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66–578 PDF 2011

S. HRG. 112–22 

CARBON CAPTURE AND 

SEQUESTRATION LEGISLATION 

HEARING 

BEFORE THE

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

TO

RECEIVE TESTIMONY ON CARBON CAPTURE AND SEQUESTRATION 

LEGISLATION, INCLUDING S. 699 AND S. 757 

MAY 12, 2011 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 
(II) 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

JEFF BINGAMAN, New Mexico, Chairman 

RON WYDEN, Oregon 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

MARIA CANTWELL, Washington 

BERNARD SANDERS, Vermont 

DEBBIE STABENOW, Michigan 

MARK UDALL, Colorado 

JEANNE SHAHEEN, New Hampshire 

AL FRANKEN, Minnesota 

JOE MANCHIN, III, West Virginia 

CHRISTOPHER A. COONS, Delaware 

LISA MURKOWSKI, Alaska 

RICHARD BURR, North Carolina 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

MIKE LEE, Utah 

RAND PAUL, Kentucky 

DANIEL COATS, Indiana 

ROB PORTMAN, Ohio 

JOHN HOEVEN, North Dakota 

BOB CORKER, Tennessee 

ROBERT M. SIMON, Staff Director 

SAM E. FOWLER, Chief Counsel 

MCKIE CAMPBELL, Republican Staff Director 

KAREN K. BILLUPS, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS 

Page 

Barrasso, Hon. John, U.S. Senator From Wyoming ............................................. 2 

Bingaman, Hon. Jeff, U.S. Senator From New Mexico ........................................ 1 

Greenberg, Sallie E., Assistant Director, Advanced Energy Technology Initiative, Illinois State Geological Survey, Champaign, IL ...................................... 8 

Klara, Scott, Deputy Laboratory Director, National Energy Technology Laboratory, Department of Energy ........................................................................... 3 

Lubbon, Ben, Managing Director, Jude Benedict & Associates ........................... 36 

Trabucchi, Chiara, Principal, Industrial Economics Incorporated, Cambridge, 

MA ......................................................................................................................... 14 

Watson, Matt, Senior Energy Policy Manager, Environmental Defense Fund .. 10 

APPENDIX 

Responses to additional questions .......................................................................... 39 

(1) 

CARBON CAPTURE AND 

SEQUESTRATION LEGISLATION 

THURSDAY, MAY 12, 2011 

U.S. SENATE, 

COMMITTEE ON ENERGY AND NATURAL RESOURCES, 

Washington, DC. 

The committee met, pursuant to notice, at 9:03 a.m. in room SD– 

366, Dirksen Senate Office Building, Hon. Jeff Bingaman, chairman, presiding. 

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. 

SENATOR FROM NEW MEXICO 

The CHAIRMAN. I’d like to welcome everyone here and thank the 

witnesses for coming to testify this morning. 

This is a hearing on two bills, S. 699 and S. 757. These 2 bills 

both focus on important aspects of carbon capture and storage that 

Senator Barrasso and I have been working on together in this Congress but also in the previous Congress. 

S. 699 focuses on creating a long term liability program that 

would incentivize large scale early mover deployment of integrated 

geologic carbon capture and storage. 

S. 757 is a bill that focuses on creating a technology prize for the 

successful demonstration of carbon dioxide capture from dilute 

sources such as the air. The topic of reducing greenhouse gases, 

particularly carbon dioxide emissions is a great concern to me and 

to other members of this committee. Carbon capture and geologic 

storage holds promise as a measure that can be used to mitigate 

a changing global climate while still allowing the use of fossil fuels 

at electric generating plants and industrial facilities such as steel 

manufacturing and cement plants. With discussion centered on coal 

use in a carbon constrained world integrated carbon capture and 

storage systems may represent the most immediate solution for 

continued use of coal and other carbon intensive fuels while not 

contributing further to carbon dioxide emissions and global warming. 

These two bills were introduced in the 111th Congress. We successfully passed them out of committee with a strong bipartisan 

vote. We’re here today to receive testimony and update the record 

in the 112th Congress. 

I’d like to welcome our panel of experts before hearing from 

them. Let me turn to Senator Barrasso for any opening comments 

he has. 
2 

STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR 

FROM WYOMING 

Senator BARRASSO. Thank you very much, Mr. Chairman. I want 

to thank you personally for your leadership on carbon capture and 

sequestration. I’m privileged to be an original co-sponsor of your 

Carbon Capture and Sequestration Liability bill. 

Uncertainty over liability is a major impediment to carbon capture and sequestration deployment. This bill will address that 

question for the first ten projects. I believe it’s a very important 

step. 

When it comes to carbon sequestration issues the State of Wyoming is a national leader. The Wyoming legislature enacted laws 

creating the legal framework for carbon sequestration. The Wyoming State Geological Survey has identified and characterized 

sequestrationsites within the State. 

The University of Wyoming is partnering with the private sector 

to develop innovative technologies. Wyoming has a long history as 

an energy producing State. We can use this knowledge and experience to make carbon sequestration a reality. There are steps, 

though, that the Federal Government must take first. That includes addressing the issue of liability. 

My direct air capture bill, the Carbon Dioxide Capture Technology Act is also on today’s agenda. I’d like to thank you, Mr. 

Chairman, for partnering with me on this legislation. This bill 

takes a fresh approach to the issue of excess carbon dioxide. It 

would create a prize system for developing technology that directly 

removes CO2 from the atmosphere. 

An article 2009 in the Economist, lays out the issue clearly. 

Some researchers think there might be a simpler way to reduce the 

level of CO2 in the atmosphere, it says. To build air capture machines that as their name suggests grab it from the air. 

It goes on to say in some respects this is a more ambitious 

version of the carbon capture and sequestration technology. Air 

capture has the further advantage that it can be done anywhere, 

not just in places where carbon dioxide is being emitted such as 

power stations. So, Mr. Chairman, rather than focusing on solutions that impose costly regulations or taxes, this bill focuses solely 

on innovation. 

So I look forward to hearing the analysis and suggestions from 

today’s panel. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. I know Senator Franken has some 

other hearings he’s going to have to leave and go to at some point. 

So let me just see if he had anything he wanted to say at this early 

point. 

Senator FRANKEN. Not at this moment. This would be—if we can 

do this it’d be a really helpful way to address climate change. So, 

I’m looking forward to the testimony. 

Thank you. Thank all the witnesses for being here today. 

The CHAIRMAN. Alright. Why don’t we start? Let me introduce all 

of our witnesses. 

Mr. Scott Klara is the Deputy Director of the National Energy 

Technology Laboratory in Pittsburgh. Thank you for being here. 
3 

Miss Sallie Greenberg is the Assistant Directory with the Advanced Energy Technology Initiative at Illinois State Geologic Survey. Thank you for being here. 

Mr. Matt Watson is a Senior Energy Policy Manager with the 

Environmental Defense Fund. Thank you for coming. 

Ms. Chiara Trabucchi, is that reasonably accurate? Thank you 

for being here. She is the Principal and Chief Financial Officer 

with the Industrial Economics Incorporated in Cambridge, Massachusetts. 

Alright. Please let’s just have you go in that order, if you would. 

Give us 5 minutes or so of the main points we need to understand 

about your views on these 2 pieces of legislation. 

Mr. Klara. 

STATEMENT OF SCOTT KLARA, DEPUTY LABORATORY DIRECTOR, NATIONAL ENERGY TECHNOLOGY LABORATORY, DEPARTMENT OF ENERGY 

Mr. KLARA. Thank you, Chairman Bingaman, Ranking Member 

Barrasso and other members of the committee. I appreciate the opportunity to discuss the department’s activities to promote the development of carbon capture and storage technologies. I will refer 

to this as CCS throughout my remarks. 

My testimony will provide an overview of the department’s research efforts in developing CCS technologies. The administration 

is still reviewing the specifics of these 2 bills and doesn’t have a 

formal position at this time. 

Before I discuss the department’s clean coal research program or 

CCS activities, I will briefly review the conclusions from the Interagency Task Force on CCS. In August 2010 the final report from 

the Task Force was issued summarizing the administration’s efforts to develop and deploy CCS technologies and the proposed 

plans to overcome the barriers for widescale deployment in 10 

years with a goal of bringing at least 5 to 10 commercial demonstrations online by 2016. 

The report is the collective work of 14 executive departments and 

Federal agencies which were tasked with developing a comprehensive and coordinated Federal strategy to speed the commercial development and deployment of these task force—or of these technologies. The Task Force concluded while there are no insurmountable technical, legal, institutional, regulatory or other barriers that 

prevent CCS from playing a key role in greenhouse gas reduction, 

early CCS projects, as many of you know, face economic challenges 

related to climate policy uncertainty, first of a kind technology risk 

and the current high cost associated with the technologies. 

DOE continues to play a leadership role in the development of 

these technologies. The programs that we run are administered by 

the Office of Fossil Energy and implemented by the National Energy Technology Laboratory. The coal program, in partnership with 

the private sector, is focusing on 2 key aspects in development: 

maximizing efficiency and environmental performance while minimizing the costs of these technologies. 

In recent years we’ve been restructured around the CCS mission 

and focusing on a 2-prong approach. 

The first is the capture and storing of the greenhouse gases. 
4 

But second in conjunction with that an important aspect is improving the efficiency of fossil energy systems. As many of you may 

be aware, one of the key issues of carbon capture is these big efficiency penalty hits. 

The first strategy aims at concerns to reduce the greenhouse gas 

emissions from these fossil fuel systems. 

The second is to improve these fuel to energy efficiency, the system, thus reducing emissions, water use, carbon dioxide on a per 

unit energy basis. 

Collectively these 2 strategies comprise the program’s approach 

in coming up with technologies for the future. The program is addressing these technical challenges through research on cost reduction for capture, monitoring verification and accounting technologies to ensure permanent storage, permitting issues and the 

development of advanced energy systems with these high efficiency 

gains. A key aspect of the research is focusing on developing options to dramatically lower the cost of carbon capture. This research is categorized into 3 pathways: Postcombustion, 

precombustion, oxycombustion. 

These pathways provide technology diversity that will allow for 

CCS integration and nearly all current and future fossil energy 

systems. This research is exploring a wide range of approaches 

such as membranes, oxy combustion concepts, sorbents and gas liquid scrubbing. 

Another key initiative is the Regional Carbon Sequestration 

Partnerships. The Partnerships are designed to form of network of 

capability, knowledge and infrastructure to enable carbon sequestration technology to play a major role in a national strategy to 

mitigate greenhouse gas emissions. These partnerships are comprised of State agencies, universities and private companies that 

represent more than 400 unique organizations in 43 States and 4 

Canadian provinces. They also encompass regions that encompass 

97 percent of coal fired CO2 emissions, 97 percent of industrial CO2

emissions, 96 percent of land mass and essentially all of the geologic storage sites that could potentially be available for carbon sequestration. 

The success of this program and the technologies that are emerging will ultimately be judged by the extent to which they get deployed in domestic and international marketplaces. Both technical 

and financial challenges associated with these high risk technologies must be overcome. To facilitate commercialization of integrated CCS systems, the Department is pursuing many commercial 

scale demonstrations to help industry understand and overcome 

startup issues, component integration and gaining early learning 

commercial experience necessary to reduce risk. 

CCS and related coal technologies, as you’re aware, can play a 

critical role in the future of mitigating CO2 emissions. The Department’s research programs are a vital step to achieving the readiness of these technologies for these future deployments. I thank 

this committee and its members for allowing me the opportunity to 

provide remarks today. I look forward to our discussion. 

Thank you. 

[The prepared statement of Mr. Klara follows:] 
5 

1 Cost and Performance Baseline for Fossil Energy Plants, Volume 1: Bituminous Coal and 

Natural Gas to Electricity, U.S. Department of Energy/National Energy Technology Laboratory, 

DOE/NETL-2007/1281, Final Report, May 2007. 

PREPARED STATEMENT OF SCOTT KLARA, DEPUTY LABORATORY DIRECTOR, NATIONAL

ENERGY TECHNOLOGY LABORATORY, DEPARTMENT OF ENERGY

Thank you Chairman Bingaman, Ranking Member Barrasso, and members of the 

Committee; I appreciate the opportunity to discuss the Department of Energy’s activities to promote the development of carbon capture and storage (CCS) technologies. 

My testimony will provide an overview of the Department of Energy’s (DOE) research efforts in developing CCS technologies. The Administration is still reviewing 

S. 699 and S. 757 and does not have a position on either bill at this time. 

INTERAGENCY TASK FORCE ON CARBON CAPTURE AND STORAGE

Before I discuss the Department’s Clean Coal Research Program, I will briefly review the conclusions from the Interagency Task Force on CCS. In August 2010, the 

final report from the Task Force was issued summarizing the Administration’s efforts to develop and deploy CCS technologies, and proposed a plan to overcome the 

barriers to the widespread, cost-effective deployment of CCS within ten years, with 

a goal of bringing five to ten commercial demonstration projects online by 2016. This 

report is the collective work of 14 executive departments and federal agencies, which 

were tasked with developing a comprehensive and coordinated Federal strategy to 

speed the commercial development and deployment of clean coal technologies. The 

task force concluded that while there are no insurmountable technological, legal, institutional, regulatory or other barriers that prevent CCS from playing a role in reducing GHG emissions, early CCS projects face economic challenges related to climate policy uncertainty, first-of-a-kind technology risks, and the current high cost 

of CCS relative to other technologies. 

CLEAN COAL RESEARCH PROGRAM

DOE continues to play a leadership role in the development of clean coal technologies with a focus on CCS. The Clean Coal Research Program—administered by 

DOE’s Office of Fossil Energy and implemented by the National Energy Technology 

Laboratory—is designed to enhance our energy security and reduce environmental 

concerns over the future use of coal by developing a portfolio of revolutionary clean 

coal technologies. The Program is well positioned to help overcome the technical 

challenges associated with the development of clean coal technologies. 

The Clean Coal Program, in partnership with the private sector, is focused on 

maximizing efficiency and environmental performance, while minimizing the costs 

of these new technologies. In recent years, the Program has been restructured to 

focus on clean coal technologies with CCS. The Program pursues the following two 

major strategies: 

1) capturing and storing greenhouse gases; and 

2) improving the efficiency of fossil energy systems. 

The first strategy aims to eliminate concerns over emissions of greenhouse gases 

from fossil fueled energy systems. The second strategy seeks to improve the fuelto-energy efficiencies of these systems, thus reducing pollutant emissions, water 

usage, and carbon emissions on a per unit of energy basis. Collectively, these two 

strategies comprise the Clean Coal Program’s approach to ensure that current and 

future fossil energy plants will have options to meet all emerging requirements for 

a safe and secure energy future. 

CORE RESEARCH AND DEVELOPMENT ACTIVITIES

The Clean Coal Program is addressing the key technical challenges that confront 

the development and deployment of clean coal technologies through research on 

cost-effective capture technologies; monitoring, verification, and accounting technologies to ensure permanent storage; permitting issues; and development of advanced energy systems. The Program is also actively engaged in interagency efforts 

to address liability issues, public outreach, and infrastructure needs. As an example, 

today’s commercially available CCS technologies would add around 80 percent to the 

cost of electricity for a new pulverized coal plant, and around 35 percent to the cost 

of electricity for a new integrated gasification combined cycle plant.1 The Program 

is aggressively pursuing developments to reduce these costs to less than a 35 percent increase in the cost of electricity for pulverized coal energy plants and less than 
6 

a 10 percent increase in the cost of electricity for new gasification-based energy 

plants. 

Research is focused on developing technology options that dramatically lower the 

cost of capturing carbon dioxide (CO2) from fossil fueled energy plants. This research can be categorized into three technical pathways: post-combustion, pre-combustion, and oxycombustion. Post-combustion refers to capturing CO2 from the stack 

gas after a fuel has been combusted in air. Pre-combustion refers to a process where 

a hydrocarbon fuel is gasified to form a mixture of hydrogen and carbon dioxide, 

and CO2 is captured from the synthesis gas before it is combusted. Oxy-combustion 

is an approach where a hydrocarbon fuel is combusted in pure or nearly pure oxygen 

rather than air, which produces a mixture of CO2 and water that can easily be separated to produce pure CO2. Collectively, research in each of these technical pathways is exploring a wide range of approaches such as membranes; oxy-combustion 

concepts; solid sorbents; CO2 hydrates; and advanced gas/liquid scrubbing technologies. These efforts cover not only improvements to state-of-the-art technologies 

but also development of several revolutionary concepts, such as metal organic 

frameworks, ionic liquids, and enzymebased systems. Coupling these developments 

with other advances in efficiency improvements and cost reduction from developments in gasification, turbines, and fuel cells, will help provide a technology base 

for commercial deployment of fossil energy systems integrated with CCS. 

