Order Code RL33971



# Carbon Dioxide (CO **2** 

# ) Pipelines for Carbon **Sequestration: Emerging Policy Issues**

**Updated January 17, 2008**

Paul W. Parfomak Specialist in Energy and Infrastructure Policy Resources, Science, and Industry Division

Peter Folger Specialist in Energy and Natural Resources Policy Resources, Science, and Industry Division

## Carbon Dioxide (CO 2 

## ) Pipelines for Carbon Sequestration: Emerging Policy Issues

**Summary**

Congress is examining potential approach es to reducing manmade contributions to global warming from U.S. sources. One approach is carbon capture and sequestration (CCS) — capturing CO 2at its source (e.g., a power plant) and storing it indefinitely (e.g., undergr ound) to avoid its release to the atmosphere. A common requirement among the various techniques for CCS is a dedicated pipeline network for transporting CO 2 from capture sites to storage sites.

In the 110 thCongress, there has been considerable debate on the capture and sequestration aspects of car bon sequestration, while there has been relatively less focus on transportation. Nonetheless, ther e is increasing understanding in Congress that a national CCS program could require the constructi on of a substantial network
of interstate CO 2 pipelines. S. 2144 and S. 2191 would require the Secretary of Energy to study the feasibility of constructing and operating such a network of pipelines. S. 2323 would require carbon seque stration projects to evaluate the most cost-efficient ways to integrate CO 2sequestration, capture, and transportation. S. 2149 would allow seven-year accelerat ed depreciation for qualifying CO 2 pipelines. P.L. 110-140, signed by President Bush on December 19, 2007, requires the Secretary of the Interior to recommend le gislation to clarify the issuance of CO 2 pipeline rights-of-way on public land.

That CCS and related legislation have been more focused on the capture and storage of CO 2 than on its transportation, reflect s a perception that transporting CO 2 via pipelines does not present a significant barrier to implementing large-scale CCS. Notwithstanding this percepti on, and even though regional CO 2pipeline networks already operate in the United States for e nhanced oil recovery (EOR), developing a more expansive national CO 2pipeline network for CCS could pose numerous new regulatory and economic challenges. There are important unanswered questions about pipeline network requi rements, economic regulatio n, utility cost recovery, regulatory classification of CO 2 itself, and pipeline safety. Furthermore, because CO 2 pipelines for EOR are already in use today, policy decisions affecting CO 2 pipelines take on an urgency that is, perhaps, unreco gnized by many. Federal classification of

CO 2 as both a commodity (by the Bureau of Land Management) and as a pollutant (by the Environmental Protection Agency) could potentially create an immediate conflict which may need to be addresse d not only for the sake of future CCS implementation, but also to ensure consistency of future CCS with CO 2 pipeline operations today.

In addition to these issues, Congress may examine how CO 2pipelines fit into the nation’s overall strategies for energy supply and environm ental protection. If policy makers encourage con tinued consumption of fossil fuels under CCS, then the need to foster the other energy options may be diminished — and vice versa. Thus
decisions about CO 2pipeline infrastructure could ha ve consequences for a broader array of energy and environmental policies.

### Contents

Introduction ......................................................1

Background ......................................................3 Carbon Capture a nd Sequestration .................................3 Capture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Sequestration in Geological Formations . . . . . . . . . . . . . . . . . . . . . . . . 4 Existing U.S. CO 2 Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Key Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

CO 2Pipeline Requirements for CCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Economic Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Federal Jurisdiction over CO 2Pipelines . . . . . . . . . . . . . . . . . . . . . . . . 8

Potential Issues Related to ICC Jurisdiction . . . . . . . . . . . . . . . . . . . . . 8 Policy Implications for Rate Regulation . . . . . . . . . . . . . . . . . . . . . . . . 9 Siting Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Commodity vs. Pollutant Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Pipeline Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Materials Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

CO 2 Pipeline Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Cost Implications for Network Development . . . . . . . . . . . . . . . . . . . 15

CO 2Pipeline Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Criminal and Civil Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19



### List of Figures

Figure 1. Major CO 2 Pipelines in the United States . . . . . . . . . . . . . . . . . . . . . . . . 5 Figure 2. U.S. Prices for Large Diameter Steel Pipe . . . . . . . . . . . . . . . . . . . . . . 131 This report does not explore the underlying sc ience of climate change, nor the question of whether action is justified. See CRS Report RL33849, Climate Change: Science and Policy Implications , by Jane A. Leggett.

2 For more information on congressional ac tivities related to global warming, see CRS Report RL31931, Climate Change: Federal Laws and Po licies Related to Greenhouse Gas
Reductions , by Brent D. Yacobucci and Larry Parker; and CRS Report RL34067, Climate Change Legislation in the 110th Congress , by Jonathan L. Ramseur and Brent D.

Yacobucci.

3 This report does not address i ndirect sequestra tion, wherein CO 2 is stored in soils, oceans, or plants through natural processes. For information on the latter, see CRS Report RL31432, Carbon Sequestration in Forests , by Ross W. Gorte.



# Carbon Dioxide (CO 2 

# ) Pipelines for Carbon Sequestration: Emerging Policy Issues

**Introduction**

Congress has long been concerned about the impact of global climate change that may be caused by manmade emissions of carbon dioxide (CO 2 ) and other greenhouse gases. 1 Congress is also debating policies related to global warming and is examining a range of potential initiatives to reduce manmade contributions to global warming from U.S. sources. 2One approach to mitigating manmade greenhouse gas emissions is dir ect sequestration: capturing CO 2at its source, transporting it via pipelines, and storing it indefinitely to avoid its release to the atmosphere. 3 This paper explores one component of direct sequestration — transporting CO 2 in pipelines.

Carbon capture and storage (CCS) is of great interest because potentially large
amounts of CO 2 emitted from the industrial burning of fossil fuels in the United States could be suitable for sequest ration. Carbon capture technologies can potentially remove 80%-95% of CO 2emitted from an electric power plant or other industrial source. Power plants are the most likely initial candidates for CCS because they are predominantly large, single-pointsources, and they contribute approximately

one-third of U.S. CO 2 emissions from fossil fuels.

