from endangerment through the UIC regulatory framework. EPA encourages states to accept primacy for Class VI, and believes that, due to the importance of implementing an effective, comprehensive, and seamless CCS program, States should be provided the flexibility to obtain primacy for Class VI only.

However, given the potential for CCS (encom passing capture, transportation, and geologic sequestration) to be an important part of a na tional priority to address climate change, EPA believes that providing states the flexibility to obtain primacy for Class VI wells independently of other well classes can help foster effective management of CCS. EPA believes that allowing independent Class VI primacy may encourage states to take res ponsibility for implementation of Class VI regulations and provide for a more co mprehensive approach to managing CCS projects by promoting the integration of GS activities under SDWA in to a broader framework for managing CCS. Furthermore, GS operations involve ancillary activities (e.g., pipeline operations, pore space ownership, land use rights, and surface access) for which states can call upon other authorities that exist at the state leve l (but outside UIC author ity) to provide a more comprehensive CCS management approach.

Letter ID: 0161 Comment ID: 21288 Letter Lines: 138 to 140

Comment Code: 1680 1.3.8 Don't overstate ris k, don't stigmatize CO2

Comment: 5. EPA should be careful not to stigmatize GS operations and to take positive measures to build public acceptance. EPA should avoid characte rizing stored CO2

as a waste.

Individual Response: EPA does not believe that the tailor ed requirements will create a negative public perception of GS. The Agency believes that a demonstration to the pub lic that GS projects are meeting the GS rule's tailored requirements would likely improve confidence in the project and help address public questions and concerns.

EPA adds that the requirements of the GS rule are tailored to the nature of the CO2 itself, and do

not address the status of CO2 as eith er a pollutant, commodity, or waste.

Letter ID: 0161 Comment ID: 21289 Letter Lines: 142 to 150

Comment Code: 1630 1.3.3 RCRA/hazardous waste i ssues (seeking comment)

Comment Code: 1640 1.3.4 CERCLA issues (seeking comment)

Comment: 6. EPA must settle the way GS activitie s will relate to RCRA and CERCLA. RCRA

is simply the wrong tool to use to regulate GS of CO2 and EPA needs to find a way to insure that the onerous requirements of CERCLA, (never intended for GS of

7CO2), are not applied to this highly specialized gas storage operation.

7. Dealing with these last tw o hazardous waste issues appears to San Miguel to

be one of the most difficult hurdles standing in the way of commercial deployment of full scale GS projects and we recognize that C ongressional action may be needed.

Individual Response: EPA agrees that any requirements for the CO2 stream should be clearly identified. EPA received many comments regardi ng the applicability of the RCRA regulations

and statute to CO2 streams that are geologically sequestered unde r the final Class VI UIC well requirements. As a result, EPA has decided to initiate a separate proposed rulemaking specifically to examine the issue of RCRA appl icability to CO2 streams being geologically sequestered, including the possible option of a conditional exemption from the RCRA requirements for CO2 GS in Class VI wells. EPA will consider these comments as part of its development of that proposal. The Agency will consider issues pa rticular to RCRA in the context of that separate rulemaking, and recommends that the commenter read that proposed rule when it is published. The Agency notes that comment ers who wish to submit comments on the RCRA proposal will need to do so during the comment pe riod for that rule. Finall y, EPA also notes that the final GS rule, which adds ne w regulations for Class VI wells under the Safe Drinking Water Act (SDWA), is not making any changes to the RCRA regulations.

CO2 itself is not listed as a hazardous substan ce under CERCLA; however, the CO2 stream may contain a listed hazardous substance (such as mercury) or may mobilize substances in the subsurface that could react with ground water to produce listed hazardous substances (such as sulfuric acid). Whether such substances may result in CERCLA liability from a sequestration facility depends entirely on th e composition of the specific CO2 stream and the environmental media in which it is stored (e.g., soil or gr ound water). CERCLA exempts from liability, under CERCLA section 107, 42 U.S.C. 9607, certain “feder ally permitted releases” (FPR) as defined in CERCLA, 42 U.S.C. 9601(10). Class VI permits will need to be carefully structured to ensure that they prevent potential releases from the we ll which are outside the scope of the Class VI permit.

Letter ID: 0161 Comment ID: 21290 Letter Lines: 152 to 174 ; 192 to 194

Comment Code: 5400 2.9 Proposed Financial Respons ibility and Long-Term Care Requirements

Comment: Comments Regarding Liability and Risk Management

San Miguel supports the comments of th e Carbon Capture and Sequestration Alliance ( CCS, or the Alliance) on th e proposed UIC regulations. The CCS Alliance is a coalition of entities, spa nning a number of economic sectors, that share a common interest in removing impedime nts to investment in and development of carbon capture and storage ("CCS"), as well as mitigating the potential risks associated with the deployment of this technology.[1] Its purpose is to promote development of policy by the states and the federal government to appropriately

8address risks and potential liabili ties, thereby enabling the further development and increased deployment of CCS. The CCS Alliance believes these technologies can be developed while pr otecting underground water resources, significantly reducing global and U.S. greenhouse gas ("GHG") emissions, and enhancing U.S. energy security. The Allianc e’s purpose is to consider ways of promoting the development and use of CCS technologies and to support efforts by the private sector, states, the fe deral government, non-governmental organizations and others, to help ensu re that these technologies can be developed and widely, efficiently and cost-effectively deployed.