The Department is the primary supporter of the National Carbon Capture Center 

(NCCC), which is a joint partnership between DOE and industry. The NCCC is a 

one of a kind, world class facility which offers an opportunity to validate capture 

technologies on actual gas from a coal fired power plant or gasification facility. Because of the ability to operate under a wide range of process conditions, research 

at the NCCC can effectively evaluate technologies at various levels of maturity for 

many different applications. 

REGIONAL CARBON SEQUESTRATION PARTNERSHIPS

The Regional Carbon Sequestration Partnerships were created by the DOE in 

2003 through a competitive solicitation. The Partnerships were designed to address 

a range of issues associated with geologic storage of CO2. The Clean Coal Program 

has been performing CCS field tests focused on injection, monitoring, verification, 

accounting and other aspects of geologic storage for many years, and the seven Regional Carbon Sequestration Partnerships are critical to this effort. These Partnerships are comprised of state agencies, universities, and private companies. They represent more than 400 unique organizations in 43 States, and four Canadian Provinces. Geographic differences in fossil fuel use and potential storage sites across the 

United States dictate the use of regional approaches in addressing CCS, so each 

Partnership is focused on a specific region of the United States and Canada that 

hold similar characteristics relating to CCS opportunities. 

Together, the Partnerships form a network of capability, knowledge, and infrastructure that will help enable geologic storage technology to play a role in the clean 

energy economy. They represent regions encompassing 97 percent of coal-fired CO2

emissions, 97 percent of industrial CO2 emissions, 96 percent of the total land mass, 

and essentially all the geologic storage sites that can potentially be available for 

geologic carbon storage. 

Regional Partnerships are drilling wells and injecting small quantities of CO2 to 

validate the potential of key storage locations throughout the country. To date, the 

Regional Partnerships have injected over 1 million tons of CO2 at 18 small scale injection projects throughout the United States and Canada. These tests have helped 

to validate storage at a small scale and understand the fate of CO2 in different 

depositional systems containing saline water, oil, and natural gas. Several large 

scale projects are also underway that will inject several million tons of CO2 over the 

life of the projects. One of these projects has safely and securely injected over 2 million metric tons of CO2. Several more large-scale field tests will begin later this 

year. 

Over the course of these initiatives, DOE and the Partnerships are addressing key 

infrastructure issues related to permitting, pore space ownership, site access, liability, public outreach, and education. We are also jointly developing Best Practice 

Manuals on topics such as site characterization, site construction, operations, monitoring, mitigation, closure, and long-term stewardship. These manuals will serve as 

guidelines for a future geologic sequestration industry in their regions, and help 

transfer the lessons learned from DOE’s Program to all regional stakeholders. Finally, DOE and the Partnerships continue to work closely with the Environmental 

Protection Agency (EPA) and other federal and state agencies in developing CCS 
7 

2Details about all of the Fossil Energy projects funded by the Recovery Act can be found here: 

http://www.fossil.energy.gov/recovery/index.html. 

regulatory strategies, which will provide additional certainty for future CCS deployments. 

DEMONSTRATIONS AT COMMERCIAL-SCALE

The success of the Clean Coal Program will ultimately be judged by the extent 

to which emerging technologies get deployed in domestic and international marketplaces. Both technical and financial challenges associated with the deployment of 

new ‘‘high risk’’ coal technologies must be overcome in order to be capable of achieving success in the marketplace. Commercialscale demonstrations help the industry 

understand and overcome start-up issues, address component integration issues, 

and gain the early learning commercial experience necessary to reduce risk and secure private financing and investment for future plants. 

The Department is implementing large-scale projects through the Regional Partnerships, the Clean Coal Power Initiative (CCPI), and FutureGen. Phase III of the 

Partnerships is focused on large-scale field tests of geologic carbon sequestration on 

the order of 1 million metric tons of CO2 per year, and are addressing the liability, 

regulatory, permitting, and infrastructure needs of these projects. As described previously in this statement, the Partnerships have brought an enormous amount of 

capability and experience together to work on the challenges of these large projects. 

The CCPI is a cost-shared partnership between the government and industry to 

develop and demonstrate advanced coal-based power generation technologies at the 

commercial scale. CCPI demonstrations address the reliability and affordability of 

the Nation’s electricity supply from coal-based generation. By enabling advanced 

technologies to overcome technical risks involved with scale-up and bringing them 

to the point of commercial readiness, CCPI accelerates the development of both advanced coal generation technologies and the integration of CCS with both new and 

existing generation technologies. The CCPI also facilitates the movement of technologies into the market place that are emerging from the core research and development activities. The CCPI program received an additional $800 million from the 

2009 American Recovery and Reinvestment Act (Recovery Act) which, in combination with base funding, was used to fund four active CCPI projects, two pre-combustion and two post-combustion projects. In addition, a CCPI round II project has been 

modified to demonstrate CCS at a new integrated gasification combined cycle power 

plant. We are working closely with the project developers to comply with NEPA, air 

and water regulatory requirements, and complete initial Front End Engineering & 

Design (FEED) studies for the facilities. All five of these projects are on track to 

be operational between 2013 and 2015. 

The FutureGen Project intends to conduct novel large-scale testing to accelerate 

the deployment of a set of advanced oxy-combustion power production technologies 

integrated with CCS. This project will be the first advanced repowering oxy-combustion project to store CO2 in a deep saline geologic formation. On August 5, 2010, Secretary of Energy Steven Chu announced an award of $1 billion in Recovery Act 

funding to the FutureGen Alliance, Ameren Energy Resources, Babcock & Wilcox, 

and Air Liquide Process and Construction, Inc., to build FutureGen 2.0, a clean coal 

repowering program and carbon dioxide storage network. On February 28, 2011, the 

FutureGen Alliance selected Morgan County, Illinois, as the preferred location for 

the FutureGen 2.0 CO2 storage site, visitor center, research, and training facilities. 

In addition to the CCPI and FutureGen 2.0 projects, the Recovery Act has also 

helped fund more than 80 additional projects which includes three large scale Industrial CCS demonstrations, ten geologic site characterizations, forty-three university 

research training projects, seven CCS research training centers, six Industrial CCS 

projects focused CO2 reuse, and 14 projects focused on accelerated component development in the core research program.2

CONCLUSION

CCS and related clean coal technologies can play a critical role in mitigating CO2

emissions under many potential future carbon stabilization scenarios. Nevertheless, 

challenges remain to achieving cost-effective commercial deployment of CCS. The 

Department’s research programs are a vital step to advancing the readiness of clean 

coal technologies for future commercial deployment. I thank this Committee and its 

members for allowing me the opportunity to provide an overview of DOE’s research 

efforts in developing CCS technologies and I look forward to your questions. The Administration is still reviewing S. 699 and S. 757 and does not have a position on 

either bill at this time. 
8 

The CHAIRMAN. Thank you very much. 

Ms. Greenberg. 

STATEMENT OF SALLIE E. GREENBERG, ASSISTANT DIRECTOR, ADVANCED ENERGY TECHNOLOGY INITIATIVE, ILLINOIS STATE GEOLOGICAL SURVEY, CHAMPAIGN, IL 

Ms. GREENBERG. Mr. Chairman, Ranking Member Barrasso, distinguished members of the committee, thank you for the opportunity to testify before you today on S. 699. 

The Illinois State Geological Survey at the University of Illinois 

is one of the largest and most diverse State geological surveys in 

the United States. Beginning in 2001 we have been researching 

carbon capture and storage in the Illinois basin of Illinois, Southwestern Indiana and Western Kentucky. We have led the Midwest 

Geological Sequestration Consortium, 1 of the 7 regional carbon sequestration partnerships supported by the U.S. Department of Energy since 2003. 

In 2008, we began developing a one million metric ton demonstration of carbon dioxide capture and storage in collaboration 

with the Archer Daniels Midland Company in Decatur, Illinois. Injection is expected to begin at the rate of 1,000 tons per day in September 2011 and continue for the next 3 years. As a result of directly dealing with such issues as underground injection control 

permitting, pore space ownership, liability and community stakeholder engagement, we are pleased to offer our comments on S. 

699. 

We commend the criteria established in this bill to define a large 

scale injection to mean the injection of at least one million metric 

tons per year. To specify a set of project selection criteria that require the submittal of comprehensive geologic data and appropriate 

plans for environmental monitoring. We see these project selection 

provisions as requiring selective projects to be beyond the applied 

research stage. Applicants must demonstrate thorough knowledge 

of their proposed site based on existing information or new information such as geophysical surveys specifically obtained to validate 

their application to the Secretary. 

A basic project will not and should not qualify. The Secretary, 

however, will require the staff to assure that the information submitted is adequate and complete in order to minimize the risk to 

the government and the taxpayer under the indemnification provisions. The recently adopted Class VI underground injection control 

or UIC regulations will also assure that many of the provisions of 

S. 699 are met. 

These regulations require that underground sources of drinking 

water are protected and no injection project may proceed without 

a UIC permit. UIC regulations cover all aspects of carbon dioxide 

injection from site characterization to well construction and from 

operational monitoring to site closure. Many of the provisions in 

the UIC Class VI regulations are mirrored in the post injection and 

monitoring elements of S. 699 which in effect means that the U.S. 

EPA or State EPAs in States with primacy will have the leading 

enforcement rule. Close coordination in between the Secretary of 

Energy and these organizations will be required. 
9 

With respect to liability, risks during site operations and immediately following closure can be minimized through rigorous geological site characterization and excellent operational and site closure practices. Best practices guidelines have been developed for 

many of these activities based on the DOE’s supported applied research conducted since 2003. We believe the indemnification provisions of S. 699 represent a backstop to new UIC Class VI regulations and to privately insurable activities that commercial carbon 

capture and storage operators will normally engage in such as the 

drilling of injection wells. 

Beyond these requirements the government’s indemnification is 

necessary to allow projects to proceed where the risk profile beyond 

post closure stewardship is poorly known. Given that it is in the 

public interest for carbon capture and storage to be thoroughly 

evaluated the provisions of S. 699 that allow for a pool of up to ten 

indemnified projects will help establish a risk profile that can inform long term liability under a fee supported structure. These 

projects must be carefully selected and monitored, however, to ensure that the indemnity is warranted at the outset and not abused 

by poor practices during project execution and post closure stewardship. 

We would also suggest that the projects be selected in geologically diverse areas to maximize the understanding of relative risk. 

Excuse me. 

Mr. Chairman and members, we appreciate the opportunity to 

submit these comments to the committee. Would welcome any follow up communications that would be useful to you. 

[The prepared statement of Ms. Greenberg follows:] 

PREPARED STATEMENT OF ROBERT J. FINLEY, DIRECTOR AND SALLIE E. GREENBERG, 

ASSISTANT DIRECTOR, ADVANCED ENERGY TECHNOLOGY INITIATIVE, ILLINOIS STATE

GEOLOGICAL SURVEY, CHAMPAIGN, IL 

Chairman Bingaman and Members U.S. Senate Committee on Energy and Natural Resources: The Illinois State Geological Survey at the University of Illinois is 

one of the largest and most diverse state geological surveys in the United States. 

Beginning in 2001, we have been researching carbon capture and storage in the Illinois Basin of Illinois, southwestern Indiana, and western Kentucky. We have led 

the Midwest Geological Sequestration Consortium, one of the seven Regional Carbon 

Sequestration Partnerships supported by the U. S. Department of Energy, since 

2003. In 2008, we began developing a one million metric ton demonstration of carbon dioxide capture and storage in collaboration with the Archer Daniels Midland 

Company at Decatur, Illinois. Injection is expected to begin at the rate of 1,000 

tonnes per day in September 2011 and continue for the next three years. As a result 

of directly dealing with such issues as Underground Injection Control permitting, 

pore space ownership, liability, and community stakeholder engagement, we are 

pleased to offer our comments on S.699. 

We commend the criteria established in this bill to define a large-scale injection 

to mean the injection of at least one million metric tons per year and to specify a 

set of project selection criteria that require the submittal of comprehensive geological data and appropriate plans for environmental monitoring. We see these Project 

Selection provisions as requiring selected projects to be beyond the applied research 

stage. Applicants must demonstrate thorough knowledge of their proposed site 

based on existing information or new information, such as geophysical surveys, specifically obtained to validate their application to the Secretary. A basic research 

project will not and should not qualify. The Secretary, however, will require the 

staff to assure that the information submitted is adequate and complete in order 

to minimize the risk to the Government and the taxpayer under the indemnification 

provisions. 

The recently adopted Class VI Underground Injection Control, or UIC, regulations 

will also assure that many of the provisions of S.699 are met. These regulations re-
10 

quire that underground sources of drinking water are protected, and no injection 

project may proceed without a UIC permit. UIC regulations cover all aspects of carbon dioxide injection from site characterization to well construction and from operational monitoring to site closure. Many of the provisions of the UIC Class VI regulations are mirrored in the Post Injection and Monitoring Elements of S.699 which, 

in effect, means that the US EPA, or state EPAs in states with primacy, will have 

the leading enforcement role. Close coordination between the Secretary of Energy 

and these organizations will be required. 

With respect to liability, risks during site operations and immediately following 

closure can be minimized through rigorous geological site characterization and excellent operational and site-closure practices. Best-practices guidelines have been developed for many of these activities based on DOE-supported applied research conducted since 2003. We believe the indemnification provisions of S.699 represent a 

backstop to new UIC Class VI regulations and to privately insurable activities that 

commercial carbon storage operators will normally engage in, such as drilling of injection wells. Beyond these requirements, the Government’s indemnification is necessary to allow projects to proceed where the risk profile beyond post-closure stewardship is poorly known. Given that it is in the public interest for carbon capture 

and storage to be thoroughly evaluated, the provisions of S.699 that allow for a pool 

of up to 10 indemnified projects will help establish a risk profile that can inform 

long-term liability under a fee-supported structure. These projects must be carefully 

selected and monitored, however, to ensure that public indemnity is warranted at 

the outset and not abused by poor practices during project execution and post-closure stewardship. We would also suggest that the projects be selected in geologically 

diverse areas to maximize understanding of relative risk. 

Mr. Chairman and Members, we appreciate the opportunity to submit these comments to the Committee and would welcome any follow-up communications that 

would be useful to you. 

Mr. Chairman and Members, we appreciate the opportunity to submit these comments to the Committee and would welcome any follow-up communications that 

would be useful to you. 

The CHAIRMAN. Thank you very much. 

Mr. Watson. 

STATEMENT OF MATT WATSON, SENIOR ENERGY POLICY 

MANAGER, ENVIRONMENTAL DEFENSE FUND 

Mr. WATSON. Chairman Bingaman, Ranking Member Barrasso, 

members of the committee: EDF appreciates the opportunity to appear in support of S. 699. Until we have a policy mechanism that 

internalizes the cost of carbon pollution and creates a true market 

for CCS, we won’t see the technology perfected and deployed at 

scale. In today’s context with the commercial basis for CCS in 

limbo and the prospects for new projects increasingly in question, 

we think the targeted rifle shot approach in S. 699 is an important 

and productive step in the right direction. 

It’s been suggested that the private market won’t provide financial risk management tools for CCS projects and that operators will 

need unlimited and perpetual liability relief in order to go forward. 

EDF strongly disagrees with this assertion. There’s no special liability relief for EOR projects or for underground injection of hazardous waste or geologic storage of natural gas. Under the right 

conditions CCS shouldn’t present risks any greater than those 

posed by these activities, all of which appear to have little trouble 

attracting investment capital and risk management options in the 

marketplace. 

We recognize, however, that as a new technology private sector 

insurance offerings for CCS are limited. Ultimately, it will take on 

the ground experience to generate the actuarial data on which a robust and well calibrated suite of risk management options can be 

built. S. 699 will help generate this on the ground experience. It 
11 

strikes an appropriate balance by providing limited indemnification 

to early CCS projects while putting 4 key protections in place to 

reduce the risk of moral hazard that’s inherent to broad liability 

relief. 

So I’d like to spend a minute on those protections because to 

EDF they’re critical aspects of the bill. 

No. 1, the bill is limited to ten projects. This should put future 

project operators as well as private insurers on notice that liability 

relief is not going to become a permanent fixture of the legal regime governing CCS. We anticipate the private insurance market 

and the CCS industry itself will respond by closely observing these 

ten demonstration projects and using the data generated there to 

develop insurance products to meet the needs of future projects. 