There are many technological appro aches to CCS. However, one common requirement for nearly all large-scale CCS schemes is a system for transporting CO 2 from capture sites (e.g., power plants) to storage sites (e.g., underground reservoirs). Transporting captured CO 2in relatively limited quantities is possible by truck, rail, and ship, but moving the enormous quantities of CO 2implied by a widespread implementation of CCS tec hnologies would likely require a dedicated interstate pipeline network.CRS-2

4 John Douglas, “Expanding Options for CO 2 Storage,” EPRI Journal, Electric Power Research Institute (Spring 2007): 24. In the 110 thCongress, there has been considerable debate on the capture and sequestration aspects of car bon sequestration, while there has been relatively less focus on transportation. Nonetheless, ther e is increasing understanding in Congress that a national CCS program could require the constructi on of a substantial network

of interstate CO 2 pipelines. The Carbon Dioxide Pipeline Study Ac t of 2007 (S. 2144), introduced by Senator Coleman and nine cosponsors on October 4, 2007, would require the Secretary of Energy to study the feasibility of constructing and operating such a network of CO 2pipelines. The America’s Climate Security Act of 2007 (S. 2191), introduced by Senator Lieb erman and nine cosponsors on October 18, 2007, and reported out of the Senate Environment and Public Works Committee in amended form on December 5, 2007, contai ns similar provisions (Sec. 8003). The Carbon Capture and Storage Technolog y Act of 2007 (S. 2323), introduced by Senator Kerry and one cosponsor on November 7, 2007, would require carbon sequestration projects authorized by the act to evaluate the most cost-efficient ways to integrate CO 2sequestration, capture, and transportation (Sec. 3(b)(5)). The Coal
Fuels and Industrial Gasi fication Demonstration a nd Development Act of 2007 (S.2149) introduced by Senator Dorgan on October 4, 2007, would allow accelerated depreciation for certain new CO 2pipelines. The Energy Independence and Security Act of 2007 (P.L. 110-140) signed by Pres ident Bush, as amended, on December 19, 2007, requires the Secretary of the Interior to recommend legislation to clarify the appropriate framework for issuing CO 2pipeline rights-of-way on public land (Sec. 714(7)).

Legislative focus on the capture and storage components of direct carbon sequestration reflects a per ception that transporting CO 2via pipelines does not present a significant barrier to implemen ting large-scale CCS. Even though regional

CO 2 pipeline networks already operate in the United States for enhanced oil recovery (EOR), developing a more expansive national CO 2pipeline network for CCS could pose numerous new regulatory and economic challenges. As one analyst has remarked,

Each of the individual technologies invo lved in the transport portion of the CCS process is mature, but integrating and deploying them on a massive scale will be a complex task. “The question is, how would the necessary pipeline network be
established and evolve?” 4

A thorough consideration of potential CCS approaches necessarily involves an
assessment of their ove rall requirements for CO 2transportation by pipeline, including the possible federal role in establishing an interstate CO 2pipeline network.

This report introduces key policy issues related to CO 2 pipelines which may require congressional attention. It summarizes the technological requirements for

CO 2 pipeline transportation under a comprehe nsive CCS strategy. It characterizes these requirements relative to the existing CO 2pipeline infrastructure in the United States used for EOR. The report summarizes policy issues related to CO 2pipeline development, including uncertainty about pipeline network re quirements, economicCRS-3

5 More detailed information is available in CRS Report RL33801, Direct Carbon Sequestration: Capt uring and Storing CO 2 , by Peter Folger.

6 Intergovernmental Panel on Climate Change, Special Report: Carbon Dioxide Capture and Storage, 2005(2005): 22-23. (Hereafter referred to as IPCC 2005.)

7 H. J. Herzog and D. Golumb, “Carbon Captur e and Storage from Fossil Fuel Use,” in C.J. Cleveland (ed.), Encyclopedia of Energy (New York, NY: Elsevier Science, Inc., 2004): (continued...) regulation, utility cost recovery, regulatory classification of CO 2itself, and pipeline safety. The report conclude s with perspectives on CO 2pipelines in the context of the nation’s overall energy and in frastructure requirements.



## Background

Carbon sequestration policies are inex tricably tied to the function and availability of the necessary technologies. Consequen tly, discussion of CCS policy
alternatives benefits from a basic understanding of the physical processes involved, and relevant experience with existing infrastructure. This section provides a basic overview of carbon sequestration processes overall, as well as specific U.S. experience with CO 2pipelines. 5



### Carbon Capture and Sequestration

Carbon capture and sequestration is essentially a thr ee-part process involving

a CO 2source facility, a long-term CO 2storage site, and an intermediate mode of CO 2 transportation.

**Capture.** The first step in direct sequestration is to produce a concentrated
stream of CO 2 for transport and storage. Currently, three main approaches are available to capture CO 2 from large-scale industrial facilities or power plants:

! pre-combustion , which separates CO 2from fuels by combining
them with air and/or steam to produce hydrogen for combustion and

CO 2 for storage,

! post-combustion , which extracts CO 2from flue gases following combustion of fossil fuels or biomass, and

! oxyfuel combustion , which uses oxygen instead of air for combustion, producing flue gase s that consist mostly of CO 2 and
water from which the CO 2is separated. 6

These approaches vary in terms of proce ss technology and maturity, but all yield a

stream of extracted CO 2which may then be compressed to increase its density and make it easier (and cheaper) to transport. Although technologies to separate and compress CO 2 are commercially available, they have not been applied to large-scale

CO 2 capture from power plants for the purpose of long-term storage. 7CRS-4

7 (...continued)

277-287.

8 IPCC 2005: 26.

9 IPCC 2005: 181.

10 CO 2 used in EOR enhances oil production by re -pressurizing geological formations and reducing oil viscosity, thereby increasing oil movement to the surface. CO 2 is used industrially as a chemical feedstock, to carbonate beverages, for refrigeration and food processing, to treat water, and for other uses.

11 IPCC 2005: 31.

12 Sedimentary basins are large depressions in the Earth’s surface filled with sediments and

fluids. **Transportation.** Pipelines are the most common method for transporting large quantities of CO 2over long distances. CO 2pipelines are operated at ambient temperature and high pressure, with primary compressor stations located where the

CO 2 is injected and booster compressors located as needed further along the pipeline. 8 In overall construction, CO 2pipelines are similar to natural gas pipelines, requiring the same attention to design, monitoring for l eaks, and protection against overpressure, especially in populated areas. 9 Many analysts consider CO 2pipeline technology to be mature, stemming from its use since the 1970s for EOR and in other

industries. 10Marine transportation may also be feasible when CO 2needs to be transported over long distances or overseas; however, many manmade CO 2sources are located far from navigable waterways, so such a scheme would still likely require pipeline construction between CO 2sources and port terminal s. Rail cars and trucks can also transport CO 2 , but these modes would be logistically impractical for large-scale CCS operations.

**Sequestration in Ge ological Formations.**  In most CCS approaches, CO 2 would be transported by pipeline to a porous rock formation that holds (or previously held) fluids where the CO 2 would be injected underground. When CO 2is injected over 800 meters deep in a typical storag e formation, atmospheric pressure induces
the CO 2 to become relatively dense and less likely to migrate out of the formation. Injecting CO 2 into such formations uses exis ting technologies de veloped primarily for oil and natural gas produc tion which potentially could be adapted for long-term storage and monitoring of CO 2 . Other underground injection applications in practice today, such as natural gas storage, deep injection of liquid wastes, and subsurface disposal of oil-field brines, also provi de potential technologies and experience for sequestering CO 2 . 11 Three main types of geological formations are being considered for carbon sequestration: (1) oil and gas reservoirs, (2) deep saline reservoirs, and (3) unmineable coal seams. The overall capacity for CO 2storage in such formations is potentially huge if all the sedimentary basins in the world are considered. 12 The suitability of any particular site, however, depends on many factors, including proximity to CO 2 sources and other reservoir-specific qualities like porosity, permeability, and potential for leakage.CRS-5

13 Kinder Morgan CO 2 Company, “Canyon Reef Carriers Pipeline (CRC),” web page (2007). [http://www.kindermorgan.com/business/co2/transport_canyon_reef.cfm]

14 U.S. Dept. of Transporta tion, National Pipeline Mapping System database (June 2005). [https://www.npms.phmsa.dot.gov]

15 Bureau of Transportation Statistics (BTS ), National Transportation Statistics 2005 (Dec. 2005), Table 1-10. In this report oilincludes petroleum and other hazardous liquids such as gasoline, jet fuel, diesel fuel , and propane, unless otherwise noted. 