We support the comments of the Alliance a nd incorporate them here by reference. San Miguel is relying on NRECA and the Alliance to provide EPA with specific comments on the Financial Assurance and Long Term Liability issues discussed in the proposal. We are not experts on these matters, however we ask EPA to

************************************** 1 MidAmerican Energy Holdings Company, National Mining Association, National Ru ral Electric Cooperative Association, NRG Energy, Inc., PacifiCorp and Zurich North America.

Individual Response: Please see the remainder of EPA's res ponses to this comment related to financial responsibility for further details. For additional information on EPA's final regulatory approach, please see the final rule and preamble as well as the rulemaking docket. EPA is using an adaptive approach to regulating GS.

Letter ID: 0161 Comment ID: 21291 Letter Lines: 174 to 190

Comment Code: 5434 2.9.1.2 Need for additional instruments (seeking comment)

Comment: the proposal. We are not e xperts on these matters, however we ask EPA to consider the following general comments for managing risk and liability

associated with GS:

1. It appears to San Miguel that a tiered approach with a government back-stop

as used in the framework of the Price- Anderson Act for nuclear faculties could be a rational way of structuring liability management for GS of CO2. This is discussed further in the comments NRECA is submitting on this rulemaking.

2. EPA should consider a broa d array of financial mechanis ms owners or operators can use to meet financial responsibi lity requirements specified in the regulations.

3. While Self Insurance mechanisms bel ong on EPA's menu of Financial Assurance options, San Miguel is a small business and we have a relatively small capitalization so Corporate Guarantees or Self Insurance may not be available options for us.

910 Individual Response: Under SDWA, EPA has the genera l authority to set financial responsibility requirements for injection well owne rs or operators to ensure that adequate resources are available to protect USDWs throughout the life of the GS pr oject. However, this authority does not extend to allowing the Agency to create a financial instrument with EPA as the trustee, due to the restrict ions of the Miscellaneous Receipts Act (MRA). The MRA requires that EPA deposit the funds it receives for the use of the Govern ment into the Treasury, therefore funds would not necessarily be availa ble for GS financial responsibility.

Additionally, EPA does not have authority under SDWA to establis h a trust fund for purposes of financial responsibility for Class VI projects. The Agency clarifie s that the trust funds that are addressed as financial responsibility instruments on the GS rule are set up by individual owners or operators and are different from a national-le vel trust described by th e commenters that would cover large numbers of GS projects.

Owners or operators may choose from a variety of financial instruments to meet their financial responsibility obligations under the rule, provided the Director de termines that the operator's proposed financial responsibility demonstrat ion is adequate to protect USDWs from endangerment, which means the ability of the owner or operator to pay for each activity for which financial responsibility must be demonstr ated, including correctiv e action on wells in the AoR, injection well plugging, PISC and site cl osure, and emergency and remedial response throughout the life of the project. The final GS rule specifies at §146.85(a)(1) the permitted types of financial responsibility instru ments. See the final rule and pr eamble for further discussion of EPA's final approach to financial responsibility.

EPA will retain self insurance as an option for financial responsibility for Class VI wells. EPA believes that if properly used, the financial test can be an appropriate option for some owners or operators. EPA recognizes that it is important fo r self-insurers to be credit-worthy, otherwise USDWs may not be adequately protected. Owner or operators who choose to self-insure and use

the financial test must be able to demonstrate profitability, with a margin sufficient to cover contingencies and unknown obligations, and stabilit y. If the owner or operator meets corporate financial test criteria, this is an indication that the owner or operator can guarantee its ability to satisfy financial obligations based solely on the strength of the company’ s financial condition. If an operator or operator is not ab le to meet the corporate financ ial test criteria may arrange a corporate guarantee by demonstrating that its cor porate parent meets the financial requirements

on its behalf.

Under SDWA authority, owners or operators of injection well s must ensure protection of USDWs from endangerment and are subject to liab ility for enforcement under the Act. The final rule requires that an owner or operator must conduct monitoring as specified in the Directorapproved PISC and site closure plan following the cessation of injection until the owner or operator can demonstrate to the Director that th e geologic sequestration project no longer poses an endangerment to USDWs. For additional information about the PISC and site closure requirements, see the preamble to the final GS rule.