No. 2, the bill requires project operators to seek financial assurances in the marketplace and only provides indemnification from liabilities over and above the coverage provided by those protections. 

Requiring project operators to have first dollar responsibility for 

damages is a critical step toward minimizing moral hazard. 

No. 3, the bill requires recipients of indemnification agreements 

to pay risk based fees to cover taxpayer exposure for the ten 

projects. Risk based fees provide an important incentive for careful 

project planning, in particular as it relates to the critical issues of 

site characterization and site selection. 

No. 4, project selection is competitive and is based on a number 

of eligibility criteria that can be thought of as underwriting standards. In particular requirements for detailed geologic characterization and requirements for thorough measurement monitoring and 

verification would serve as important thresholds for program participation. 

By establishing a program that mimics risk management models 

that exist in the marketplace and by restricting the program to a 

limited number of early projects, S. 699 should help lay a foundation for the development of market based solutions to the industry’s 

need to manage risk at a reasonable cost. 

Finally a few words about the post closure stewardship aspects 

of the bill. EDF supports creation of a third party entity, adequately funded by industry to manage the routine maintenance and 

monitoring of properly closed sequestrationsites. S. 699 goes beyond routine maintenance allowing DOE to take responsibility for 

remediation activities. The limited confines of this bill for these ten 

projects we believe this broad definition of stewardship is appropriate. However, when stewardship policies are crafted for future 

projects it would not be appropriate to transfer major remediation 

responsibilities or responsibilities for other liabilities that may 

arise to third party entities, again, because of the risk of moral 

hazard that this creates. 

That concludes my written remarks other than to commend the 

Chairman and Senators Murkowski, Barrasso and Rockefeller for 

putting forward this important legislation. Look forward to the discussion. 

[The prepared statement of Mr. Watson follows:] 
12 

PREPARED STATEMENT OF MATT WATSON, SENIOR ENERGY POLICY MANAGER, 

ENVIRONMENTAL DEFENSE FUND

Environmental Defense Fund (EDF) appreciates the opportunity to speak in support of S.699 as the Committee considers how to help early carbon capture and sequestration (CCS) projects conduct operations in a safe and effective manner and 

otherwise address risk management issues. Since 1967 EDF has linked science, economics and law to create innovative, equitable and cost-effective solutions to urgent 

environmental problems. 

The primary challenges to CCS deployment are not technological. The component 

technologies exist today. Rather, the primary barrier is the lack of a commercial 

basis for deployment. Without a policy mechanism that internalizes the costs of carbon pollution—such as a declining cap on carbon emissions, or more robust regulatory requirements than are currently being contemplated—it is unlikely that we’ll 

see CCS deployment at scale. As such, costs will remain high and technology advancements will be slower than they would otherwise be. 

However, the problem of climate disruption isn’t going away. As a society, it is 

something we will be forced to address, sooner or later, whether we like it or not. 

And EDF believes that successful deployment of geologic sequestration will be a critical technology option if we are to accommodate fossil energy in a carbon-constrained future. 

EDF therefore supports moving forward with pilot projects than can help us begin 

the process of acquiring operational experience with CCS. We likewise favor moving 

forward judiciously in building up the legal and regulatory frameworks that will be 

necessary to support CCS commercialization. 

Progress is being made on this front. For example, in December the EPA promulgated final rules for geologic sequestration of CO2 under the Underground Injection 

Control program and for injection and geologic sequestration of CO2 under the 

greenhouse gas reporting program. These rules represent important steps forward 

in laying the groundwork for CCS deployment. 

As Congress and the Administration contemplate additional steps on the legal and 

regulatory front, though, it will be important to not get too far ahead of our on-theground experience. Decision makers should resist the temptation to intervene in the 

marketplace or create exemptions in fundamental laws that protect citizens and the 

environment in an attempt to solve problems or reduce barriers to CCS deployment 

that may not actually exist. 

CCS DOES NOT PRESENT INHERENTLY UNIQUE FINANCIAL RISK MANAGEMENT

CHALLENGES

It has been suggested that the private market will not provide adequate financial 

risk management tools for CCS projects and that operators will need unlimited and 

perpetual ‘‘liability relief’’ in order to move forward with CCS projects. EDF strongly 

disagrees with this assertion. 

Under the right conditions, CCS should present risks no greater than those posed 

by any number of other similar activities. The IPCC Special Report on Carbon Capture and Sequestration concluded in 2005 that the local health, safety and environmental risks of CCS are comparable to the risks of similar underground injection 

and storage activities if there is ‘‘appropriate site selection based on available subsurface information, a monitoring programme to detect problems, a regulatory system and the appropriate use of remediation methods to stop or control CO2 releases 

if they arise.’’ 

With these protections in place, CCS projects should be able to secure risk management tools in the private marketplace, rather than rely on taxpayers to take on 

the liability risks associated with projects. 

There is no special liability relief for the enhanced oil recovery business. Businesses engaged in the underground injection of industrial and hazardous wastes operate without any special liability relief. Natural gas storage operators are not 

shielded from liability. Firms in these industries face potential liability for their actions until normal statutes of limitation have run their course or the companies are 

relieved of liability through bankruptcy. Yet all of these businesses inject material 

into geologic formations and appear to have little trouble attracting investment capital and risk-management tools in the marketplace. 

We recognize, however, that at this early stage the private sector has not yet developed a robust suite of risk management tools for CCS projects. At least one private-sector insurer is now offering policies for CCS projects. But ultimately it will 

take on-the-ground operational experience to generate the actuarial data on which 

a robust and well-calibrated suite of risk-management options can be built. Simi-
13 

larly, on-the-ground experience will help banks and other investors better understand project risk, which should bring down the costs of capital over time. 

S.699 IS A MEASURED APPROACH TO A TEMPORARY PROBLEM

Given these facts, EDF is willing to support temporary, limited and thoughtful 

intervention in the marketplace in order to acquire the operational experience that 

will support the development of a broader range of risk management options in the 

private sector. It is critical, however, that any such intervention put protections in 

place to avoid the problems of ‘‘moral hazard’’ that are inherent to broad liability 

relief. 

Current liability rules, grounded in common law and statutes, serve an important 

purpose—encouraging people to take prudent and necessary steps to avoid putting 

fellow citizens and investors at risk. Privatizing economic benefits while socializing 

the associated risks through so-called liability relief increases the odds that shortcuts will be taken and warnings will be ignored, potentially leading to disastrous 

results. 

S.699 strikes an appropriate balance between the need to provide limited indemnification to early CCS projects—in order to generate the operational experience 

that will allow the private sector to take over the task of financial risk management—and putting protections in place to reduce the risk of ‘‘moral hazard’’ for 

these early projects. 

First and foremost, the indemnification program under S.699 is limited. Limiting 

the program to 10 projects puts future project operators, as well as private insurers, 

on notice that liability relief is not going to become a permanent fixture of the legal 

regime governing CCS. We anticipate the private insurance market will respond by 

closely observing the 10 demonstration projects and developing private insurance 

products to meet the needs of future projects. Likewise, expect the CCS industry 

itself will use the experience gained through the demonstration projects to develop 

self-insurance strategies and mutual insurance arrangements. 

Second, in order to be eligible for an indemnification agreement, S.699 requires 

project operators to seek financial assurances in the private marketplace and only 

provides indemnification from liabilities over and above those privately-secured financial protections. Requiring project operators to have ‘‘first dollar’’ responsibility 

for any damages that may arise is a critical step toward minimizing moral hazard. 

Third, S.699 requires recipients of indemnification agreements to pay risk-based 

fees to cover the taxpayer exposure for the 10 projects. Risk-based fees provide an 

important incentive for careful planning of CCS projects—in particular as relates to 

site selection, an issue of utmost importance to project safety. 

Fourth, project selection is competitive and based on a number of eligibility criteria that can be thought of as ‘‘underwriting standards.’’ In particular, requirements for detailed geologic characterization and risk analysis and requirements for 

thorough measurement, monitoring and verification serve as important thresholds 

to protect taxpayers, local communities and the environment. 

By establishing a program that mimics risk management models that exist in the 

marketplace, and by restricting the program to a limited number of early projects, 

S.699 should help lay a foundation for the development of market-based solutions 

to the emerging CCS industry’s need to manage financial risk at a reasonable cost. 

POST-CLOSURE INFRASTRUCTURE MAINTENANCE—AN APPROPRIATE GOVERNMENT

FUNCTION

Properly closed sequestration sites will require stewardship for long time periods 

even though there is sound basis to believe that properly planned and operated 

projects will present minimal risk in the post-closure period. EDF supports the creation of a third-party entity, adequately funded by industry, to manage the maintenance of properly closed sequestration sites. Ultimately the function might be 

privatized, but it makes sense for the government to perform this role for early 

projects. 

The bill extends DOE’s post-closure stewardship obligations beyond simple infrastructure maintenance (plugging the occasional leaking well, conducting a low-intensity monitoring regime, etc.) to include ‘‘remediation activities to ensure the geological integrity of the site and prevent any endangerment of public safety.’’ Given the 

nature of the program established by S.699—one in which the government will indemnify eligible sites for damages that do not arise from gross negligence or intentional conduct—we believe this broad definition of stewardship is appropriate. 

When long-term stewardship policies are crafted for future projects, however, we 

recommend that Congress re-consider the scope of any third-party stewardship program. Creation of a third-party entity for site maintenance is probably appropriate 
14 

for both early projects and later projects, but the optimum funding method, duties 

and obligations of the stewardship entity are likely to be different once the marketplace has had time to develop robust insurance offerings and other risk mitigation 

tools. 

And while it may be appropriate to allow a future third-party entity to take on 

routine stewardship responsibilities, it would not be appropriate to transfer responsibility for remediation or other liabilities to a third-party entity in the post-closure 

phase. Again, this would raise the prospect of moral hazard. Certainly, decisions 

made during a project’s operational phase could lead to problems that might not materialize until post-closure. Therefore, responsibility for liabilities that may arise 

should rest with the project operator, even in the event that a third-party entity 

takes on stewardship responsibilities. 

ASSISTING STATE REGULATORY AGENCIES

EDF is pleased that the bill establishes grants to state agencies for employee 

training purposes. CCS projects raise a number of new regulatory issues and federal 

assistance in helping to educate state agencies regarding these issues is important. 

The CHAIRMAN. Thank you very much. 

Ms. Trabucchi. 

STATEMENT OF CHIARA TRABUCCHI, PRINCIPAL, INDUSTRIAL 

ECONOMICS INCORPORATED, CAMBRIDGE, MA 

Ms. TRABUCCHI. Mr. Chairman, Senator Barrasso, distinguished 

members of the committee, thank you for introducing S. 699 and 

for the invitation to testify at today’s hearing. 

I’m a Principal and Chief Financial Officer with Industrial Economics in Cambridge, Massachusetts. My expertise relevant to this 

matter is in financial insurance frameworks and long term indemnity models. My testimony focuses on the financial management in 

indemnification framework proposed in the bill. My remarks today 

address 2 specific aspects. 

The first being the assessment, collection and use of fees from developers of CCS projects. 

No. 2, the dollar delimited amount of indemnification included in 

the bill. 

Firms seeking investment capital to finance business ventures 

including CCS must demonstrate the ability to assume and manage 

risks inherent to the venture. By doing so the firm is able to assure 

investors whether private or public that the value of their investment will not erode. In fact, over time will gain value. 

In the case of CCS the use of taxpayer dollars in the very long 

time horizon demands a financial assurance structure that blends 

the strengths of private and public risk sharing. To be effective a 

financial assurance structure that implements private/public risk 

sharing should achieve 4 goals. 

No. 1, it should ensure funds are adequate when needed. 

No. 2, it should ensure these funds are readily assessable when 

needed. 

No. 3, it should establish minimum standards for financial institutions providing funds or underwriting risk. 

No. 4, it should insure continuity of financial assurances when 

ownership of sites is transferred. 

The long term indemnity model proposed in S. 699 is a notable 

step forward in achieving these goals. However, to the extent the 

bill is designed to establish a financial management structure that 

ensures sufficient resources are available to pay for long term stewardship at the time of a demonstration projects are transferred. 
15 

Then in my view the following elements warrant additional clarification. 

No. 1, in the section addressing collection of fees and the use of 

net present value analysis, the amount of fees assessed and collected should be based on the net present value of probable damages arising from each project. The analytic tools exist to estimate 

dollar values for potential damages and are routinely used by firms 

expert and financial and natural resource economics. 

No. 2, consistent with basing fees on a net present value analysis, the fees collected should be investing the dedicated interest 

bearing account that generates a rate of return at least equal to 

the risk adjusted discount rate used in the net present value calculation. In the absence of doing so the fees collected may not yield 

sufficient revenue to avoid an intergenerational transfer of costs to 

future taxpayers. 

No. 3, by design an appropriate fee structure should be adjustable whereby the CCS developer pays a risk adjusted, site specific 

fee that is reassessed as actual site specific monitoring, measuring 

and verification data become available. 

No. 4, given the experimental nature of CCS and its limited commercial application insufficient information may exist about the 

risk profiles of a candidate demonstration projects to establish a 

limited liability today that appropriately adjusts for risk and uncertainty over the long term. 

In my view pending the availability of such information and to 

provide a measure of certainty to markets interested in investing 

in CCS projects establishing a dollar delimited amount of indemnification for a discreet number of early mover demonstration 

projects may in fact be appropriate. But only if the stated public 

policy objective to accelerate the deployment of CCS technology. It 

is important to recognize that public financing of this sort distorts 

or eliminates the impact of market forces in determining what is 

or is not a rational risk neutral business venture. 

With respect to the specific indemnification provisions included 

in the bill, as I understand the bill authorizes financial assistance 

for up to ten CCS demonstration projects with explicit provisions 

for project selection and financial responsibility. In my view by 

doing so the bill appropriately limits the overall risk exposure to 

the public to a discreet number of sites with a discreet array of selection criteria. Further, by limiting the timing of liability relief to 

after a defined period of post injection and by requiring that transfer of title be contingent upon performance based standards, the 

bill appropriately provides incentives for developers of CCS demonstration projects to properly operate and maintain their sites 

limiting the potential for future damages and public liability. 

Finally, in the section addressing the amount of indemnification 

the language should state clearly that indemnification is applicable 

only to CCS related activities. A business entity or ‘‘person’’ underwriting a CCS project should not be allowed to package its operating activities in such a way as to yield an inappropriate risk 

transfer of preexisting non CCS related liabilities to the public. 

In my view clarifying the language of S. 699, as I have suggested 

will help ensure continuity of financial assurances and provide a 

measure of certainty with respect to the long term stewardship of 
16 

CCS sites in a manner cognizant of and consistent with potential 

risks to the public. My written testimony elaborates on these areas. 

I would be pleased to answer any questions. 

Thank you. 

[The prepared statement of Ms. Trabucchi follows:] 

PREPARED STATEMENT OF CHIARA TRABUCCHI, PRINCIPAL, INDUSTRIAL ECONOMICS

INCORPORATED, CAMBRIDGE, MA 

SUMMARY

Firms seeking investment capital to finance business ventures, including CCS, 

must demonstrate the ability to assume and manage risks inherent to the venture. 

By doing so, the firm is able to assure investors, whether private or public, that the 

value of their investment will not erode, and with time, will gain value. In the case 

of CCS, the very long time horizon and the use of taxpayer dollars demands a financial assurance structure that adequately protects the private and public investor. 

To be effective, a financial assurance structure that implements private—public 

risk sharing should achieve four clear goals: (1) Ensure funds are adequate, when 

needed; (2) Ensure these funds are readily accessible, when needed; (3) Establish 

minimum standards for financial institutions providing funds or underwriting risk; 

and (4) Ensure continuity of financial assurances, when ownership of sites is transferred. 

The long-term indemnity model proposed in Senate Bill 699 is a notable step forward in achieving these goals, and appropriately limits indemnification to certain 

types of damages. To the extent that Senate Bill 699 is designed to establish a financial management structure that ensures sufficient resources are available to pay 

for long-term stewardship at the time ownership of the demonstration projects is 

transferred, then, in my view, the following elements of the Bill would benefit from 

additional clarification: 

1. In the section addressing Collection of Fees and the use of Net Present 

Value analysis, the amount of fees assessed and collected should be based on 

the Net Present Value of probable damages arising from each demonstration 

project. Damages associated with CCS projects are a function of site location 

and plant design; the analytic tools exist to estimate dollar values for potential 

damages and are routinely used by firms expert in financial and natural resource economics. 