### Existing U.S. CO **2** 

### Pipelines

The oldest long-distance CO 2pipeline in the United States is the 225 kilometer Canyon Reef Carriers Pipeline (in Texas) , which began service in 1972 for EOR in regional oil fields. 13 Other large CO 2pipelines constructed since then, mostly in the Western United States, have expanded the CO 2pipeline network for EOR. These pipelines carry CO 2from naturally occurring underg round reservoirs, natural gas processing facilities, ammonia manufacturing plants, and a large coal gasification project to oil fields. Additional pipelines may carry CO 2from other manmade sources to supply a range of industrial applications. Altogeth er, approximately 5,800 kilometers ( 3,600 miles) of CO 2pipeline operate today in the United States. 14

Sources: Denbury Resources Inc., “EOR: The Economic Alternative for CCS,” Slide presentation (Octobe r 2007). [http ://www.ga sification.org/ Docs/2007_Papers/25EVAN.pdf]; U. S. Dept. of Transportation, National Pipeline Mapping System, Official use only. (June 2005). [https://www.npms.phmsa.dot.gov]

The locations of the major U.S. CO 2pipelines are shown in Figure 1 . By comparison, nearly 800,000 kilometers (500,000 miles) of natural gas and hazardous liquid transmission pipelines crisscross the United States. 15 **Figure 1. Major CO 2**  **Pipelines in the United States**CRS-6

16 R.T. Dahowski, J.J. Dooley, C.L. Davidson, S. Bachu, N. Gupta, and J. Gale, “A North
American CO 2 Storage Supply Curve: Key Findings a nd Implications for the Cost of CCS Deployment,” Proceedings of the Fourth AnnualConference on Carbon Capture and Sequestration ( Alexandria, VA: May 2-5, 2005). The study addresses CO 2 capture at 2,082 North American facilities including power plants , natural gas processing plants, refineries, cement kilns, and other industrial plants.

17 Jennie C. Stevens and Bob Van Der Zwaan, “T he Case for Carbon Capture and Storage,” Issues in Science and Technology , vol. XXII, no. 1 (Fall 2005): 69-76. (See page 15 of this report for a discussion of safety issues.) 

## Key Issues for Congress

Congressional consideration of potential CCS policies is still evolving, but so far initiatives have focused more on developing capture and sequestration technologies than on transportation. Sp ecific legislative proposals in the 110 th Congress reflect the current perception that CO 2capture probably represents the largest technological hurdle to imple menting widespread CCS, and that CO 2 transportation by pipelines does not present as significant a barrier. While these perceptions may be accurate, i ndustry and regulatory analys ts have begun to identify important policy issues related specifically to CO 2pipelines which may require congressional attention.



### CO **2** 

### Pipeline Requirements for CCS

Although any widespread CCS scheme inthe United States would likely require
dedicated CO 2 pipelines, there is considerable uncertainty about the size and configuration of the pipeline network required. This uncertainty stems, in part, from uncertainty about the suitability of geolog ical formations to sequester captured CO 2 and the proximity of suitable formations to specific sources. One recent analysis
concludes that 77% of the total annual CO 2captured from the major North American sources may be stored in reservoirs dir ectly underlying these sources, and that an additional 18% may be stored within 100 miles of additional sources. 16 If this were the case, the need for new CO 2 pipelines would be limited to onsite transportation and a relatively small number of long-dista nce pipelines (only a subset of which might need to be interstate pipelines).

Other analysts suggest that captured CO 2may need to be sequestered, at least initially, in more centralized reservoirs to reduce potential risks associated with CO 2 leaks. 17 They suggest that, given current un certainty about the suitability of various on-site geological formations for long-term CO 2 storage, certain specific types of formations (e.g., salt caverns ) may be preferred as CO 2repositories because they have adequate capacity and are most likely to retain sequestered CO 2 indefinitely. As geologic formations are characterized in more detail and suitable repositories identified, CO 2 sources can be mapped against storage sites with increasing certainty. The current uncertainty over proximity of sources to storage sites, however, implies a wide range of possible pipeline configura tions and a wide range of possible costs.

Whether CCS policies ultimate ly lead to centralized or decentralized storage configurations remains to be seen; however, pipelin e requirements and storageCRS-7

18 John Deutch, Ernest J. Moniz, et al., The Future of Coal . (Cambridge, MA: Massachusetts Institute of Technology: 2007): 58. (Hereafter referred to as MIT 2007.)

19 MIT 2007: 58.

20 Eric Williams, Nora Greenglass, and Rebecca Ryals, “Carbon Capture, Pipeline and Storage: A Viable Option for North Carolin a Utilities?” Working paper prepared by the Nicholas Institute for Environmental Policy Solutions and The Center on Global Change, Duke University (Durham, NC: March 8, 2007): 4.

21 MIT 2007: 58.

22 General Accounting Office (now Government Accountability Office), Surface Transportation: Issues Associated With Pi peline Regulation by the Surface Transportation
Board , RCED-98-99 (Washington, DC: April 21, 1998):3; and 49 U.S.C. § 155.

23 The STB is the successor agency to the Interstate Commerce Commission (ICC) under the Interstate Commerce Commission Termination Act of 1995 (P.L. 104-88).

24 For a more comprehensive discussion of CO 2 pipeline regulatory jurisdiction, see CRS Report RL34307, Regulation of Carbon Dioxide (CO 2 ) Sequestration Pipelines: (continued...) configurations are closely related. A 2007 study at the Massachusetts Institute of Technology (MIT) concluded that “the ma jority of coal-fired power plants are situated in regions where there are high expectations of having CO 2 sequestration sites nearby.” 18 In these cases, the MIT study estimated the cost of CO 2transport and injection to be less than 20% of total CCS costs. However, the study also stated that
the costs of CO 2 pipelines are highly non-linear with respect to the quan tity transported, and highly vari able due to “physical ... a nd political considerations.” 19 Another 2007 study, at Duke University, c oncluded that “geologic sequestration is not economically or technically feasible within North Carolina,” but “may be viable if the captured CO 2 is piped out of North Caro lina and stored elsewhere.” 20There are also significant scale economies for large, integrated CO 2pipeline networks that link many sources together rather than si ngle, dedicated pipelines between individual sources and storage reservoirs. 21 As Congress considers CCS policies, it may examine the relationship between CO 2reservoir sites and pipeline requirements.