2. This section also should require the design of an adjustable fee structure, 

whereby the CCS developer pays a risk-adjusted, site-specific fee that is reassessed as actual site-specific monitoring, measuring and verification data become available. 

3. Consistent with basing fees on a Net Present Value analysis, the fees collected should be invested in a dedicated, interest-bearing account that generates 

a rate of return at least equal to the risk-adjusted discount rate underpinning 

the Net Present Value calculation. In the absence of doing so, the fees collected 

may not yield sufficient revenue to avoid an inter-generational transfer of costs 

to future tax payers. 

4. Given the experimental nature of CCS and its limited commercial application, insufficient information may exist about the risk profiles of the candidate 

demonstration projects to design a site-specific fee structure, today, that appropriately adjusts for risk and uncertainty over the long-term. Pending the availability of such information, establishing a dollar-denominated amount of indemnification for a discrete number of early-mover, demonstration projects may be 

appropriate. 

Over the long term, I caution against establishing an arbitrary limit of absolute dollar liability. Rather, the amount of indemnification should be correlated 

to the pooled value of probable loss associated with the specific CCS demonstration projects subject to cooperative agreements under the Bill. 

5. In the section addressing the amount of indemnification, the language 

should state clearly that indemnification is applicable only to CCS-related activities; a business entity (or ‘person’) underwriting a CCS project should not 

be allowed to package its operating activities in such a way as to yield an inappropriate risk transfer of pre-existing, non-CCS related liabilities to the public. 

In my view, clarifying the language of Senate Bill 699 as I have suggested will 

help ensure continuity of financial assurances and provide a measure of certainty 

with respect to the long-term stewardship of CCS sites in a manner cognizant of, 
17 

and consistent with, potential risks to the public. In so doing, Senate Bill 699 will 

send a positive signal to private capital markets seeking to invest in CCS technology. 

Thank you for the opportunity to testify in today’s legislative hearing on Senate 

Bill 699, Department of Energy Carbon Capture and Sequestration Program 

Amendments Act of 2011. I am a Principal with, and the Chief Financial Officer of, 

Industrial Economics Incorporated in Cambridge, Massachusetts. My expertise is in 

finance and economics, with specific focus on financial assurance frameworks and 

financial indemnity models. Founded in 1981, Industrial Economics is a privatelyowned professional services firm expert in the areas of financial and natural resource economics. The clients of the firm span the public and private sectors. 

The focus of my testimony is on the financial management and indemnification 

framework proposed by Senate Bill 699. Below, I offer my overall assessment of Senate Bill 699, I highlight areas of the Bill with which I agree, and offer suggestions 

for consideration by the Committee. These suggestions are based on the language 

proposed in Senate Bill 699, and the Bill’s intended objective of fostering earlymover deployment of no more than 10 Carbon Capture and Sequestration 

(herinafter CCS) demonstration projects. 

The sections that follow map to the provisions proposed by Senate Bill 699. Where 

appropriate, I highlight elements of the proposed language that are well designed; 

and I offer suggestions where the language of Senate Bill 699 might be clarified or 

improved. 

OVERVIEW. THE IMPORTANCE OF FINANCIAL RESPONSIBILITY

Firms seeking investment capital to finance business ventures must demonstrate 

the ability to assume and manage risks inherent to the venture. By doing so, the 

firm is able to assure investors, whether private or public, that the value of their 

investment will not erode, and with time, will gain value. Under traditional financing models, investors require that risks be bounded, quantified and accounted for 

either directly as an expense, or indirectly through third-party financial instruments 

(letters of credit, surety bonds, insurance, to name a few). 

CCS processes create a suite of risks, including possible injury to private and public sector interests, e.g., possible injury to natural resources, bodily injury and/or 

property damage. Traditional financing models presume that the project developer 

is an active business entity capable of setting aside funds today to pay for future 

obligations related to these risks. However, the objective of CCS is to store CO2 in 

perpetuity, i.e., a period of time that transcends the typical business life cycle of 

many corporate endeavors. To the degree risks arising from CCS ventures continue 

beyond the operational life of the project, and in the event the CCS developer is no 

longer a going concern, prudent risk management dictates consideration of who will 

finance the obligations arising from these risks. 

The use of taxpayer dollars and the very long time horizon associated with CCS— 

one which may extend beyond the natural life of the corporate entity undertaking 

the demonstration project—demands a financial management solution that blends 

the strengths of private and public risk sharing. To be effective, a financial assurance structure that implements a private—public risk sharing should achieve four 

clear goals: 

(1) Ensure funds are adequate, when needed; 

(2) Ensure these funds are readily accessible, when needed; 

(3) Establish minimum standards for financial institutions providing funds or 

underwriting risk; and 

(4) Ensure continuity of financial assurances, when ownership of sites is 

transferred. 

To the degree society wishes to reduce greenhouse gas emissions, and the portfolio 

of emission reduction technologies includes CCS, then an effective financial assurance and indemnification framework will balance the four above-listed goals with 

needed incentives to foster the safe deployment of a limited number of early mover, 

demonstration projects. 

If modified as I suggest below, the design of the financial assurance framework 

and the implementation of private—public risk sharing as proposed in Senate Bill 

699 should provide a measure of financial and legal certainty with respect to the 

long term stewardship of CCS sites in a manner cognizant of, and consistent with, 

potential risks to the public. In so doing, Senate Bill 699 sends a positive signal to 

private capital markets seeking to invest in CCS projects. 
18 

PROJECT SELECTION CRITERIA

In my view, the science-based criteria and provisions for project selection as proposed by Senate Bill 699 are necessary but not sufficient to underpin the financial 

management structure defined in later sections of the Bill. Additional provisions requiring the explicit evaluation of potential human health and environmental impacts from a financial perspective—deriving expected and maximum loss values 

with a clear understanding of the statistical range of possible outcomes—are needed 

for each proposed demonstration project. 

The outputs of these evaluations will achieve three objectives. 

First, they will help the implementing agency assess competitive bids for demonstration projects, and make an informed decision as to the potential financial risk 

posed by each demonstration project. 

Second, they will provide an appropriate basis to calculate the amount of financial 

assurance that should be set aside by the individual CCS developer during the operating lifecycle of the CCS project, and for a defined period post-injection. 

Third, to the degree the Secretary agrees to indemnify recipients of cooperative 

agreements for CCS demonstration projects, they will inform the amount of indemnification that is warranted. 

TERMS AND CONDITIONS (FINANCIAL ASSURANCE)

In my view, as proposed by Senate Bill 699, the CCS developer should remain financially responsible for events that occur during the operating lifecycle of the CCS 

project, and for a defined period post-injection. Specifically, financial assurances 

should be secured and maintained by the developer of the CCS demonstration 

project until such time as title to the site is transferred and accepted by the implementing Federal agency. In this way, the Bill provides incentives for CCS developers to properly operate and maintain their sites, limiting the potential for future 

damages. Firms are more likely to undertake design and operating decisions that 

minimize environmental (and remediation) costs, if they are held financially accountable. 

Further, maximum flexibility should be afforded to developers of the early mover 

demonstration projects in selecting the financial instruments that may be used, including but not limited to trust funds, letters of credit, surety bonds, insurance, and 

self-insurance through a corporate financial test or corporate guarantee, or any combination thereof. The array of acceptable financial instruments must ensure that 

funds are adequate if and when needed, and readily accessible to pay for delineated 

activities. For this reason, minimum standards are necessary for financial institutions securing funds or underwriting CCS risks. 

INDEMNIFICATION AGREEMENTS

Exception for Gross Negligence and Intentional Misconduct 

In my opinion, Senate Bill 699 appropriately limits indemnification to certain 

types of damages. The exception provided in Senate Bill 699 for gross negligence 

and intentional misconduct is important, particularly as it relates to fraud and misrepresentation of site (monitoring, measuring and verification) data. The importance 

of this exception can not be overemphasized, because these data likely will be used 

to underpin financial assurances, fee calculations and indemnification amounts. 

Collection of Fees 

I believe it is appropriate to assess and collect fees from the CCS developer to 

finance the cost of long-term stewardship. In my view, the language proposed by 

Senate Bill 699 should be clarified to ensure that the amount of fees collected is 

not arbitrary or based on a fixed rate for all sites. Establishing a blanket fixed fee 

to be paid by all CCS developers regardless of their individual site characteristics, 

operational methods and potential for consequences results in an inefficient use of 

available resources which otherwise could be invested for productive economic purposes. From a financial perspective, establishing a fixed rate of financial assurance 

that is paid by all CCS developers results in some developers paying more, and others less, than their fair share, because of differences in site attributes. Further, 

without strong oversight regarding site selection and fund management, and a clear 

process by which the amount of fees collected are periodically evaluated against the 

risk profiles of pooled sites, there is no reason to believe that the amount of funds 

collected will map to the actual financial resources needed to address long-term care 

expenses and delimited compensatory damages. 

If the intent of Senate Bill 699 is to ensure a fee structure whereby the CCS developer pays a risk-adjusted, site-specific fee, then additional clarifying language in 
19 

the section of the Bill that addresses the criteria for determining the amount of the 

fee to be collected is prudent. In my opinion, this fee should be based on the Net 

Present Value of the future expected losses for each individual demonstration 

project. Specifically, damages associated with CCS projects are a function of location 

and plant design (including fuel source and technology), and therefore probable loss 

scenarios can be derived from each project’s site characterization and risk assessment plans. These analyses provide an indication of ‘how bad it could get’ if an adverse event related to a CCS project were to occur, as well as a measure of the expected amount of funds required for remediation and to compensate for harm or injury, taking into account the probability of an event arising. 

The amount of money collected from each CCS developer should directly correlate 

to the funds needed for long-term stewardship once ownership of their specific site 

is transferred. A ‘one-size-fits-all’ approach will result in perverse financial incentives, whereby poorly designed, sited and operated sites may be allowed to proceed 

without ‘paying’ for their share of prospective risk; allowing exclusions for a subset 

of sites will exacerbate these incentives, contributing to market distortions and the 

potential for moral hazard. 

The use of Net Present Value analysis is accepted practice for funds management 

within the financial community; in addition, the analytic tools exist to estimate the 

expected range of dollar values for potential damages on a site-specific basis. Similar tools are used by: (1) firms, such as insurers, in the risk management industry; 

(2) firms in the financial sector; and (3) firms with expertise in human health and 

natural resource economics. 

Additional clarifying language is warranted with respect to the timing of when 

such fees will be paid by the CCS developer. To ensure continuity of financial assurance during active site injection, post-injection, and through long-term stewardship, 

the amount of fees collected from the CCS developer should be established either 

as an up-front payment or as a payment over time during the operating lifecycle— 

the period of active injection—of the demonstration project. If the intent of Senate 

Bill 699 is not to delay the collection of fees until the end of the project, when there 

is the danger that the CCS developer may not have the resources available to pay 

the fees, or until an event or claim arises, then the language of the Bill should clearly state this. Provisions should be made at the outset of the demonstration project 

for the possibility of future bankruptcy or financial distress of the developer of the 

CCS demonstration project. 

As the provisions proposed by Senate Bill 699 relate to a limited number of demonstration projects, and the public is assuming a measure of financial risk, the fees 

should be reassessed as information about the risk profiles become available. Practical reality should inform the application of financial theory. For example, if actual 

site monitoring, measuring and verification data demonstrate a declining risk profile 

and a reduced dollar value of future expected loss, the Net Present Value calculation 

underpinning the fee collection should be adjusted to reflect this situation, and the 

CCS developer should pay less in fees. Overfunding a long-term financial structure 

benefits neither the private sector nor the public sector. However, the inverse is also 

true—if monitoring, measuring and verification data suggest an increasing risk profile—the fees assessed should reflect the incremental increase in potential harm 

that may arise from the occurrence of an adverse event. 

Establishing an adjustable fee structure that is based on the results of actual 

monitoring, measuring and verification data ensures that the CCS developer is rewarded for design and operating decisions that minimize future risk, and by extension future loss. Further, underpinning the financial management structure proposed by Senate Bill 699 with an adjustable fee structure that reflects the evolution 

of site risks over time ensures that the financial instruments used for purposes of 

financial assurance can be scaled up or down in response to site-specific differences. 

Analyses underpinning the Net Present Value calculation proposed by Senate Bill 

699, and the determination of how much to collect in fees, should be developed prior 

to entering into an indemnification agreement. These analyses should be transparent, identifying key assumptions regarding the timing of probable payments and 

an appropriate risk-adjusted discount rate. The public should know what it is financing, especially if there is the expectation that these fees will be passed through 

to end consumers in the form of increased energy rates. Further, to the degree other 

projects (beyond the early mover demonstration projects) come on-line, the data generated as part of these early mover efforts should inform the financial assurances 

and design of financial management strategies for long-term stewardship of subsequent projects. 
20 

1 26 U.S.C. 9602 

2See Comprehensive Environmental Response, Compensation, and Liability Act § 221, 42 

U.S.C. 9631 (2007), Superfund Amendments and Reauthorization Act § 517, 42 U.S.C. 9601(11) 

(2006), 26 U.S.C. 9507 (Hazardous Substance Superfund). 3See Oil Pollution Act § 1001(11), 33 U.S.C. 2701(11) (2007). 26 U.S.C. 9509 (Oil Spill Liability Trust Fund). 4See Act of May 13, 1954 (commonly referred to as the ‘‘St. Lawrence Seaway Act’’) § 13(a), 

33 U.S.C. 988(a). Water Resources Development Act § 210(a), 33 U.S.C. 2238(a) (2007). 26 

U.S.C. 9505 (Harbor Maintenance Trust Fund). 

Use of Fees (Net Present Value and the Importance of Funds Management) 

In my view, the use of Net Present Value analysis as proposed in Senate Bill 699 

is effective only if the money that is collected is set aside in a dedicated, interestbearing account that generates a rate of return at least equal to the risk-adjusted 

discount rate underpinning the Net Present Value calculation. In the absence of 

doing so, the fees collected may not yield sufficient revenue to avoid an intergenerational transfer of costs to future tax payers. 

The portion of funds collected that is not required to meet annual withdrawals 

should be invested in interest-bearing obligations of the United States.1 Other longterm liability and federal indemnity models, including the Hazardous Substances 

Superfund,2 the Oil Spill Liability Trust Fund,3 and the Harbor Maintenance Trust 

Fund,4 to name a few, adopt a similar investment strategy. Further, the Secretary 

of the Treasury should rely on the implementing agency, as established by Senate 

Bill 699, to provide information on the annual funding needs of the program, either 

as it may relate to the payment of claims following acceptance of title to the CCS 

demonstration project, or for purposes of long-term monitoring activities. 

Ensuring that the language of Senate Bill 699 clearly articulates the intent of 

Congress in assessing, collecting and using fees from the developers of CCS demonstration projects will help to avoid future litigation over how much should have 

been collected in fees, how much was collected in fees, and what happened to the 

fees that were collected. 

Contracts in Advance of Appropriations—Limitation 

I am persuaded that investing in a limited number of CCS demonstration projects 

through a public financial assistance program is prudent. In my view, the financial 

management and indemnification framework as set forth in Senate Bill 699 provide 

a measure of financial and legal certainty with respect to long term stewardship of 

CCS sites in a manner cognizant of, and consistent with, potential risks to the public. In so doing, Senate Bill 699 sends a positive signal to private capital markets 

seeking to invest in CCS projects. 

All else being equal, site-specific, risk-based pricing is predicated on the premise 

that the amount of funds collected over the life of the CCS project equals the 

amount of funds necessary to hedge financial obligations arising from project risks 

in the long-term. This is particularly true if the fees are regularly adjusted to reflect 

evolutions in the project’s risk profile over time. However, given the experimental 

nature of CCS and its limited commercial application, insufficient information may 

exist about the risk profiles of the individual demonstration projects to design a sitespecific fee structure, today, that appropriately adjusts for risk and uncertainty over 

the long-term. Therefore, pending the availability of such information, establishing 

a dollar-delimited limitation of liability for a discrete number of early mover, demonstration projects may be appropriate. 

However, over the long term, any limitation of liability (i.e., dollar-denominated 

amount of indemnification) should not be arbitrary in design. Establishing an arbitrary limitation of liability contributes to unreasonable expectations and fosters misunderstanding with respect to the amount and timing of funds necessary for the responsible deployment of CCS. Perhaps more importantly, arbitrary limits of absolute dollar liability can result in moral hazard arising, because the CCS developer 

believes itself insulated from risk, and therefore may act less prudently with respect 

to how it sites and operates its project. Rather, the amount of indemnification 

should be correlated to the pooled value of probable loss associated with the specific 

CCS demonstration projects subject to cooperative agreements under the Bill. 

As the provisions proposed by Senate Bill 699 relate to a limited number of demonstration projects, and the public is assuming a measure of financial risk, the 

amount of indemnification should be reassessed as information about the risk profiles of the CCS demonstration projects becomes available. Finally, if the intent of 

Senate Bill 699 is to provide financial certainty with respect to long term stewardship, then additional clarifying language in the section of the Bill that addresses 

limitations of liability is warranted. 
21 

First, with respect to the amount of indemnification proposed by the Bill, the language in this subsection should apply only to CCS-related activities underpinning 

each demonstration project subject to cooperative agreement. Blanket indemnification should not be provided to ‘all persons indemnified in connection with an agreement’ irrespective of activity. In the absence of clearly delineating that the amount 

of indemnification is applicable only to CCS-related activities, a business entity (or 

‘person’) underwriting a CCS project could package its operating activities in such 

a way as to yield an inappropriate risk transfer of pre-existing, non-CCS related liabilities to the public. Second, as written, the Bill leaves open to interpretation whether the $10 billion 

amount of indemnification applies to the collective pool of CCS demonstration 

projects, or whether each CCS demonstration project is subject to an individual 

amount of indemnification equal to $1 billion per project. In my view, of the two 

options, the more effective means of protecting the public against financial risks associated with the early-mover CCS demonstration projects over the long-term would 

be to apply the amount of indemnification to the collective pool. Notwithstanding, 

if the intent of Senate Bill 699 is to establish per project indemnification, then additional clarifying language is warranted to address what happens if a single CCS 

demonstration project exceeds its per project limit of liability. 

FEDERAL LAND

The same financial and legal provisions, with respect to financial assurances and 

indemnification, should exist regardless of whether the CCS demonstration project 

is sited on private lands, public lands or tribal lands. The failure to establish the 

same financial provisions for demonstration projects sited on public or tribal lands 

as for those sited on private lands may result in: (1) poor operating decisions and 

lack of appropriate site selection, because the project developer is not held financially accountable for its business decisions; and/or (2) provide an unintended subsidy or competitive market advantage to developers of demonstration projects on 

public or tribal lands. 

CONCLUSION

The use of tax payer dollars and the very long time horizon associated with 

CCS—one which may extend beyond the natural life of the corporate entity undertaking the demonstration project—demands a financial assurance structure that 

blends the strengths of private and public financing and risk management tools. In 

my view, a financial assurance structure that successfully implements private—public risk sharing should achieve four clear goals: 

(1) Ensure funds are adequate, when needed; 

(2) Ensure these funds are readily accessible, when needed; 

(3) Establish minimum standards for financial institutions providing funds or 

underwriting risk; and 

(4) Ensure continuity of financial assurances, when ownership of sites is 

transferred. 

To the degree society wishes to reduce greenhouse gas emissions, and the portfolio 

of emission reduction technologies includes CCS, then an effective financial assurance and indemnification framework will balance the above-listed goals with needed 

incentives to foster the safe deployment of a limited number of early mover, demonstration projects. The long-term indemnity model proposed in Senate Bill 699 is 

a step forward in accomplishing this objective. 

However, if the intent of Senate Bill 699 is also to establish a financial assurance 

structure that ensures sufficient funds are available to pay for long-term stewardship at the time ownership of the demonstration projects is transferred, then the 

Bill would benefit from the modifications that I outline above. Finally, ensuring that 

the language of Senate Bill 699 clearly articulates the intent of Congress in assessing, collecting and using fees from the developers of CCS demonstration projects will 

help to avoid future litigation. 

The CHAIRMAN. Thank you very much. Let me ask a few questions. 

Ms. Greenberg, let me ask you first. This project that you folks 

are involved with with Archer Daniels Midland that’s beginning 

here in September, as I understand, the first of September you’re 

going to start injecting a thousand tons of CO2 per day. 

Ms. GREENBERG. That’s correct. 
22 

The CHAIRMAN. How have you dealt with the issue of potential 

liability in connection with that project? 

Ms. GREENBERG. Thank you for your question, Senator. The Midwest Geological Sequestration Consortium approached Archer Daniels Midland back in 2007 having done considerable amount of geologic site characterization in the Illinois Basin region itself and 

then more specifically in that area of Illinois. So we came to ADM 

with a significant amount of geologic knowledge and understanding 

of what the benefits of the rock units in the area are for carbon 

capture and storage. 

We were very fortunate in that Archer Daniels Midland has a 

considerable amount of experience in the operation and handling of 

liquid carbon dioxide. So while the subsurface component of storing 

carbon dioxide was new to them and unfamiliar to them, the surface and operational handling of that carbon dioxide was actually 

something they were quite familiar with. So we were able, through 

a series of board meetings and meetings with their legal counsel 

and a variety of other individuals in the core processing and operations to bring them along with respect to their comfort level with 

respect to carbon—excuse me, carbon capture and storage. 

In addition to that I will say that the carbon capture storage, 

this project and the plume of carbon dioxide stored in the subsurface is expected to stay wholly with on underneath ADM owned 

lands. So there has been no additional liability protection that’s 

been undergone for the particular project. 

The CHAIRMAN. OK. 

Mr. Klara, let me ask you. We had a hearing earlier this week 

here where we had various experts talking to us about enhanced 

oil recovery and the use of CO2 in enhanced oil recovery. The complaint that we heard pretty loud and clear was they didn’t have 

enough CO2. That there was a much more demand for CO2 to—for 

use in enhanced oil recovery than they could find. 

There was very little concern raised. We didn’t—the subject of 

the hearing was not focused on liability, potential liability. But my 

impression is that this whole issue of liability is one that the oil 

and gas industry basically blew right past in all of their use of CO2

as enhanced oil recovery. 

Am I wrong about that? Is there anything in place to deal with 

the liability problems that they encounter in use of that CO2? 

Mr. KLARA. I’ll even give you a step backward in terms of just 

within the Department’s portfolio. There are upwards of 25 plus 

projects that are drilling. Many have already injected CO2 in the 

ground. That several of those projects do relate to EOR, many 

don’t. 

The department has no ability to provide indemnifications. So 

the requirement for proposers was that you would have to figure 

out a way to find indemnification elsewhere or we would be unable 

to accept the project. We were able to fill our portfolio of projects. 

I think, as Sallie indicated, what has happened amongst all the 

projects is it really required a lot of due diligence on their part in 

finding partners that really believed in the need for future CCS. 

Were willing to—and I think generally speaking, use their private 

mechanisms of assurances to deal with the liability issues. Now 

having said that, certainly we are aware as well that there are 
23 

many potential proposers that will not come to the table with ideas 

because of the fear of liability. 

So what I can tell you is the projects that are out there, especially the ones like EOR, where there’s a value added aspect to it, 

that the liability issue seems to not get much chatter and attention. 

The CHAIRMAN. Thank you very much. 

Senator Barrasso. 

Senator BARRASSO. Thank you very much, Mr. Chairman. 

I would like to ask Ms. Trabucchi just along the line of what Mr. 

Klara was talking about, the issue of giving the private sector some 

legal framework that they can understand and then maybe bringing others to the table. This bill does provide steps that an applicant must demonstrate to receive the long term indemnification. 

One of the things that the indemnification agreement section of the 

bill says. The language says, ‘‘The Secretary may agree to indemnify a project 1 year after the completed application is submitted.’’ 

Does the term may provide adequate certainty for a company and 

for potential investors? 

Ms. TRABUCCHI. In my view actually it does. 

I think what your investment community is looking for and what 

your capital markets are looking for in the form of certainty is the 

appreciation that the return on their investment will mature with 

time and gain value. I think if you create an indemnification provision that says will, no matter who you are. You enter into the cooperative agreement. You will receive indemnification. 

What ends up happening is you provide the potential for perverse incentive where you have created a cap of liability. If it’s an 

arbitrary limit, say it’s just a random number. Then you are encouraging those actors to manage to that number without perhaps 

taking the necessary steps in place to do the performance based 

limits that are so much a function of the cooperative agreement. 

So what I like about the use of the word may, is it leaves it to 

the Secretary to make a determination whether or not that indemnification is negotiated at the outset of the cooperative agreement 

based on the information provided by the site or whether that indemnification is negotiated throughout the life of the site. As information becomes available because these are experimental projects, 

the Secretary may decide that, you know, they’re not doing their 

due diligence managing the projects correctly. So, no, we’re going 

to protect the public’s risk by not offering indemnity. 

So in my view I think it provides adequate coverage. 

Senator BARRASSO. Great. 

Ms. TRABUCCHI. Certainty to the capital market. 

Senator BARRASSO. That’s kind of what I heard from Mr. Watson 

as well, along with that thought process. 

Could I ask you as well, Ms. Trabucchi, if this bill were signed 

into law how you think it would impact investor interest including 

interest in carbon capture and sequestration projects even beyond 

the first ten? 

Ms. TRABUCCHI. You mean more for scaling up for commercial 

applications? 

Senator BARRASSO. Yes. 
24 

Ms. TRABUCCHI. You know, in my view what—in my view the bill 

if signed into law as it’s currently configured would certainly foster 

capital investment in the ten demonstration projects with certainty. I think beyond that my sense is the capital—you know, it’s 

the early entrants. It’s the curve of your financial markets. 

So those who are the early entrants who are willing to bear the 

risk are likely to bear the greater reward. So I think what this bill 

will do is create more of a competitive interest within the capital 

markets to invest in the ten projects. I think the real question is 

after those ten projects is there sufficient capacity for greater commercial application? 

If there is additional capacity then what you’re going to have is 

perhaps a more mature functioning market whereby your investors 

are more likely to be willing to invest because somebody else absorbed the risk on their behalf. So I’ll leave it at that. 

Senator BARRASSO. Thank you. 

Mr. Klara, if I could just visit with you for a second? Researchers 

around the world are looking at geo-engineering as a potential approach to this issue of excess carbon dioxide. The focus of the one 

bill that we’re looking at today, Direct Air Capture, follows a similar approach of using technology in innovation. Do you think the 

geo-engineering or direct air capture is a potential option at this 

point? 

You know, there’s been a lot written. Even the New York Times 

earlier this week had an article about it. 

Mr. KLARA. Certainly it represents a very high risk option in 

terms of just the availability of technology to do so. Just generally 

speaking the portfolios, certainly in our portfolio, have focused primarily on looking at capturing large, high percentage quantities, 

which the bill recognizes. We have looked at, to some degree, these 

options for direct air capture. In every case we’re just finding insurmountable barriers in terms of cost. 

Senator BARRASSO. Cost. 

Mr. KLARA. Other things like, for example Princeton is mentioned. Another issue there too, which you may be aware, at the 

end of the day it’s going to all be about how many tons you take 

out of the atmosphere. So obviously out of the air when it’s 380 

parts per million, you have to process a lot of air to get one ton 

of carbon dioxide. That’s another factor that leads into this cost 

issue. 

So is it possible? Perhaps. Are there many technological barriers 

to it? Absolutely. 

Senator BARRASSO. You know it’s interesting in that recent article that Columbia professors disagreed with the Princeton professors as the cost and what the technology would be which makes me 

get to the final question, Mr. Chairman, is that what do think 

about the use of prizes as an effective way to try to spur private 

investment and then looking for ways to lower the cost? 

Mr. KLARA. Certainly within our program we’ve never taken that 

approach. But if that approach certainly stimulates, you know, the 

best minds in the country, if not the world, to do so, we’d certainly 

encourage that. 

Another aspect too, that we’ve tried in the past is often what 

happens in an area you kind of get bogged down in discipline. So 
25 

for example, it’s obviously geologists, chemical engineers. So we 

even tried to expand beyond that to get some interest from any diverse, you know, subset of education leaders, scientists. So if the 

prize can kind of encourage that as well I think that would be very 

valuable. 

Senator BARRASSO. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Manchin. 

Senator MANCHIN. Thank you, Mr. Chairman. To all of you, 

thank you for being here. 

If I could and I think the first question will go to Mr. Klara. But 

you know the whole thing that with technology today and where 

we stand with CCS we faced this with acid rain back in the 1980s 

as you recall. At that time you all had worked and developed a 

technology with scrubbers, low nox boilers. There was an alternative with how we would fix it. It was fixable because it was technology. 

You all have an impressive record at NETL. I’ve been there 

many times and have gone through the process. Are you close to 

getting something that’s commercial able and also affordable other 

than just the capture and storage? Because with the CO2, I mean, 

the SO2 that we were able to, the sulphur, that we were able to 

capture. We were able to create a whole nother industry. 

Mr. KLARA. Right. 

Senator MANCHIN. With the low nox boilers. But now the Federal 

Government has taken a position unless we can find a way to effectively capture CCS you can’t move forward with any projects. It 

doesn’t make any sense at all because technology has not developed 

or matured enough. 

How close are you and how much—I know that the Department 

of Energy, you all have been on the front end. Are you still in that 

position or are they putting all their effort toward you all finding 

the cure? 

Mr. KLARA. Certainly within the CCS portion of our program, we 

have a program designed to try to reduce those barriers. As you 

point out many good points, right now it’s a very expensive technology and likely too prohibitive under many scenarios to go forward. We have a 10-year plan, roughly a 10-year plan. 

Senator MANCHIN. But basically you all agree that the Federal 

Government has taken a position, everything stops, nothing happens unless CCS is implemented. We don’t have the technology in 

place. Would that be a fair statement? 

Mr. KLARA. I can only comment on the technology side. On the 

technology side it’s a very expensive option right now. However, if 

you look at our portfolio that there are many developments potentially emerging that we believe within a 10-year span will drive 

these costs and risks down to such a point that then it might be 

a whole new dynamic of how these technologies—— 

Senator MANCHIN. Such as scrubbers and low nox did for the 

acid rain? 

Mr. KLARA. Exactly. In fact when developing these kinds of technologies we often look at those kind of past learning curves to try 

to get some insights into the kind of timing we might need to drive 

those costs and increase those performance. 
26 

Senator MANCHIN. Is NETL playing a significant role in administering? Do you all see that in the future you’re going to play a 

significant role or is DOE are they fracturing this off and going in 

different directions? 

Mr. KLARA. Yes, we have—I don’t have any indications that 

would not say that NETL would play a key role. 

Senator MANCHIN. How’s your funding? 

Mr. KLARA. Adequate. 

Senator MANCHIN. What was the recommendation from DOE for 

your funding? 

Mr. KLARA. For what year, sir? 

Senator MANCHIN. For this coming year. 

Mr. KLARA. For fiscal year 2011? 

Senator MANCHIN. 2011. 

Mr. KLARA. With a continuing resolution, we stayed stagnate. 

Senator MANCHIN. How about 2012? 

Mr. KLARA. For 2012, there is a slight reduction due to the fiscal 

constraints we’re all under. 

Senator MANCHIN. Alright. Also, with what’s going on around the 

country, around the world, you have India. You have, of course, 

China. We hear so much about what China has been doing as far 

as in this arena. 

Do you see them making significant strides because there’s no 

limit or no restraints on them from being able to use different 

types of technology? 

Mr. KLARA. From what we’ve seen on the technical side is that 

they definitely are showing interest. In fact, we have technical collaborations with most of those countries relative to what our researchers are doing and what they’re doing. So from a technology 

standpoint, we’ve seen a lot of interest and potential there. 

I would kind of use an analogy that if you look back at the kind 

of technologies you’re mentioning for NOX and SOX that have been 

developed out of the Federal Government that those are the technologies that are leading the way in these emerging countries. So, 

you know, using that as the potential analogy and, you know, I 

would say that—— 

Senator MANCHIN. Is China using, I mean, are they using the 

scrubbers and the low NOX boilers? Are they going NOX and SOX

in China? 

Mr. KLARA. Yes, there are using the—— 

Senator MANCHIN. For their new are they retrofitting their old 

or taking their old? 

Mr. KLARA. They’re using the latest technologies, many and most 

of which have come out of the Federal Government’s past portfolio. 

All indications are, at least from a technology exchange standpoint, 

that they would continue to do that with U.S. leadership and the 

technologies that we develop. 

Senator MANCHIN. Would it be a fair statement to say that we 

don’t have the technology in place to basically that would handle 

the CCS, if you will, carbon capture whether it’s the storage or 

the—have we come close to finding any technology that would be 

able to take the waste of carbon CO2 and turn that into a useable 

fuel? 
27 

Mr. KLARA. At this point we categorize those as reuse opportunities. So generally speaking with storage you put it underground 

and it’s—— 

Senator MANCHIN. I know from that. But—— 

Mr. KLARA. Yes. But from a standpoint of looking at CO2 reuse 

opportunities which means converting CO2 to some other product. 