### Economic Regulation

Economic regulation of interstate pipelines by the federal government is generally intended to ensure pipelines fulfill common carrier obligations by charging reasonable rates; providing rates and services to all upon reasonable request; not unfairly discriminating among shippers; establishing reasonable classifications, rules, and practices; and interchanging traffic with other pipelines or transportation

modes. 22If interstate CO 2pipelines for carbon sequestration are ultimately to be developed, it will raise important regulatory questions in this context because federal jurisdiction over hypothetical interstate CO 2pipeline siting and rate decisions is not clear. Based on their current regulatory roles, two of the more likely candidates for jurisdiction over interstate pipelines transporting CO 2for purposes of CCS are the Federal Energy Regulatory Commission (FERC) and the Surface Transportation Board (STB). 23 However, both agencies have atsome point expressed a position that
interstate CO 2 pipelines are not within their purview, as summarized below. 24CRS-8

24 (...continued)

Jurisdictional Issues , by Adam Vann and Paul W. Parfomak.

25 15 U.S.C. 717f(c).

26 49 App. U.S.C.§1.

27 Section 1801 of the Energy Policy Act of 1992 directed FERC to “promulgate regulations establishing a simplified and generally applic able ratemaking methodology” for oil pipeline transportation.

28 49 U.S.C. § 1-501(a)(1)(c).

29 Cortez Pipeline Company, 7 FERC ¶ 61,024 (1979).

30 Id.

31 Cortez Pipeline Company — Petition for Declaratory Order — Commission Jurisdiction Over Transportation of Carbon Dioxide by Pipeline, 46 Fed. Reg. 18805 (March 26, 1981). **Federal Jurisdiction over CO 2**  **Pipelines.** The Natural Gas Act of 1938 (NGA) vests in FERC the authority to i ssue “certificates of public convenience and necessity” for the construction and operati on of interstate natural gas pipeline

facilities. 25 FERC is also charged with extensive regulatory authority over the siting of natural gas import and export facilities, as well as rates for transportation of natural gas and other elements of transportation service. FERC also has jurisdiction over regulation of oil pipelines pursuant to the Interstate Commerce Act (ICA). 26 Although FERC is not involved in the oil pipe line siting process, as with natural gas, FERC does regulate transportation rates and capacity allocation for oil pipelines. 27 Jurisdiction over rate regulation for pipe lines “other” than “water, gas or oil” pipelines resides with the STB, a deci sionally independent regulatory agency affiliated with the Department of Transportation. 28 The STB acts as a forum for resolution of disputes related to pipelines within its jurisdic tion. Parties who wish to challenge a rate or another aspect of a pipeline’s common carrier service must petition the STB for a hearing, however; there is no ongoing regulatory oversight.

Although CO 2 pipelines are not explicitly excluded from FERC jurisdiction by statute, FERC ruled in 1979 that they are not subject to the Commission’s jurisdiction because they do not transport natural gas for heating purposes. 29
Likewise, the ICC in 1980 concluded that Congress intended to exclude all types of gas, including CO 2 , from ICC regulation. After making the initial decision that it likely did not have jurisdiction over CO 2pipelines, the ICC did conclude that the issue was “important enough to institu te a proceeding and accept comments on the petition and our view on it.” 30After the comment period the ICC confirmed its view

that CO 2pipelines were excluded from the ICC’s (and, therefore, the STB’s) jurisdiction. 31 Thus, the two federal regulatory agencies that, generally speaking, have jurisdiction over interstate pipeline rate and capacity allocation matters appear to have rejected explicitly jurisdiction over CO 2siting and rates, and there is no legislative or judicial history to suggest that their rejections were improper at the time. Absent federal authority, CO 2pipelines are regulated to varying degrees by the

states.

**Potential Issues Related to ICC Jurisdiction.** Notwithstanding the ICC’s 1980 disclaimer of ju risdiction over CO 2pipelines, other evidence indirectly suggestsCRS-9

32 Now known as the Government Accountability Office.

33 Surface Transportation Board (STB), Personal communication, (December 2007). The
STB Office of Governmental and Public Affa irs informed CRS that the board recognizes the conflict between this GAO report and the ICC decision (as well as the wording of 49 C.F.R. § 15301 governing STB jurisdiction overpipelines other than those transporting “water, gas or oil”). However the office did notwant to state an opinion as to the current extent of STB jurisdiction over CO 2 pipelines and suggested that the STB would likely not
act to resolve this conflict unless a CO 2 pipeline dispute comes before it.

34 Chevron U.S.A. v. Nat. Res. De f. Council, 467 U.S. 837, at 863-64 (1984).

35 Beard Company 2000 annual report (10-k) filed with the U.S. Securities and Exchange Commission states that the company (with othe r plaintiffs) filed a lawsuit in 1996 against

CO 2 pipeline owner Shell Oil Company and othe r defendants alleging, among other things, that the defendants “controlled and depresse d the price of CO2” from a field partially owned by Beard and “reduc[ed] the delivered price of CO2 while ... simultaneously inflating the cost of transportation.” [h ttp:// www.secinfo.com/dRxzp.424.htm#1fmr] the possibility that interstate CO 2pipelines could still be considered subject to STB jurisdiction. For example, an April 1998 report by the General Accounting Office (GAO) 32stated that interstate CO 2pipelines, as well as pi pelines transporting other gases are subject to the board’s oversightauthority. The STB reviewed the GAO’s analysis and, apparently, did not object to this jurisdictional classification. 33 Furthermore, although the STB is the su ccessor to the now-defunct ICC, the STB conceivably could determine that its juri sdiction is not governed by the ICC’s
decision in the CO 2 matter. Indeed, the Supreme Court has ruled that federal agencies are not precluded from changing their positions on the issue of regulatory jurisdiction. According to the Court, “an initial agency interpretation is not instantly carved in stone. On the contrary, the agency , to engage in informed rulemaking, must consider varying interpretations and the wi sdom of its policy on a continuing basis.” 34 Accordingly, regulation of CO 2 pipelines for CCS purposes by the STB (or by FERC, for that matter) under existing statutes remains a possibility.

**Policy Implications for Rate Regulation.**  If CCS technology develops to the point where interstate CO 2pipelines become more common, and if FERC and the STB continue to disclaim jurisdiction over CO 2pipelines, then the absence of federal regulation described above may pose policy challenges. In particular, with many more pipeline users and interconnections than exist today, complex common carrier issues might arise. 35 One potential concern, for example, is whether rates should be set separately for existing pipelines carrying CO 2as a valuable commercial commodity (e.g., for EOR), vers us new pipelines carrying CO 2 as industrial pollution for disposal. Furthermore, if rates are notreviewed prior to pipeline construction, it might be difficult for regulators to ensure the reasonableness of CO 2pipeline rates until after the pipelines were already in service. If CO 2pipeline connections become mandatory under future regulations, such arrangements might expose pipeline users to abuses of potential market power in CO 2pipeline services, at least until rate cases could be heard. Presiding over a large number of CO 2rate cases of varying complexity in a relatively short time frame might also be administratively overwhelming for state agencies, which may have limited resources available for pipeline regulatory activities.CRS-10

36 18 C.F.R. § 157.