Senator MANCHIN. Right. 

Mr. KLARA. Like aggregates or—— 

Senator MANCHIN. Yes. 

Mr. KLARA. Other chemical products. We have a small portfolio 

looking at that. It does become a key issue that CO2 is such a stable molecule that it’s often very expensive, high pressures, high 

temperatures, to convert it to these other products. 

So people are looking at trying to look at creative mechanisms, 

chemistry and otherwise, to make that a reality. But right now in 

nearly every case that is in our portfolio, the costs are still too prohibitive for that options, those options. 

Senator MANCHIN. So CCS is about the only viable option that 

we have right now? 

Mr. KLARA. Even with CCS it’s very costly. But yes, it does appear to be the lower cost option of those other alternatives. 

Senator MANCHIN. Thank you, sir. 

The CHAIRMAN. Senator Portman. 

Senator PORTMAN. Thank you, Mr. Chairman. Thanks to the 

panelists here. I’m going to follow up, if I could, on some of the 

questions that Senator Manchin raised. 

We had testimony earlier this week in committee regarding oil 

recovery, tertiary recovery particularly and the use of CO2. The 

comment was made by some of the industry experts that there’s 

not an adequate supply of CO2 for that kind of recovery. So I guess, 

Mr. Klara and others, feel free to chime in, in talking about the 

uses of CO2 understanding that it’s very expensive to convert it to 

an energy use as you said. 

But what’s the relationship here between capture, transportation, sequestration on the one hand and on the other hand this 

need that the oil and gas industry appears to have for additional 

CO2 for recovery efforts? 

Mr. KLARA. In a sense it’s a chicken and an egg scenario. The 

problem becomes that right now there are capture technologies 

that go out there and capture CO2 in large quantities that could 

be used for everything from EOR and other. The problem there is 

it’s too costly of a source currently with the capture technologies 

that we have available. 

So what I would say, relative to EOR, that it’s the logical. If CCS 

becomes well deployed into the future that EOR will certainly be 

one of the first options that are pursued as we start to unroll CCS 

out. But that will be pursued only when we get the cost of these 

technologies down. 

As I was commenting to Senator Manchin is that if we look at 

our 10 year road map, we are hopeful that we can drive the cost 

of those technologies down over the course of 10 years. At that time 

we would potentially be able to capture these large quantities of 

CO2 at costs that can be acceptable to the oil industry for enhanced 

oil recovery. 
28 

Senator PORTMAN. Is EOR sequestration? 

Mr. KLARA. A good point there as well. With those kinds of exchange options you will logically hear well, aren’t you just putting 

carbon in the ground to produce carbon? There’s a little bit of truth 

to that. 

We’ve looked at it from a resource portfolio standpoint right now 

if you look at today’s practices for EOR. How much CO2 you put 

in the ground for how much oil you recover. You put about 80 percent of the carbon in the ground compared to the emissions you’d 

produce from the oil. 

Now if we go into a CCS dominated environment where all of 

sudden there’s a cost to the CO2 and maybe a cost to keep it underground. 

Senator PORTMAN. Right. 

Mr. KLARA. We’ve looked at new reservoir management practices 

where all of a sudden now you could put 120 percent of the carbon 

in the ground that you’d produce. So the bottom line is we still do 

believe that there’s a storage potential to that if indeed CCS begins 

to roll forward. CO2 gets a value to be stored underground. 

But it’s a very logical and important point to make. 

Senator PORTMAN. It would seem to be. What are the best geological formations for sequestration currently? What parts of the 

country are they? 

Mr. KLARA. The good news is we’ve done a lot of study on options 

for storage. 

Senator PORTMAN. You’ve got regional partnerships? 

Mr. KLARA. Yes, absolutely. 

Senator PORTMAN. You’ve got, what, 18 going around the country. So you’ve got some experience now. 

Mr. KLARA. Yes. In fact we’re already on our third version of a 

national atlas for the United States and Canada, nothing like it 

anywhere in the world. The bottom line is depending on the projection of how much reduction CCS would have to accommodate. 

If that reduction is pretty large, what tends to happen is you 

really have to have the final backstop in these saline formations. 

EOR could play a key role. But when you’re talking billions of tons 

potentially that’s just a lot of volume to be dealing with. 

So these saline aquifers—salt water, undrinkable—these are the 

real prime targets for the ultimate storage opportunity relative to 

CCS. Just to show you why CCS and sequestration tends to get a 

lot of hoopla that it does, the magnitude of these storage formations are huge even though the emissions are huge. 

So for example, with our estimates so far, we found that the storage opportunities are widespread under at least 43 States. We’ve 

also found that they’re huge, especially relative to the saline formations. That if you would look at the U.S. emissions in a given year, 

we have hundreds to thousands of years of capacity to store all 

those emissions. 

So again, another reason why sequestration tends to be such an 

attractive option people don’t want to get away from because it has 

that ability to store these huge, huge volumes, if needed. 

Senator PORTMAN. Those of us, including Senator Manchin and 

myself, who are interested in this technology and want to move it 

forward. We like the fact that there’s some hoopla, as you said, as-
29 

sociated with it. Hope that the department and the industry, frankly and others in academia continue to focus on this. 

It seems to me we’re close to the technology that’s commercial 

able on the capture side which seems to me is your biggest scientific challenge. Then on the sequestration side obviously there’s 

a lot of issues including political issues that aren’t science based. 

But we are committed to working with you on that and hope that 

again, after this hearing and others, that you’re getting the message that there are lots of folks who believe that this hoopla is justified and that this is a way for us to make great gains using the 

coal resources that we have here in this country. 

Thank you. 

Mr. KLARA. Thank you. 

Senator PORTMAN. Thank you all. 

The CHAIRMAN. Senator Shaheen. 

Senator SHAHEEN. Thank you, Mr. Chairman. Thank you all for 

being here this morning. I’m not sure exactly who to direct this 

question to because I was not here for all of the—all of your testimony. I apologize for that. So I’ll just throw this out and see who 

responds. 

Does S.669 address the most serious barriers that companies 

who are doing carbon capture and sequestration will face? If we 

pass this is, is this going to open the opportunities for companies 

to actually move forward in a way that will make this technology 

commercially viable? I’m particularly interested in this because we 

have a company in New Hampshire called Powerspan, that is—actually has their technology being tested in Ohio at First Energy, 

that First Energy utility is doing. 

They believe their technology is very competitive in terms of cost 

with any of the other technologies that are out there. So if we were 

to pass this does this provide real opportunities for companies like 

Powerspan to move forward? Who would like to answer that? 

There’s no penalty. You can just step right up. 

Ms. GREENBERG. Senator, I’ll speak to a portion of that. 

Senator SHAHEEN. OK. 

Ms. GREENBERG. From the project perspective we spend a lot of 

time talking to a variety of stakeholders about issues related to 

carbon capture and storage. So I think from the perspective of companies being able to manage the real and perceived risks that they 

face from the public and various other stakeholders that this bill 

would go a long way toward addressing the liability issues which 

is one of the key issues that’s brought up repeatedly from those 

stakeholders. 

Senator SHAHEEN. Anybody else want to add? Yes? 

Ms. TRABUCCHI. Yes, I’ll actually follow on what Sallie just said. 

I think that one of the significant elements of the bill is that it 

sends a positive signal to the capital markets that there’s perceived 

value in carbon capture and storage. That there should be a public/ 

private sharing of the risks associated with that and the rewards 

associated with that. 

I think that again, if there’s a public policy goal that CCS can 

satisfy then what this bill does is it provides that necessary signal 

to say investment in this, these projects, these 10 projects, is warranted. Because at some point in the future that investment will 
30 

pay off either in a public policy reward and/or in financial rewards. 

I think that the indemnification provisions, the marriage that’s 

been created by this bill with performance standards, the timing of 

when the liability relief happens coupled with dollar values and 

limits of liability, I think it’s a nice coupling. I think it sends a 

positive signal. 

Mr. WATSON. Senator, a bit more simplistic answer, but I don’t 

think I’ll be allowed back in the office if I don’t make this point. 

The primary barrier to commercialization of CCS is the lack of a 

price on carbon. So we can make progress with bills like this but 

beyond applications like EOR or maybe you can get closer to it and 

have it be economical. Ultimately you’re going to need a policy that 

creates a market for CCS. 

Senator SHAHEEN. Thank you. I appreciate your making that 

point. 

There was some discussion earlier about China. Is there—has 

there been any thought given to the idea of trying to set up a real 

cooperative effort with China? I mean, obviously, they stand to benefit significantly and they’re working hard on this technology as 

well. 

So has there been any thought given to our setting up a real formal working effort to try and see if we combine all of our scientists 

whether we could come up with a commercially viable technology 

faster? 

Ms. GREENBERG. Senator, that’s an excellent question. I would 

like to say that those efforts are already underway at a significant 

level both through the U.S. State Department, U.S. Department of 

Energy. We have hosted several delegations of Chinese scientists at 

the Illinois State Geological Survey to share with them the knowledge that we’re getting first hand through our experiences. 

The Director of our program, Dr. Robert Finley, has been to 

China as well. So there are very strong, individual, scientific partnerships and collaborations in place. I believe DOE just funded an 

international collaboration which is through Lawrence Berkley and 

the University of West Virginia and Tsinghua University in China. 

So there really is actually quite, on the technical side, quite a lot 

of activity. 

Senator SHAHEEN. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Hoeven. 

Senator HOEVEN. Thank you, Mr. Chairman. 

It seems to me that the 2 big issues in getting the technology to 

move forward for carbon capture and sequestration are cost and liability. This legislation really goes to the liability aspect. I and our 

State of North Dakota, we’ve actually put a legal and regulatory 

regime in place that addresses the liability aspects. It’s modeled 

after the Interstate Oil and Gas Compact Commission model legislation which some of you may be familiar with. 

So it does appear to me that this legislation makes a very good 

attempt to deal with the liability aspect. I think that would be very 

helpful. Following this—and I hope I don’t—I’m going to take a 

stab at your name. I know I’m going to get it wrong, Trabucchi, 

mentioned I think getting ten projects going would be phenomenally helpful. 

Ms. TRABUCCHI. I’ll take it. 
31 

Senator HOEVEN. Nobody wants to be first. Everybody wants to 

be second or third. Wants this commercially viable hence going to 

the question that I’d like each of you to address for a minute. 

Mr. Watson got at it in a way. But not the way that I think we 

need to do it. The concept of mandating something I think is problematic particularly with our financial constraints that we have in 

the Federal Government today. 

We have got to find a way to address the cost aspect where we 

use the CO2 in a productive way. Hence, you know, tertiary oil recovery or maybe some type of coal to liquids conversion where 

you’ve got to, you know, an easier ability to capture that CO2 in 

the process, but if you would address that cost driver. How do we 

put this CO2 to use in a way that justifies a cost that will enable 

us to move this forward verses a mandate? 

Mr. Watson, you could sure weigh in on this one too. Maybe you 

even want to start. But I’m looking for ideas on how we use it so 

that we can handle that cost aspect of moving this forward. 

Mr. WATSON. Thank you, Senator. I think costs coming down is 

a function of experience and a function of the market. My point 

was that until we have a kind of policy in place that creates a market for CCS we’re just not going to have the level of experience 

with it and the kind of deployment and economies of scale that will 

ultimately bring those costs down. 

Senator HOEVEN. I don’t mean to interrupt. But I mean revenue, 

revenue generation. The cost will come down as the technology gets 

better. It always does. 

But some revenue aspect that helps us make this commercially 

viable. 

Mr. WATSON. The EOR application seemed to be the most immediate one that could provide some source of revenue. 

Senator HOEVEN. Right. Somebody well we’re 10 years away. 

We’ve been 10 years away for the last 10 years. 

We’re constantly working to try to get more enhanced oil. We do 

that in our State. I mean, based on electric puts a down hold on 

the waiver and fields get paid for it. 

But we want to do more with conventional coal fired plants. We 

can’t seem to find somebody to take the CO2. Either it’s not concentrated enough. It’s too expensive, all these kinds of things. 

We want to try to get coal to liquids going. Would that help pay 

for it? 

Mr. WATSON. There are other smaller applications like the food 

services industries and others. Mr. Chairman, I’m reasonably certain you’re not looking to re-litigate climate policy here right now. 

But you know, one of the values of the structures that were being 

considered was that it did create a value for that CO2. 

Without a policy like that, absent these other applications, you 

really don’t have one. 

Senator HOEVEN. Other uses. Anybody? Obviously enhanced oil 

recovery. What else? 

Where do we use the CO2? How do we get it in a useable form 

that generates revenue that helps bring this cost equation together? 

Go ahead. Anybody? Any ideas? Any thoughts? 
32 

Ms. TRABUCCHI. I don’t have the technical background to answer 

that specific question. But what I can say is I understand where 

you’re coming from which is the financial and capital markets are 

looking for value proposition. Fundamentally it’s revenue minus 

costs equals profit. If you can’t generate a positive margin there 

has to—just purely on the function of price and cost, then there has 

to be some other proposition that fosters the need for the product, 

the technology, whatever it may be. 

So, you know, I hear where you’re coming from. I don’t personally have the expertise to tell you what other technologies might 

be in use. But what I can say is your capital markets and your financial markets are very interested in this very same question. 

If that’s answered you’re going to have more investment sooner. 

Senator HOEVEN. Absolutely. So Mr. Klara, Ms. Greenberg in the 

lab and in your brainstorming sessions, what are we going to do 

with this CO2 that’s going to generate some revenue for us? 

Mr. KLARA. The key obviously and you’ve addressed it, is that we 

have to come up with technologies that reduce the cost of the capture. I mean, at the end of the day it’s the cost signal that’s going 

to dictate, even if it’s used for EOR. 

Just to give you some dynamics. EOR, a lot of those agreements 

are business confidential. But generally speaking you can say in 

the neighborhood of $20 a ton would be what you might purchase 

CO2 for, for EOR. 

Right now with the best technologies we have it will cost you $60 

a ton or more. But we are looking at sets of technologies that we 

believe can drive those costs down by two-thirds. So we do believe 

they’re successful in the next 10 years that will start driving those, 

the cost of capture down. 

Certainly at least with regard to EOR that the price signal might 

start to approach a price signal that might all of sudden it does 

open the flood gates for those opportunities which then just lets the 

technology base start rolling out. 

Ms. GREENBERG. Senator, if I could just add 2 things that you 

touched on in your question that are also important to this. That 

is the purity of CO2. So technologies that give you less volatiles and 

added elements are important. Then also transportation and infrastructure that will get anthropogenic CO2 from the locations where 

it is being produced to the places where you’re going to be doing 

enhanced oil recovery. 

Senator HOEVEN. Mr. Chairman, with your indulgence? 

Exactly. Again, that goes to the cost equation. You have to have 

a pipeline to get it to the oil field typically or to the wells in the 

field. You have to have certain maturity on the wells. You have to 

have certain density of the wells. You have to have a certain concentration of the CO2. 

All those things are vital to make it, you know, a commercially 

viable proposition. What I’m picking up from you and maybe Mr. 

Klara, I guess, you got there, is we really haven’t come out with 

something other than enhanced oil recovery. We’ve got to drive the 

cost equation down further to make that commercially viable. 

That’s where you see the situation today. 

Mr. KLARA. We do have a small portfolio looking at CO2 reuse 

where you could convert the CO2 to aggregate plastics, anything 
33 

that has carbon in it. Again, right now the state of that research 

is that those opportunities right now are much more expensive 

than getting those materials off the market today. They are looking 

at novel chemistry approaches etcetera to try to drive that cost 

down. 

So those are other potential markets. But when you start looking 

at the magnitude of the CO2, those markets typically don’t have 

enough capacity, even if we do drive those costs down, to make a 

big dent in emissions. But what they could do is, again, promote 

the idea of CO2 capture and promote the idea of there are some opportunities to use this CO2 in a value added way. 

Senator HOEVEN. Thank you. 

The CHAIRMAN. Let me just follow up on the point that you 

made, Ms. Greenberg, about transportation and the need there. At 

the current time there is no Federal agency with authority to site 

CO2 pipelines. Should we change that and give FERC that authority? 

Ms. GREENBERG. I think that if enhanced oil recovery at the use 

of anthropogenic CO2 is a goal in, as Senator Hoeven was saying, 

in doing something with our CO2. Then anything that the Federal 

Government can do to facilitate the siting and building of a pipeline infrastructure is certainly advantageous. 

The CHAIRMAN. Good. Let me ask, Mr. Klara. You had said about 

$20 a ton is the price that people are—that companies are paying 

for CO2 for enhanced oil recovery. Is that what I understood you 

to say? 

Mr. KLARA. Yes, and generally speaking you’re like $10 to $30 

per ton. So I just used $20 as a—— 

The CHAIRMAN. Right. Because yesterday, one of our witnesses 

said that. I asked him what the price of CO2 was in the Permian 

Basin. He was saying that it had been about a dollar an MCF, but 

that he’d seen a recent contract where they had agreed to pay $2 

per MCF. 

Is that—I’m not quick enough to tell you how you convert MCFs 

to tons. Can you tell me whether that is pretty much what you said 

or not? 

Mr. KLARA. Yes. That should be in the ballpark. Yes. 

The CHAIRMAN. OK. 

Mr. KLARA. I can’t remember the conversion off the top of my 

head. But yes, those are close numbers. But a point I want to make 

is that CO2 pricing is complicated. It’s often related to the oil 

prices. 

So how these agreements get made have some complexity to it. 

So if the oil price goes up high or goes down, that also impacts, you 

know, what the price is that somebody pays for the CO2. So it’s an 

ever changing, you know, with the oil prices, well, it’s ever changing what it is. 

But a good number and you kind of got to think in tons, but you 

know, $10 to $30 per ton is a nice range of probably where most, 

if not all, of the price for CO2 for EOR kind of resides. 

The CHAIRMAN. OK. 

Senator Manchin. 

Senator MANCHIN. Thank you, sir. 
34 

I think just in general I’m speaking that what does the cost of 

carbon capture add to the price of energy as far as the house? Any 

of you all can talk about that. What is done in the legislation that 

we can continue to pursue? If this is passed on what would that 

be to the consumer? What does it mean to the manufacturers? 

I know that in a realm of coal fired electricity being what drives 

most of our industry right now. Manufacturing because of its competitive cost, it has gone up dramatically and it seems to keep 

going up dramatically. Can you put a price on that? 

Mr. KLARA. If we were to look at off the shelf technologies today 

for CO2 capture and transport and storage, but capture by far is 

80 percent of the cost for that. 

Senator MANCHIN. Are you talking about even retrofitting existing plants? 

Mr. KLARA. Yes. 

Senator MANCHIN. Such as a mountaineer plant. 

Mr. KLARA. So if you were to look at a retrofit opportunity, it 

could add as much as 80 percent to the cost of electricity adding 

CCS. If you were to look at a new technology like gasification, and 

the reason why it gets so much interest is that it’s more conducive, 

you’d add maybe about 35 percent to the cost of electricity. 

If you look, take a snapshot forward on a road map saying what 

might happen in 10 years if the research portfolio is successful? 

Our desires would be we drive that cost down to maybe a 20 percent increase in cost of electricity and a 10-percent increase in cost 

of electricity if all is successful. But there’s still going to be a cost 

increase. 

Senator MANCHIN. We understand. 

Here’s my concern. We’re competing with all these manufacturing, these Third World developing countries, whether it be 

China coming on so strong taking most of our jobs, if you will. You 

have India. You have all the different. 

They’re dealing with a much lower cost base on their energy than 

what we are as I understand. We used to be in a 4 to 6 cent range 

as far as commercial on a kilowatt hour. 

Mr. KLARA. Right. 

Senator MANCHIN. You start driving that up 20, 40, 60, 80 percent expeditiously before. You just give them a greater competitive 

advantage. That doesn’t make sense to us as Americans why we 

would lose more jobs because of our high cost of manufacturing 

when we don’t have the proven technology, I think, is the point 

that I’m making. Why the money should be put on the technology 

or on the research to find the technology. 

Do you see us putting a very disadvantaged competitive situation 

here with China, India? 

Mr. KLARA. I’m a technologist. But certainly it’s a worldwide 

issue and just to go to your point. Now, how that gets addressed 

is way beyond my—— 

Senator MANCHIN. Do any of you all want to speak to that? I 

know you knowing what your cost is. At West Virginia we pulled 

out of the FutureGen because of liability at the end result. We 

were on the forward down to the wire and we supported all noise 

at the back. They were willing to take the whole liability. 
35 

You don’t have any comment on that one do you? I don’t blame 

you. Any of you all have a comment on this competitive advantage 

or disadvantages that we’re putting ourselves in by moving before 

we have technology? 

I think what I’m saying we’re moving policy before technology is 

readily available and that we can put a cost to it, to the point that 

we can still be competitive worldwide. 

Mr. Watson. 

Mr. WATSON. Senator, well I’m not sure I follow you. This bill 

wouldn’t mandate anyone to use CCS. 

Senator MANCHIN. But the reality is is the Federal Government 

is not giving any permits. We’re not expanding. You can’t build 

anything. You can’t do a thing. 

They’ve got you tied up with EPA and everything else because 

unless it has CCS attributed to it, you’re not going to get a permit. 

Mr. WATSON. I’m not aware that that’s the case, Senator. My understanding is that power plants are being permitted and built. 

Senator MANCHIN. Oh, please give me the list where ever you 

found one? 

Mr. WATSON. I’d be happy to get that for you. 

Senator MANCHIN. You’re saying new coal fired plants without 

CCS is being built? 

Mr. WATSON. Yes, sir. I’d be happy to get you something. 

[The information referred to follows:] 

Power Plant Owner State Operating Status Current Generating 

Capacity 

Dry Fork Station Multiple WY Under 

Construction 

385.00 

Edwardsport IGCC Duke Energy Indiana 

Inc. 

IN Under 

Construction 

618.00 

Formosa Point 

Comfort 

Formosa Plastics Corp TX Under 

Construction 

286.20 

Goodland Energy 

Center 

Goodland Energy Center LLC KS Under 

Construction 

25.00 

John W. Turk, Jr. 

UPC 

Multiple AR Under 

Construction 

600.00 

Longview Power Multiple WV Under 

Construction 

700.00 

Plant Ratcliffe 

IGCC (David) 

Mississippi Power Co. MS Under 

Construction 

596.10 

Prairie State Energy Campus Multiple IL Under 

Construction 

1,600.00 

Sandy Creek Multiple TX Under 

Construction 

900.00 

Spiritwood Energy 

Cogen Plant 

Great River Energy ND Under 

Construction 

99.00 

Two Elk One North American 

Power Group 

WY Under 

Construction 

290.00 

Virginia City Hybrid Energy Center Virginia Electric & 

Power Co. 

VA Under 

Construction 

585.00 
36 

Senator MANCHIN. Please, please, please. 

Ms. Greenberg, do you know of any? 

Ms. GREENBERG. Not off the top of my head. 

Senator MANCHIN. I don’t either. I don’t either. 

Mr. Klara, how about you? Do you know any new power plants 

being built, coal fired power plants? 

Mr. KLARA. I’d have to look into that. 

Senator MANCHIN. OK. 

The CHAIRMAN. Thank you all very much. Think it’s been a useful hearing. Appreciate your excellent testimony. 

That will conclude our hearing. 

[Whereupon, at 10:12 a.m., the hearing was adjourned.] 

[The following statement was received for the record.] 

PREPARED STATEMENT OF BEN LUBBON, MANAGING DIRECTOR, JUDE BENEDICT & 

ASSOCIATES, IN BEHALF OF ORIGINOIL AND THE ALGAL BIOMASS INDUSTRY

Thank you Chairman Bingaman, Ranking Member Barrasso, and members of the 

Committee; I appreciate the opportunity to submit public comment for the record 

to promote algae-to-oil technology’s capability and its rapid development of carbon 

capture and storage (CCS). 

After listening to the hearing and reading written testimony; one item was apparent; algae-to-oil technology’s capability to capture and sequester carbon was unfortunately not mentioned. Yet, this was not a fault of any one individual; the technology 

is advancing in great strides ahead of communicating these efforts to Capitol Hill. 

Fortunately, due to the avenue of public comment; I am able to inform you of the 

attributes of this promising technology. 

S. 757 APPLIES TO ALGAE TECHNOLOGY

Algae carbon bio-capture technology is a post-combustion process. It involves no 

geo-sequestration; a pre-combustion process injecting CO2 into the ground. Therefore, S. 699 does not apply to Algae Technology. 

S. 757 IS A GREAT START

First, the bill needs a short title: the Direct Air Carbon Capture Act would suffice. 

S. 757 has two provisions: (1) a direct air carbon dioxide capture prize and (2) 

the initiation of a nine member Carbon Capture Task Force appointed by the administration. 

However, ‘‘algae carbon bio-capture’’ is at a pilot-to-commercial stage at three 

coal-fired power plants in Australia. In the Land Down Under, they are advancing 

free enterprise deploying US technology. In the Land of the Manhattan Project and 

putting Men on the Moon, a prize short sells our proprietary knowledge. We as a 

Nation are better than this. Amending this bill should include financial and legislative support. 

ALGAE-TO-OIL DIRECT AIR CARBON CAPTURE IS SAFER AND PRODUCES MULTIPLE

REVENUE STREAMS

Geo-sequestration: Injecting anything into the ground and not thinking it will end 

up in the water table defies common sense. Environmental groups, with just cause; 

will tie up geo-sequestration projects in the environmental study and review process. And then, there will be the challenges in the Courts. 

Algae Carbon Bio-Capture: Direct-air carbon capture is a multiple proactive ‘‘winwin-win!’’ 

The post-combustion process sucks CO2 directly from the flue stack. Algae growth 

thrives in closed-loop industrial bolt-on bio-reactors and reclaims dirty polluted 

brackish water. A multitude of products from drop-in biofuels, pharmaceuticals, 

neutraceuticals, oil-based chemicals, plastics, human food and supplements, animal 

feed and fertilizer; are just a few of algae’s revenue producing drivers. Research has 

proven algae cures blindness in mice; cures for cancer are soon to follow. The final 

kicker, the remaining biomass left in the closed-loop system, is burned as ‘‘biochar’’ 

which sequesters the CO2 and is used as a soil supplement. 

Algae Technology is also a major job creator. With wind, solar and geo-sequestration technologies; once a project is constructed, there are few jobs to maintain the 
37 

facility. Algae technology, on the other hand, is labor intensive throughout construction, maintenance and production phases of the co-located power plant algae refinery. Jobs downstream from supply distribution networks will be exponential. 

ALGAE TECHNOLOGY’S NEGATIVE

Skeptics and cynics claim if algae technology is so great; then why isn’t it a thriving free market enterprise? Yet, this rings true for all promising technology to overcome throughout History. Fossil fuels still get subsidies; the algae industry just 

wishes for an even playing field. Furthermore; legislative government support is far 

more imperative than federal financial aide. Long-term legislative federal stability 

is what the investment community demands to minimize risk before they will support the free-market. 

The pre-combustion geo-sequestration process is also an unproven technology with 

challenges to overcome. 

CONCLUSION

Previous CCS legislation includes billions of dollars to be allocated. ‘‘Bio-capture’’ 

and geo-sequestration are both viable choices and deserve parity. Both bills deserve 

further review at the committee level before going to a floor vote. There are several 

regions worthy of geo-sequestration; and, there are some that are questionable. 

There are no silver bullets in our pursuit for energy independence; there’s just a 

lot of silver buckshot. We must promote them all in a full climate capitalism approach rather than argue about the ideologies of climate change. Before any decisions are made per energy policy; our government leaders need to hear more from 

its entrepreneurial energy leaders who are taking monumental risks in the name 

of energy independence and national security. 

Thank you for your consideration. 

(39) 

APPENDIX 

RESPONSES TO ADDITIONAL QUESTIONS

RESPONSES OF SALLIE E. GREENBERG TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. In the project that you have been involved with in Illinois that partners with Archer-Daniel Midland, have you encountered any unexpected events or 

unknown risks that your project team did not expect to? Is there anything that has 

impacted your views of the risks associated with geologic CCS? 

Answer. Three categories of unexpected events or risks have occurred during the 

course of the Illinois Basin—Decatur Project (IBDP) in Decatur, Illinois: 1) Geologic/ 

Operational, 2) Material Compliance, and 3) Regulatory Response. 

Geologic/Operational events occurred during the drilling the injection well at 

IBDP when we encountered a carbonate rock unit with dissolution features, which 

caused a loss of circulation of drilling mud. Mitigating this ‘‘lost circulation zone’’ 

resulted in the loss of time and increase in cost to drill the well. Risks such as this 

are common when little direct geologic information, such as stratigraphic well logs 

and samples, is available. Risk mitigation for the second, deep monitoring well, benefitted from the knowledge of the lost circulation zone and a mitigation strategy was 

put into to place, such that minimal time was lost and limited cost incurred. Events 

such as these speak to the necessity of Applicants under S.699 needing to have substantial geologic data available when applying for liability assurance from the Secretary. 

Material Compliance with Underground Injection Control (UIC) Class VI regulations may prove to be difficult. An example from the IBDP is in our preemptive decision to use chrome steel in the lower 2,000’ of the injection interval. This decision 

was made in anticipation of the Class VI regulations (which were in the rulemaking 

process at the time) that would require the use of carbon dioxide (CO2) resistant 

well construction materials. We were initially unable to find chrome steel casing for 

the injection well and ultimately found the material in a yard in Aberdeen, Scotland. The material was shipped to our location, inspected, and approved for use. 

This material shortage potential may result in operators using materials that do not 

meet the UIC regulations and will have to be closely monitored. 

Lastly, while not an environmental or operational risk, but a significant risk for 

researchers and future commercial investors, is the lack of knowledge of densephase CO2 and oil field (or deep subsurface) technologies applicable to carbon capture and storage (CCS) on the part of regulators. To date, our permitting process 

has extended over 3+ years and continues to be extended as the Class VI regulations are put into place. That lack of knowledge has to be remedied by targeted 

training, otherwise wider deployment beyond the research phases and the long-term 

monitoring responsibility of the Environmental Protection Agency will be hampered. 

Question 2. I am aware that you have worked very deeply in the areas of public 

outreach, awareness, and acceptance issues of geologic CCS. Based on your research—what have been the biggest areas of concern for public stakeholders? Do you 

have any recommendations for project developers as they undertake these types of 

large-scale CCS projects? 

Answer. The most commonly expressed concerns we encounter relate to two areas: 

1) subsurface misconceptions, and 2) surface technical and nontechnical issues. 

Public concerns about the concept of CCS stem from misconceptions about the nature of the subsurface. Members of the general public often perceive that CO2 will 

be stored in large underground caverns and lack knowledge of the actual process 

of storage, which takes place in small rock pore spaces. This perception is further 

compounded by the perceived uncertainty of earthquake impacts on stored CO2. In 

fact, the most frequently asked questions we encounter are, ‘‘What will happen to 

stored CO2 in the event of an earthquake?’’ and ‘‘Will CO2 injection cause earthquakes?’’ Additional subsurface concerns focus on the displacement of brine during 

CO2 injection and the perception that brine migration will result in contamination 
40 

of fresh water or migration to the surface. With careful explanation, physical models, and demonstration tools, these concerns can be addressed and alleviated. Future 

project developers should avail themselves of CCS communication experts and utilize best practices manuals to develop public engagement strategies. Engaging and 

informing the public will be essential to commercial deployment. 

Surface technical and nontechnical issues are also of great concern to the public, 

especially landowners in close proximity to CCS projects. We have experienced landowners who after discussions express no further concern with the subsurface storage 

concept of CCS, but rather are concerned with what bringing a CO2 pipeline 

through their driveway will do to their property values and/or ability to use the 

area. Issues such as the perceived decrease in property value due to stored CO2, liability over stored CO2 after the close of a project, and distrust of government to 

adequately regulate project developers and protect citizens are often expressed. 

Project developers will need to be held to the highest performance standards in 

order to warrant the trust of the public. In addition, liability funds or other financial 

mechanisms will need to be adequately managed, regulators properly trained, and 

commercial projects successfully operated for long periods of time in order to minimize public concerns. 

RESPONSES OF CHIARA TRABUCCHI TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. Can you speak briefly on what you think the real vs. perceived risks 

for a given geologic CCS project are? 

Answer. There are a number of studies which have attempted to identify and assess the range of risks potentially related to CCS during the project lifecycle, and 

which give rise to the need for financial responsibility (see, for example, Donlan and 

Trabucchi, 2010; Trabucchi et al., 2009; Trabucchi and Patton, 2008; Bacanskas et 

al., 2009; WRI, 2008; DOE, 2007; OSPAR, 2007). 