37 National Commission on Energy Policy, Siting Critical Energy Infrastructure: An Overview of N eeds and Challenges . (Washington, DC: June 2006): 9. (Hereafter referred to as NCEP 2006.)

38 Partha S. Chaudhuri, Michael Murphy, a nd Robert E. Burns, “Commissioner Primer: Carbon Dioxide Capture and Storage” (National Regulatory Research Institute, Ohio State Univ., Columbus, OH: Mar. 2006): 17. **Siting Authority.** A company seeking to construct a CO 2 pipeline must secure siting approval fro m the relevant regulatory authoritie s and must subsequently secure rights of way from landowners along the pipeline right by purchasing easements or by eminent domain. However, since federal agencies claim no regulatory authority with respect to CO 2pipeline construction, pot ential builders of new CO 2 pipelines do not require, and could not obtain, federal approval to constr uct new pipelines. Likewise, federal regulators claim no eminent domain authority for pipeline construction, and so cannot ensure that pipe line companies can secure rights of way to construct new pipelines. By contrast, companies seeking to build interstate natural

gas pipelines must first obtai n certificates of public c onvenience and necessity from

FERC under the Natural Gas Act (15 U.S.C. §§ 717, et seq.) . Such certification may include safety and security provisions w ith respect to pipeline routing, safety

standards and other factors. 36 A certificate of public convenience and necessity granted by FERC (15 U.S.C. § 717f(h )) confers eminent domain authority.

The state-by-state siting approval process for CO 2pipelines may be complex and protracted, and may face public opposition, especially in populated or environmentally sensitive areas. As the National Commission on Energy Policy (NCEP) states in its 2006 report: 37

Recent developments notwithstanding, most new energy projects are still regulated primarily at the state level and public opposition remains inextricably intertwined with local concerns, includi ng environmental and ecosystem impacts as well as, in some cases, complex issues of property rights and competing land uses.... In some cases, upstream or dow nstream infrastructure requirements — such as the need for ... underground carbon sequestration sites ... may generate as much if not more opposition than the energy facilities they support. At the same time — and despite recent moves toward consolidated oversight by FERC or other regulatory authorities — fragmented permitting processes, nonstandard permitting requirements, and interagency redundancy often s till compound s iting challenges.

Securing rights of way along existing eas ements for other in frastructure (e.g., natural gas pipelines, electric transmission lines) may be one way to facilitate the siting of new CO 2 pipelines. However, existing eas ements may be ambiguous as to the right of the easement holder to install and operate CO 2pipelines. Questions may also arise as to compensation for landowne rs or easement holders for use of such easements, and as to whether existing eas ements can be sold or leased to CO 2 pipeline companies. 38 A related issue is whether state condemnation laws, which are often used to secure sites for infrastructure deemed to be in the public interest, allow

for CO 2pipelines to be treated as public utilities or common carriers. This issue also

arises on federal lands mana ged by the Bureau of Land Management (BLM). NewCRS-11

39 U.S. Dept. of the Interior , Bureau of Land Management, Environmental Assessment for Anadarko E&P Company L.P. Monell CO 2 Pipeline Project , EA #WY-040-03-035 (Feb. 2003): 71.

40 Chaudhuri et al: 17.

41 NCEP 2006: 9.

42 IOGCC 2005: 41.

43 S.M. Frailey, R.J. Finlay, and T.S. Hickman, “CO 2 Sequestration: Storage Capacity Guideline Needed,” Oil & Gas Journal (Aug. 14, 2006): 44.

44 Massachusetts v. EPA ; at [http://www.supremecourtus.gov/opinions/06pdf/05- 1120.pdf]. (continued...) CO 2 pipelines through BLM lands potentia lly may be sited under right of way provisions in either the Federal Land Policy and Management Act (FLPMA; 43 U.S.C. § 35) or the Mineral Leasing Ac t (MLA; 30 U.S.C. § 185). However, the MLA imposes a common carrier requirementwhile the FLPMA does not. Although the agency currently permits CO 2pipelines for EOR under the MLA, 39 CO 2 pipeline companies seeking to avoid common carri er requirements unde r CCS schemes may litigate to secure rights of way under FLPMA. 40Provisions in P.L. 110-140 require the Secretary of the Interior to recomme nd legislation to clarify the appropriate framework for issuing CO 2pipeline rights-of-way on federal land (Sec. 714(7)).

Another complicating factor in the siting of CO 2pipelines for CCS is the types of locations of existing CO 2sources. Although a network of long-distance CO 2 pipelines exists in the United States today for EOR, these pipelines are sited mostly in remote areas accustomed to the presence of large energy infrastructure. However, many potential sources of CO 2 , such as power plants , are located in populated regions, many with a history of public resistance to the siting of energy infrastructure. If a widespread CO 2 pipeline network is required to support CCS, the ability to site pipelines to serve such facilities may become an issue requiring congressional attention. As the NCEP concluded, “In sum, it seems probable that the siting of critical infrastructure will continue to present a major challenge for policymakers.” 41



### Commodity vs. Pollutant Classification

Under a comprehensive CCS policy, captured CO 2arguably could be classified as either a commodity or as a pollutant. CO 2used in EOR is considered to be a commodity, and is regulated as such by the states. Because captured CO 2 may be sold as a valuable commodity for EOR, and may have further economic potential for enhanced recovery of coal bed methane (ECBM), some argue that all CO 2under a CCS scheme should be classified as a commodity. 42 However, it is unlikely that the quantities of CO 2 captured under a widely impleme nted CCS policy could all be absorbed in EOR or ECBM applications. In the long run, significant quantities of captured CO 2 will have to be disposed as industrial pollution, with negative

economic value. 43 Furthermore, on April 2, 2007, the U.S. Supreme Court held that the Clean Air Act gives the U.S. Environmental Protection Agency (EPA) the authority to regulate greenhous e gas emissions, including CO 2 , from new motor
vehicles. 44 The court also held that EPA ca nnot interpose policy considerations toCRS-12

44 (...continued) For further information see CRS Report RL33776, Clean Air Issues in the 110 th Congress: Climate Change, Air Quality Standards, and Oversight , by James E. McCarthy.

45 U.S. Environmental Protection Agency , memorandum (July 5, 2006). Available at [http://www.epa.gov/OGWDW/uic/pdfs/memo_wells_sequestration_7-5-06.pdf].

46 MIT 2007: xi.

47 Eric Williams et al. (2007): 20. refuse to exercise this authority. Whilethe specifics of EPA regulation under this ruling might be subject to agency discre tion, it has implications for the regulation of

CO 2 emissions from stationary s ources, such as power plants.

Separately, EPA has also concluded that geologic sequestration of captured CO 2 through well injection meets the defin ition of “underground injection” in § 1421(d)(1) of the Safe Drinking Water Act (SDWA). 45 EPA anticipates protecting underground sources of drinking water, through its authority under the SDWA, from “potential endangerment” as a re sult of underground injection of CO 2in anticipated CCS pilot projects. EPA’s assertion of authority under SDWA for underground injection of CO 2during CCS pilot studies may contribute to uncertainty over future
classification of CO 2as a commodity or a pollutant.

Conflicting classification of captured CO 2as either a commodity or pollutant has important implications for CO 2pipeline development. For example, classifying
all CO 2as a pollutant not only would contradi ct current state and BLM treatment of

CO 2 for EOR, but might also undermine an interstate commerce rationale for FERC regulation of CO 2 pipelines. On the other hand, classifying all CO 2as a commodity would create other policy contradictions, for example, in regions like New England where EOR may be impracticable. Under either scenario, legislative and regulatory ambiguities would arise — especially for an integrated, interstate CO 2pipeline network carrying a mixture of “commodity” CO 2and “pollutant” CO 2 . Resolving these ambiguities to establish a consistent and workable CCS policy could likely be an issue for Congress.



### Pipeline Costs

If an extensive network of pipelines is required for CO 2transportation, pipeline costs may be a major consideration in CCS policy. MIT es timated overa ll annualized pipeline transportation (and storage) cost s of approximately $5 per metric ton of

CO 2 . 46 If CO 2 sequestration rates in the United States were on the order of 1 billion metric tons per year at mid-century, as some analysts propose, annualized pipeline

costs would run into the billions of dollars. Furthermore, becausemost pipeline costs are initial capital costs, up-front capital outlays for a new CO 2pipeline network would be enormous. The 2007 Duke study , for example, estimated it would cost approximately $5 billion to construct a CO 2trunk line along existing pipeline rights of way to transport captured CO 2from North Carolina to potential sequestration sites in the Gulf states and Appalachia. 47 Within the context of overall CO 2 pipeline costs, several specific cost-related issues may warrant furthe r examination by Congress.CRS-13

48 N. Parker, “Using Natural Gas Transmission Pipeline Costs to Estimate Hydrogen Pipeline Costs,” UCD-ITS-RR-04-35, Inst. of Tr ansportation Studies, Univ. of California (Davis, CA: 2004): 1. [http://hydrogen.its.ucdavi s.edu/people/ncparker/papers/pipelines]; see, also, G. Heddle, H. Herzog, and M. Klett, “The Economics of CO 2 Storage,” MIT LFEE
2003- 003 RP (Laboratory for Energy and the Environment, MIT, Cambridge, MA: Aug. 2003). [http://lfee.mit.edu/public/LFEE_2003-003_RP.pdf]

49 MIT 2007: 58.

50 N. Parker (2004): Fig. 23. **Materials Costs.** Analysts commonly develop cost estimates for CO 2 pipelines based on comparableconstruction costs for natu ral gas pipelines, and to a lesser extent, petroleum produc t pipelines. In most cases, these comparisons appear appropriate since CO 2 pipelines are similar in design and operation to other pipelines, especially natural gas pipelines. A University of California (UC) study analyzing the costs of U.S. transmission pipelines constructed between 1991 and 2003 found that, on average, labor accounted for approximate ly 45% of the total construction costs. Materials, rights of way, and miscellaneous costs accounted for 26%, 22%, and 7% of total costs, respectively. 48 Materials cost was most closely dependent upon pipeline size, accounting for an increasing fraction of the total cost with increasing pipeline size, from 15% to 35% of total costs. The MIT study estimated that transportation of captured CO 2from a 1 gigawatt coal-fired power plant would require a pipe diam eter of 16 inches. 49 According to the UC analysis, total construction costs for such a pipe between 1991 and 2003 averaged around $800,000 per mile (in 2002 dollars), although the study stated that costs for any individual pipeline could vary by a factor of five depending its location. 50

Source: Preston Pipe & Tube Report . Pipe prices represent average transaction price (by weighted average value) for double-submerged arc-welded pipe > 24” diameter, combining domestic and import shipments. Prices are reported through October 2007.

Since pipeline materials make up a significant portion of CO 2pipeline construction costs, analysts have called attention to rising pipeline materials costs, **$200 $400**  **$600 $800**  **$1,000 $1,200**  **$1,400 $1,600** 

**Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Price per Ton**  **Figure 2. U.S. Prices for Large Diameter Steel Pipe**CRS-14

51 IPCC 2005: 27.

52 See CRS Report RL32333, Steel: Price and Policy Issues , by Stephen Cooney.

53 Michael Cowden, “A Profus ion of New Pipeline Projec ts and Profits... for Now,”

American Metal Market (January 2008): 18; Global Insight, Steel Industry Review(2nd Qtr. 2006), tabs. 1.11-1.12; and American Metal Market , “West Sees More Steel Plate But Prices Holding Ground” (Aug. 31, 2006).

54 In market-based states, cost reco very may affect electricity markets. especially steel costs, as a concern for policymakers. 51 Following a period of low steel prices and company bankruptcies earlier in the decade, the North American steel industry has returned to profitability and enjoys strong domes tic and global demand. 52 Now, higher prices resulting from both strong demand and increased production costs for carbon steel plate, used in making large-diameter pipe, may alter the basic

economics of CO 2pipeline projects and CCS schemes overall. As Figure 2 shows, the price of large-diameter pipe was generally around $600 per ton in late 2001 and early 2002. By late 2007, the price of pipe was approaching $1,400 per ton. Analysts forecast carbon steel prices to decline over th e next two years, but only gradually, and to a level still more than double the price early in the decade. 53

If some form of CCS is effectively mandated in the future, a surge in demand

for new CO 2 pipe, in competition with demand for natural gas and oil pipelines, may exacerbate the trend of rising prices for pipeline materials, and could even lead to shortages of pipe steel from North American sources. As a consequence, the availability and cost of pipeline steel to build such a CO 2pipeline network for CCS may be a limiting factor for widespread CCS implementation.

**Cost Recovery.** In states where traditional rate regulation exists,

construction and operation of CO 2pipelines for CCS could raise questions about cost recovery for electric utilitie s under state utility regulati on. If, for example, a CO 2 pipeline is constructed for the exclusive us e of a single power plant for on-site (or nearby) CO 2sequestration, and is owned by th e power plant owners, it logically could be considered an extension of the plant itself. In such cases, the CO 2pipelines could be eligible for regulated returns on the invested capital and their costs could be recovered by utilities in electricity rates. Alternatively such a CO 2pipeline could be owned by third parties and considered a non-plant asset providing a transportation service for a fee. In the latter case, the costs could still be recovered by the utility in its rates as an operating cost.

Two complications arise with respect to pipeline cost recovery. First, because utility regulation varies from state to state (e.g., some states allow for competition in electricity generation, others do not), 54 differences among states in the economic regulation of CO 2 pipelines could create economic inefficiencies and affect the

attractiveness of CO 2 pipelines for capital i nvestment. Second, if CO 2transportation

infrastructure is intended to e volve from shorter, stand-alone, intra state pipelines into

a network of interconnected inter state pipelines, pipeline operators wishing to link

CO 2 pipelines across state lines may face a regulatory environment of daunting complexity. Without a coherent sy stem of economic regulation for CO 2pipelines, whether as a commodity, pollutant, or so me other classification, developers ofCRS-15

55 For further information of electric transmission regulation, see CRS Report RL33875,
Electric Transmission: Approaches for Energizing a Sagging Industry , by Amy Abel.