Briefly stated, CCS may adversely impact human health and the environment 

through a variety of pathways (see, IPCC, 2005 for a broad based discussion of these 

impacts from the operational phase of a CO2 capture unit, and Bacanskas et al., 

2009 for how adverse impacts could impact human and ecological receptors during 

the lifecycle of a CO2 storage operation). Specifically, CCS risks include, but are not 

limited to: (1) groundwater contamination; (2) surface/subsurface trespass, (3) asset 

infringement, (4) bodily injury; (5) property damage; (6) ecological damage; and/or 

(7) business interruption. 

Delimiting factors that will influence the degree of injury at a particular CCS 

project include site-specific geology and geochemistry, proximity to population centers, infringement of valuable (sub)surface resources, increasingly scarce sources of 

potable surface and ground water, and protected or sensitive (endangered) habitats. 

The nature and degree to which one or more of these factors are applicable to a particular CCS project will shape its risk profile and create the potential for financial 

consequences in the form of corrective action (e.g., mitigation, remediation expenses) 

and/or compensatory damages. Establishing permitting and performance-based 

standards to ensure sound siting, design, operation and management of the CCS 

project will contribute to risk mitigation and limit the degree to which harm or injury, and attendant compensatory damages arise. 

Question 2. Where do you think the hardest economic step or gap is for project 

developers? CCS project financiers? What can project developers do to reduce the 

risks perceived by project financers? In other words, what is the financial community the most concerned with for CCS projects? 

Answer. When considering whether or not to invest in a project, developers and 

financiers will assess the degree to which the project will realize a net positive return on investment. A generally accepted practice in investment valuation is conducting a discounted cash flow analysis. This type of analysis considers the present 

value of the project’s forecasted cash flows, net of the project’s initial investment. 

If the net present value (NPV) is greater than zero, then the project is accepted. 

If the NPV is less than zero, then the project is rejected. Essentially, developers and 

financiers are seeking value creation which will result in positive cash flows, and 

therefore positive return on investment. 

Project financing that relies on this type of analysis necessitates the ability to 

identify and value the stream of a project’s cash flows. To effectively assess the 

project’s NPV, a degree of certainty is required with respect to: (1) the cash flows 

generated by the project; (2) the cost of investing in the project; and (3) the terminal 

value of the assets comprising the project, i.e., either salvage, or sale. Projects with 

positive cash flows, minimal costs, and high terminal value represent strong investment potential to project financiers. 
41 

In my view, the limited analytic evaluation of the range of potential impacts, and 

corresponding financial consequences attributable to individual CCS projects, has 

hindered project financing. On a project-specific basis, answers are needed to the 

questions: ‘‘What are the dollar amounts that need to be managed?’’ ‘‘Under what 

set of circumstances, will amounts present?’’ ‘‘Across what time frame will these dollars be needed?’’ I believe that focus on anecdotal references with respect to possible 

financial consequences arising from CCS projects has contributed to unreasonable 

expectations and misunderstandings with respect to the amount and timing of funds 

necessary for the responsible deployment of CCS. As a result, the developer and 

project financier’s ability to accurately forecast key variables in the project’s NPV, 

i.e., the ‘cost of investing in the project’ and ‘the terminal value of the project’s assets’, is limited. As long as financiers are unable to reduce a CCS project to its net 

present value, they are unlikely to place their investment capital behind the technology. 

In addition, the public debate on ‘liability’ as it relates to the long-term stewardship of CCS projects, i.e., who should bear financial responsibility for paying claimants when damages occur, has clouded the ability of project financiers to accurately 

assign a risk premium to their calculus of whether CCS represents a viable business 

venture. In my view, S. 699 is a measurable step forward in offering a measure of 

certainty with respect to this issue. 

Question 3. You state in your testimony on page 5 that the bill should include 

a requirement for the explicit evaluation of potential human health and environmental impacts from a financial perspective. Would a requirement for a financial 

risk analysis on a per applicant/project basis fulfill this need? 

Answer. Yes, as long as the requirement for a financial risk analysis explicitly includes consideration of the financial consequences arising from possible human 

health and/or environmental impacts on a per applicant/project basis. 

References 

Bacanskas, Lisa, Anhar Karimjee, Kaylene Ritter, Toward practical application of 

the vulnerability evaluation framework for geological sequestration of carbon dioxide, Energy Procedia, Volume 1, Issue 1, Greenhouse Gas Control Technologies 9, 

Proceedings of the 9th International Conference on Greenhouse Gas Control Technologies (GHGT-9), 16-20 November 2008, Washington DC, USA, February 2009, 

Pages 2565-2572, ISSN 1876-6102, DOI: 10.1016/j.egypro.2009.02.021. 

Donlan, Michael and Chiara Trabucchi, Valuation of Consequences Arising from 

CO2 Migration at Candidate CCS Sites in the U.S., Energy Procedia, Volume 4, Proceedings of the 10th International Conference on Greenhouse Gas Control Technologies (GHGT-10) (2011) Pages 2222-2229, doi:10.1016/j.egypro.2011.02.110. 

Intergovernmental Panel on Climate Change (IPCC). 2005. Special Report on Carbon Dioxide Capture and Storage. Prepared by Working Group III of the Intergovernmental Panel on Climate Change [Metz, B.,O. Davidson, H. C. de Coninck, M. 

Loos, and L. A. Meyer (eds.)] Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. 

OSPAR Commission. 2007. OSPAR Guidelines for Risk Assessment and Management of Storage of CO2 Streams in Geological Formations. OSPAR Convention for 

the Protection of the Marine Environment of the North-East Atlantic. Reference 

Number: 2007-12 

Trabucchi, Chiara, Michael C. Donlan, Sarah Wade, A Multi-Disciplinary Framework to Monetize Financial Consequences Arising from CCS Projects and Motivate 

Effective Financial Responsibility. International Journal of Greenhouse Gas Control: 

GHGT9 Special Issue. October 2009. 

Trabucchi, Chiara and L. Patton. 2008. Storing Carbon: Options for Liability Risk 

Management, Financial Responsibility. The Bureau of National Affairs, Inc., Daily 

Environment, Vol. 2008, No. 170, 09/03/2008. 

U.S. Department of Energy (DOE). December 22, 2006; (Revision 1 April 2007); 

(Revision 2 October 2007). Final Risk Assessment Report for the FutureGen Project 

Environmental Impact Statement; Contract No. DE-AT26-06NT42921. 

World Resources Institute (WRI). 2008. CCS Guidelines: Guidelines for Carbon Dioxide Capture, Transport and Storage. Washington DC: WRI. 

RESPONSES OF SCOTT KLARA TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. While you state in your testimony that the official DOE position is 

that the bills are still under review, is it your opinion that a program such as that 

S. 699 is a program that your office could oversee and facilitate? In other words, 
42 

do you have workforce and technical capabilities to administer the indemnity program laid out in the bill? 

Answer. The Administration is still reviewing S. 699 and S. 757 and does not 

have a position on either bill at this time. However, as part of the plan proposed 

by the Interagency Task Force on Carbon Capture and Storage: 

‘‘Efforts to improve long-term liability and stewardship frameworks 

should continue. By late 2011, EPA, DOE, Department of Justice (DOJ), 

DOI, and Treasury should further evaluate and provide recommendations 

to address long-term liability and stewardship in the context of existing and 

planned regulatory frameworks. Of the seven options identified by the Task 

Force, the following four approaches, or combinations thereof, should be 

considered: (1) reliance on the existing framework for long-term liability 

and stewardship; (2) adoption of substantive or procedural limitations on 

claims; (3) creation of an industry-financed trust fund to support long-term 

stewardship activities and compensate parties for various types and forms 

of losses or damages that occur after site closure; and (4) transfer of liability to the Federal government after site closure (with certain contingencies). 

Open-ended Federal indemnification should not be used to address longterm liabilities associated with CO2 storage.’’ 

Question 2. Are there currently projects in the CCS program that would be of the 

scale and caliber that would qualify for the program specified in S. 699? 

Answer. The DOE has multiple CCS demonstrations projects underway (through 

the Clean Coal Power Initiative, FutureGen 2.0, and Industrial Carbon Capture and 

Storage) as well as a set of large-scale injection tests through the Regional Carbon 

Sequestration Partnerships (RCSPs) that would likely fit the project definition contained in the bill. However, the Administration is still reviewing S. 699 and S. 757 

and does not have a position on either bill at this time. 

RESPONSES OF MATT WATSON TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. EDF has worked very closely with the states in helping to develop the 

regulatory mechanisms for geologic CCS projects. Is there one state in particular 

that has most accurately quantified risk and liability for these projects that we 

could use as model or example for thinking about this federal legislation? 

Answer. Although no state has created a fully adequate model, North Dakota and 

Texas each have experience to share that the Committee could find useful. Both 

states have examined these issues in the context of setting fees for trust funds and 

processing of permits. 

Question 2. Have you encountered any CCS projects that have incurred liabilities 

(even at the pilot to demonstration scale)? 

Answer. We are not aware of any CCS projects that have incurred liabilities. 

Question 3. You mentioned the coal plants and siting at the hearing—to get specifically at the issue of coal plant siting—what are the requirements for new coal 

plant construction under BACT regulations? Can you provide a list of coal plants 

under siting and construction? 

Answer. Senator Manchin raised the issue of coal plant permitting during the 

hearing. If I understood him correctly, his belief is that CCS is not a fully-developed, 

commercially-available technology and, yet, EPA regulations are requiring permit 

applicants for coal-fired generating units to employ CCS—and that permits were 

being denied because applicants weren’t planning to use CCS. 

To our knowledge, there has been no case in which a permitting agency has denied an air permit for a coal-fired power plant on the grounds that the applicant 

failed to employ CCS as a control technology for greenhouse gas emissions. 

Under the Clean Air Act’s Prevention of Significant Deterioration (PSD) Program 

(§§ 165-169), any major stationary source of air pollutants that is to be constructed 

or undergo a major modification must obtain a permit that includes an emissions 

limitation for each pollutant regulated under the Clean Air Act. The emissions limitation is based on a source-specific analysis, conducted by the state or federal permitting authority, to identify the Best Available Control Technology (BACT) for that 

source. In Step 1 of a BACT analysis, all available pollution control options are identified. In Step 2, technically infeasible options are eliminated. In Step 3, the list of 

available and technically feasible controls are ranked in terms of environmental effectiveness. In Step 4, economic, energy, and environmental impacts are considered 

in determining whether each control option is ‘‘achievable.’’ After identifying the 

most environmentally effective control option that is achievable, the permitting authority then specifies an emissions limitation for the source that reflects the max-
43 

1 Environmental Protection Agency, ‘‘PSD and Title V Permitting Guidance for Greenhouse 

Gases,’’ p. 35-36 (March 2011). 

imum degree of reduction achievable for the pollutant considering economic, energy 

and environmental impacts. Although a source is required to meet the emissions 

limitation, it is not required to install the control technology used in the BACT analysis to derive the emission limit. 

After conducting extensive stakeholder outreach, the Environmental Protection 

Agency released guidance for state permitting authorities to use in identifying 

BACT for sources requiring PSD permits for their greenhouse gas emissions. In that 

guidance, EPA specifically discussed the potential for CCS to be identified as BACT 

by a permitting authority: 

[A]lthough CCS is not in widespread use at this time, EPA generally considers CCS to be an ‘‘available’’ add-on pollution control technology for facilities emitting CO2 in large amounts and industrial facilities with highpurity CO2 streams. Assuming CCS has been included in Step 1 of the topdown BACT process for such sources, it now must be evaluated for technical 

feasibility in Step 2. CCS is composed of three main components: CO2 capture and/or compression, transport, and storage. CCS may be eliminated 

from a BACT analysis in Step 2 if it can be shown that there are significant 

differences pertinent to the successful operation for each of these three 

main components from what has already been applied to a differing source 

type. For example, the temperature, pressure, pollutant concentration, or 

volume of the gas stream to be controlled, may differ so significantly from 

previous applications that it is uncertain the control device will work in the 

situation currently undergoing review. Furthermore, CCS may be eliminated from a BACT analysis in Step 2 if the three components working together are deemed technically infeasible for the proposed source, taking 

into account the integration of the CCS components with the base facility 

and site-specific considerations (e.g., space for CO2 capture equipment at an 

existing facility, right-of-ways to build a pipeline or access to an existing 

pipeline, access to suitable geologic reservoirs for sequestration, or other 

storage options). 

While CCS is a promising technology, EPA does not believe that at this 

time CCS will be a technically feasible BACT option in certain cases. As 

noted above, to establish that an option is technically infeasible, the permitting record should show that an available control option has neither been 

demonstrated in practice nor is available and applicable to the source type 

under review. EPA recognizes the significant logistical hurdles that the installation and operation of a CCS system presents and that sets it apart 

from other add-on controls that are typically used to reduce emissions of 

other regulated pollutants and already have an existing reasonably accessible infrastructure in place to address waste disposal and other offsite 

needs. Logistical hurdles for CCS may include obtaining contracts for offsite 

land acquisition (including the availability of land), the need for funding 

(including, for example, government subsidies), timing of available transportation infrastructure, and developing a site for secure long term storage. 

Not every source has the resources to overcome the offsite logistical barriers 

necessary to apply CCS technology to its operations, and smaller sources 

will likely be more constrained in this regard. Based on these considerations, a permitting authority may conclude that CCS is not applicable to 

a particular source, and consequently not technically feasible, even if the 

type of equipment needed to accomplish the compression, capture, and storage of GHGs are determined to be generally available from commercial vendors.1

In discussing consideration of CCS under Step 4 of the BACT process, EPA noted 

that: 

[A]t present CCS is an expensive technology, largely because of the costs 

associated with CO2 capture and compression, and these costs will generally make the price of electricity from power plants with CCS uncompetitive compared to electricity from plants with other GHG controls. Even if 

not eliminated in Step 2 of the BACT analysis, on the basis of the current 

costs of CCS, we expect that CCS will often be eliminated from consideration in Step 4 of the BACT analysis, even in some cases where underground storage of the captured CO2 near the power plant is feasible. However, there may be cases at present where the economics of CCS are more 
44 

2 Id. at 42-43. 

3 Environmental Protection Agency, ‘‘Available and Emerging Technologies for Reducing 

Greenhouse Gas Emissions from Coal-Fired Electric Generating Units,’’ p. 26-35 (October 2010). 

favorable (for example, where the captured CO2 could be readily sold for enhanced oil recovery), making CCS a more viable option under Step 4. In addition, as a result of the ongoing research and development described in the 

Interagency Task Force Report noted above, CCS may become less costly 

and warrant greater consideration in Step 4 of the BACT analysis in the 

future.2

EPA’s analysis of control options was primarily focused on power plant efficiency 

measures that could be put in place as a means to reduce the quantity of greenhouse gases emitted per unit of energy produced.3

While there have been several coal plant cancellations over the past two years, 

these cancellations have primarily been the product of reduced energy demand resulting from the increasing costs and financing difficulties, the economic downturn 

and low natural gas prices—not regulatory requirements relating to greenhouse 

gases. Further, the requirement to obtain an air permit for greenhouse gases under 

the Clean Air Act only recently took effect, becoming operative on January 2, 2011. 

And while natural gas power plants are increasingly considered a more financially 

attractive option for new fossil fuel-based generation, there are coal-fired projects 

pending in various stages of development. The SNL Financial power plant data base 

describes the twelve coal fired power plants listed below as under construction. 

Power Plant Owner State Operating Status Current Generating 

Capacity 

Dry Fork Station Multiple WY Under 

Construction 

385.00 

Edwardsport IGCC Duke Energy Indiana 

Inc. 

IN Under 

Construction 

618.00 

Formosa Point 

Comfort 

Formosa Plastics Corp TX Under 

Construction 

286.20 

Goodland Energy 

Center 

Goodland Energy Center LLC KS Under 

Construction 

25.00 

John W. Turk, Jr. 

UPC 

Multiple AR Under 

Construction 

600.00 

Longview Power Multiple WV Under 

Construction 

700.00 

Plant Ratcliffe 

IGCC (David) 

Mississippi Power Co. MS Under 

Construction 

596.10 

Prairie State Energy Campus Multiple IL Under 

Construction 

1,600.00 

Sandy Creek Multiple TX Under 

Construction 

900.00 

Spiritwood Energy 

Cogen Plant 

Great River Energy ND Under 

Construction 

99.00 

Two Elk One North American 

Power Group 

WY Under 

Construction 

290.00 

Virginia City Hybrid Energy Center Virginia Electric & 

Power Co. 

VA Under 

Construction 

585.00 

Æ