56 Unfortunately for EOR investors, while this tax credit is part of current federal tax law, its phaseout provisions mean that presently it is not available — the credit is zero — due to high crude oil prices. interstate CO 2pipelines may need to negotiate or litigate repeatedly issues such as siting, pipeline access, terms of service, and rate “pancaking” (the accumulation of transportation charges assesse d by contiguous pipeline ope rators along a particular transportation route). It is just these ki nds of issues which have complicated and impeded the integration of individual utility electric transmission systems into larger regional transmission networks. 55

**CO 2**  **Pipeline Incentives.** Oil industry representatives frequently point to EOR as offering a market-b ased model for profitable CO 2transportation via pipeline. It should be noted, however, that much of the existing CO 2pipeline network in the

United States for EOR has been established with the benefit of federal tax incentives. Although current federal tax law provides no special or targeted tax benefits specifically to CO 2 pipelines, investments in CO 2pipelines do benefit from tax provisions targeted for EOR. They also benefit from accelerated depreciation rules, which apply generally to any capital inves tment including petrol eum and natural gas (non-CO 2 ) pipelines. For example, the Inte rnal Revenue Code provides for a 15%

income tax credit for the costs of recoveri ng domestic oil by oneof nine qualified EOR methods, including CO 2injection (I.R.C. § 43). 56 Also, extraction of naturally occurring CO 2 may qualify for percentage depl etion allowance under I.R.C. § 613(b)(7). Prior federal law, both tax and nontax, also provided various types of

incentives for EOR which stimulated investment in CO 2pipelines. In particular, oil produced from EOR projects was exempt from oil price controls in the 1970s. Development of CO 2 pipeline infrastructure in the 1980s benefitted from tax advantages to EOR oil under the crude o il windfall profits tax law, which was in effect from March 1980 to August 1988.

Although there were never incentives explicitly for CO 2 pipelines under federal tax and price control regulation in the 1970s and 1980s, it is clear that CO 2 pipeline infrastructure development benefitted from these regulations. In a CCS environment where some captured CO 2is a valuable commodity, but the remainder is not, establishing similar regulatory incentives for CO 2pipelines becomes complex. One initial proposal in S. 2149 would a llow seven-year accelerated depreciation for qualifying CO 2 pipelines constructed after enactment (Sec. 4) . As debate continues
about the economics of CO 2capture and sequestration ge nerally, and how the federal government can encourage CCS infrastru cture investment, Congress may seek to understand the implications of CCS incentives specifically on CO 2pipeline development.

**Cost Implications for Network Development.** In light of the overall costs
associated with CO 2 pipelines, including the uncertain ty about future materials costs and cost recovery, some analysts anticipate that a CO 2network for CCS will begin with shorter pipelines from CO 2sources located close to sequestration sites. Larger

CO 2 trunk lines are expected to emerge to capture substantial scale economies inCRS-16

57 Ibid., MIT. (2007): 59.

58 John Gale and John Davidson, “Transmission of CO 2 — Safety and Economic Considerations,” Energy, Vol. 29, Nos. 9-10 (July-August 2004): 1326.

59 IPCC 2005: 190.

60 For further discussion see CRS Report RL34316, Pipelines for Carbon Dioxide (CO2)
Control: Network Needs and Cost Uncertainties , by Paul W. Parfomak and Peter Folger.

61 J. Barrie, K. Brown, P.R. Hatcher, and H.U. Schellhase, “Carbon Dioxide Pipelines: A Preliminary Review of Design and Risks,” Pr oceedings of the 7th International Conference on Greenhouse Gas Control Technologies (V ancouver, Canada: Sept. 5-9, 2004): 2. long-distance pipeline transportation. According to the 2007 MIT report, “it is anticipated that the first CCS projects will involve plants that are very close to a sequestration site or an existing CO 2pipeline. As the number of projects grow, regional pipeline networks will likely evolve.” 57 It is debatable, however, whether piecemeal growth of a CO 2pipeline network in this wa y, presumably by individual facility operators seeking to minimize their own costs, would ultimately yield an economically efficient and publically acceptable CO 2pipeline network for CCS. Weaknesses and failures in the North American electric power transmission grid, which was developed in this manner, may be one example of how piecemeal,
uncoordinated network development may fail to satisfy key economic and operating objectives.

As an alternative to piecemeal CO 2pipeline development, some analysts suggest that it may be more cost effective in the long run to build large trunk pipelines when

the first sites with CO 2capture come on line with the expectation that subsequent users could fill the spare capacity in the trunk line. In add ition to lower per-unit transport costs for CO 2 , such an arrangement would smooth out potentially
intermittent CO 2flows from individual capture sites (especially discontinuously operated power plants), provide a greater buffer for overall CO 2supply fluctuations, and generally allow for more operational flexibility in the system. 58 Planning and financing such a CO 2trunk line system would present its own challenges, however. As another analysis points out, “implement ation of a ‘backbone’ transport structure may facilitate access to large re mote storage reservoirs, but infrastructure of this kind will require large initial upfront investment decisions.” 59 How a CO 2network for CCS would be configured, and who would configure it, may be issues for Congress. 60



### CO **2** 

### Pipeline Safety

CO 2occurs naturally in the atmosphere, and is produced by the human body during ordinary respiration, so it is comm only perceived by the general public to be a relatively harmless gas. However, at concentrations above 10% by volume, CO 2 may cause adverse health effects and at c oncentrations above 25% poses a significant asphyxiation hazard. Because CO 2is colorless, odorless, and heavier than air, an uncontrolled release may accumulate and re main undetected near the ground in lowlying outdoor areas, and in confined spaces such as caverns, tunnels, and basements. 61 Exposure to CO 2gas, as for other asphyxiates , may cause rapid “circulatoryCRS-17

62 Airco, Inc., “Carbon Dioxide Gas,” Material Safety Data Sheet (Aug. 4, 1989). [http://www2.siri.org/msds /f2/byd/bydjl.html]

63 Kevin Krajick, “Defusing Africa’s Killer Lakes,” Smithsonian , v. 34, n. 6. (2003): 46 —
55.

64 PHMSA succeeds the Research and Special Programs Administration (RSPA), reorganized under P.L. 108-246, which was signed by the President on Nov. 30, 2004.

65 Office of Pipeline Safety (OPS), “Distribution, Transmi ssion, and Liquid Accident and Incident Data,” (2007). OPS has not yet rele ased 2007 incident statistics. Data files available at [http://ops.dot.gov/stats/IA98.htm].

66 John Gale and John Davidson. (2004): 1322.

67 Barrie et al. (2004): 2.

68 Gale and Davidson (2004): 1321. insufficiency,” coma, and death. 62Such an event occurred in 1986 in Cameroon, when a cloud of naturally-occurring CO 2spontaneously released from Lake Nyos killed 1,800 people in nearby villages. 63

The Secretary of Transportation has primary authority to regulate interstate CO 2 pipeline safety under the Hazardous Liqui d Pipeline Act of 1979 as amended (49 U.S.C. § 601). Under the act, the Departme nt of Transportation (DOT) regulates the design, construction, operation and maintenance, and spill response planning for CO 2 pipelines (49 C.F.R. § 190, 195-199). Th e DOT administers pipeline regulations through the Office of Pipeline Safety (O PS) within the Pipelines and Hazardous Materials Safety Administration (PHMSA). 64 Although CO 2is listed as a Class 2.2 (non-flammable gas) hazardous material under DOT regulations (49 C.F.R. § 172.101), the agency applies nearly th e same safety re quirements to CO 2pipelines as it does to pipelines carrying hazardous li quids such as crude oil, gasoline, and anhydrous ammonia (49 C.F.R. § 195).

To date, CO 2 pipelines in the United States have experienced few serious accidents. According to OPS statistics, there were 12 leaks from CO 2pipelines reported from 1986 through 2006 — none resu lting in injuries to people. By contrast, there were 5,610 accidents causing 107 fatalities and 520 in juries related to natural gas and hazardous liquids (excluding CO 2 ) pipelines during the same period. 65

It is difficult to draw firm conclusi ons from these accident data , because CO 2 pipelines account for less than 1% of total natural gas and hazardous liquids pipelines, and CO 2 pipelines currently run primarily through remote areas. Based on the limited sample of CO 2incidents, analysts conclude that, mile-for-mile, CO 2 pipelines appear to be safer than the other types of pipelin e regulated by OPS. 66 Additional measures, such as adding gas odorants to CO 2to aid in leak detection, may further mitigate CO 2pipeline hazards. Nonetheless, as the number of CO 2 pipelines expands, analysts suggest that“statistically, the number of incidents involving CO 2should be similar to those for natural gas transmission.” 67 If the

nation’s CO 2 pipeline network expands signifi cantly to support CCS, and if this expansion includes more pipelines near populated areas, more CO 2pipeline accidents are likely in the future. 68CRS-18

69 “Shell, Olympic Socked for Pipeline Accident,” Energy Daily (Jan. 22, 2003).

70 John Heilprin, “Ashcroft Promises Increase d Enforcement of Environmental Laws for Homeland Security,” Assoc. Press , Washington dateline (Mar. 11, 2003).

71 Business Editors, “Olympic Pipe Line, Others Pay Out Record $75 Million in Pipeline Explosion Wrongful Death Settlement,” Business Wire (April 10, 2002).

72 National Transportation Safety Board, Pipeline Accident Report, PAR-03-01. (Feb. 11, 2003).

73 El Paso Corp., Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, Form 10-Q, Period ending June 30, 2002. (Houston, TX: 2002). The impact of these lawsuits on the company’s business is unclear, however; the report states that “our costs and legal exposure ... will be fully covered by insurance.”

74 MIT 2007: 58.

75 An example is the Gwinville, MS-Lake St. John, LA natural gas pipeline purchased by (continued...) **Criminal and Civil Liability.** There are no special provisions in U.S. law protecting the CO 2pipeline industry from criminal or civil liability. In January 2003, the Justice Department announced over $100 million in civil and criminal penalties against Olympic Pipeline and Shell Pipeline resolving claims from a fatal gasoline pipeline fire in Bellingham, WA, in 1999. 69 In March 2003, emphasizing the environmental aspects of homeland secu rity, Attorney General John Ashcroft reportedly announced a crackdown on companie s failing to protect against possible terrorist attacks on storage tanks, trans portation networks, i ndustrial plants, and pipelines. 70

Even if no federal or state regulations are violated, CO 2pipeline operators could still face civil liability for personal injury or wrongful death in the event of an accident. In the Bellingham accident, the pipeline owner and a ssociated defendants reportedly agreed to pay a $75 million settlement to the fam ilies of two children

killed in the accident. 71 In 2002, El Paso Corporation se ttled wrongful death and personal injury lawsuits stemming from a natural gas pipeline explosion near Carlsbad, NM, which killed 12 campers. 72 Although the terms of those settlements were not disclosed, two additional lawsuits soug ht a total of $171 million in damages. 73 The MIT study concluded that operational liability for CO 2pipelines, as part of an integrated CCS infrastructure, “can be managed within the framework that has been successfully used for decades by the oil and gas industries.” 74 Nonetheless, as CCS policy evolves, Congress may seek to ensure that liability provisions for CO 2 pipelines are adequate and consistent with liability provisions in place for other CO 2 infrastructure.



### Other Issues

In addition to the issues discussed above , additional policy i ssues related to CO 2 pipelines may arise as CCS policy evolves. These may include addressing technical transportation problems related to the presence of othe r pollutants, such as sulfuric and carbonic acid, in CO 2 pipelines. Some have also suggested the use or conversion of existing non-CO 2 pipelines, such as natural gas pipelines, to transport CO 2 . 75CRS-19

75 (...continued) Denbury Resources, Inc. in 2006 and converted to CO 2 transportation for EOR in 2007. Coordination of U.S. CO 2 pipeline policies with Canada, with whom the United States shares its existing pipeline infrastru cture, may also become a consideration. Finally, the potential impacts of CO 2pipeline development overseas on the global availability of construction skills and materials may arise as a key factor in CCS economics and implementation.



## Conclusion

Policy debate about the mitig ation of climate change through some scheme of carbon capture and sequestration is expandi ng quickly. To date, debate among legislators has been focused mostly on CO 2sources and storage sites, but CO 2 pipelines are a vital connecti on between the two. Although CO 2transportation by pipeline is in some respects a mature technology, there are many important unanswered questions about th e socially optimal configur ation, regulation, and costs
of a CO 2pipeline network for CCS. Furthermore, because CO 2pipelines for EOR are already in use today, policy decisions affecting CO 2pipelines take on an urgency that is, perhaps, unrecognized by many. It appears, for example, that federal

classification of CO 2as both a commodity (by the BLM) and as a pollutant (by the EPA) potentially could create an immediate conflict which may need to be addressed not only for the sake of future CCS impleme ntation, but also to ensure consistency between future CCS and today’s CO 2pipeline operations.

In addition to these issues, Congress may examine how CO 2pipelines fit into the nation’s overall strategies for energy supply and environmen tal protection. The
need for CO 2pipelines ultimately derives from the nation’s consumption of fossil fuels. Policies affecting th e latter, such as energy c onservation, and the development of new renewable, nuclear, or hydrogen en ergy resources, could substantially affect the need for and configuration of CO 2pipelines. If policy makers encourage continued consumption of fossil fuels under CCS, then the need to foster the other energy options may be diminished — and vice versa. Thus decisions about CO 2 pipeline infrastructure could have consequences for a broader array of energy and environmental policies.