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[Senate Hearing 111-652]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 111-652

              CARBON CAPTURE AND SEQUESTRATION LEGISLATION

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                                   TO

  RECEIVE TESTIMONY ON CARBON CAPTURE AND SEQUESTRATION LEGISLATION, 
      INCLUDING S. 1856, S. 1134, AND OTHER DRAFT LEGISLATIVE TEXT

                               __________

                             APRIL 20, 2010

                       Printed for the use of the
               Committee on Energy and Natural Resources

                  U.S. GOVERNMENT PRINTING OFFICE
61-699 PDF                WASHINGTON : 2010
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20402-0001

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Barrasso, Hon. John, U.S. Senator From Wyoming...................     5
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Brownstein, Mark S., Deputy Director, Energy Program, 
  Environmental Defense Fund.....................................    40
Casey, Hon. Robert P., Jr., U.S. Senator From Pennsylvania.......     2
Castle, Anne, Assistant Secretary for Water and Science, 
  Department of the Interior.....................................    13
Hilton, Robert, on Behalf of Ms. MacNaughton, CB, Senior Vice 
  President, Power and Environmental Policies, Alstom Power......    29
House, Kurt Zenz, Ph.D., President, C12 Energy Research Fellow, 
  MIT............................................................    43
Markowsky, James, Assistant Secretary for Fossil Energy, 
  Department of Energy...........................................     6
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     4
Vann, Adam S., Legislative Attorney, American Law Division, 
  Congressional Research Service.................................    47
Yamagata, Ben, Executive Director, Coal Utilization Research 
  Council........................................................    33

                                APPENDIX

Responses to additional questions................................    63

 
              CARBON CAPTURE AND SEQUESTRATION LEGISLATION

                              ----------                              

                        TUESDAY, APRIL 20, 2010

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:03 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. OK, why don't we go ahead?
    Welcome everyone today. I thank the witnesses who are 
testifying before the committee on these bills. This is a 
hearing on S. 1856 and S. 1134, as well as a legislative 
discussion draft proposed by Senators Rockefeller and 
Voinovich.
    These bills each focus on important issues associated with 
the deployment of commercial carbon dioxide capture and 
storage, CCS technologies. S. 1856 focuses on the issue of pore 
space ownership in the subsurface below Federal lands. S. 1134 
focuses more broadly on CCS research, development, and 
demonstration related generally to clean coal power generation. 
The draft legislation aims to accelerate the commercial 
viability of CCS technologies and methods by supporting 
commercial-scale demonstrations of integrated CCS technology 
projects.
    The topic of reducing greenhouse gases, particularly carbon 
dioxide emissions, remains of great concern to this committee 
and to myself. Carbon capture and storage holds promise as one 
means that can be used to mitigate global climate change, while 
still allowing the use of fossil fuels at electricity-
generating plants and industrial facilities.
    With discussions centered on coal use in a carbon-
constrained world, integrated carbon capture and storage 
systems may present 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.
    Last May, I introduced S. 1013. That was legislation that 
focused on reducing some of the uncertainty for CCS project 
developers by providing an indemnity program for the first 10 
early mover commercial-scale CCS projects. We had a hearing in 
this committee that received testimony not just on that bill, 
but also on the issues that are being discussed today, 
particularly on pore space ownership.
    S. 1013 did make it through the committee process. It is 
now part of the larger energy bill that we have reported from 
this committee. However, much work still needs to be done to 
scale up CCS technologies to meet the level of carbon 
reductions that are needed to mitigate the effects of climate 
change.
    Earlier this year, President Obama announced he would begin 
charting a path toward a cleaner future for coal use by 
initiating the Interagency Task Force on Carbon Capture and 
Storage. The task force, which is co-chaired by one of our 
witnesses today--Dr. Markowsky from the Department of Energy--
is working to develop a plan to overcome the barriers to 
widespread cost-effective deployment of CCS within 10 years.
    We look forward to hearing more about what that task force 
has identified as challenges for CCS deployment, also to how 
we, as members of this committee, can work with the 
administration to address and overcome some of those 
challenges.
    I would like to begin by welcoming the original bill 
sponsors who have come to speak to us today. Senator Casey is 
here to speak on the issue of S. 1134, and Senator Barrasso, 
who is, of course, a valued member of this committee, will 
introduce his and talk about his bill, S. 1856.
    So, Senator Casey, why don't you go ahead and tell us 
anything we need to know about your proposed legislation?
    Senator Casey. Thank you very much, Chairman Bingaman and 
Ranking Member----
    The Chairman. Excuse me, I'm sorry. Senator Murkowski needs 
to give an opening statement here before we call on you.
    Senator Murkowski. Mr. Chairman, I respect the fact that we 
have conflicting schedules. So if Senator Casey needs to move 
to another committee hearing this morning, I would certainly be 
happy to defer my opening to allow you to give yours, if you 
would like.

   STATEMENT OF HON. ROBERT P. CASEY JR., U.S. SENATOR FROM 
                          PENNSYLVANIA

    Senator Casey. Thank you very much. Chairman and Ranking 
Member Murkowski, I appreciate the courtesy.
    Senators Barrasso, Bunning, and Burr as well, thank you for 
this opportunity.
    I wanted to talk briefly--and it will be brief, I know we 
have other witnesses here--about the bill that I introduced, S. 
1134, the Responsible Use of Coal Act of 2009.
    The bill provides the Department of Energy's National 
Energy Technology Laboratory with the funding needed to 
accelerate research, development, and demonstration and, 
ultimately, the deployment of carbon capture and storage 
technology and other critical advanced coal power generation 
technology needed to respond to climate change. Further, the 
bill would position the United States as the world leader in 
CCS technology development and export, creating the potential 
for thousands of new clean energy jobs.
    Climate change is one of the most complex and challenging 
imperatives that our Nation and even the world has ever faced. 
We need to move forward in crafting legislation that will 
reduce greenhouse gas emissions, encourage the use of renewable 
power, and create clean energy jobs.
    As we move forward, we must do so in a manner that will 
ensure our energy security and protect our industries from so-
called ``carbon leakage'' and help get our economy back on 
track and enable us to continue to benefit from our most 
abundant, affordable energy resource, and that is coal. Today, 
coal provides over half of the Nation's electricity. It helps 
keep American homes, businesses, factories, airports, schools, 
and hospitals humming and creates millions of good-paying jobs 
across all sectors of the economy.
    Further, much of the world depends upon coal. Large 
economies like China and India are increasingly relying upon 
coal to power them into the 21st century.
    While the use of coal in the United States has more than 
tripled since 1970, emissions of sulfur dioxide, nitrogen 
oxide, and particulate matter from power plants have been 
dramatically reduced, reduced, as the power industry deploys 
technologies for capturing these pollutants. This illustrates 
how advanced technology has allowed coal to remain a critical 
component of the Nation's energy strategy in the face of ever-
increasing environmental requirements.
    However, the continued use of coal in the United States and 
abroad is facing its toughest challenge ever. That is how to 
use this abundant resource without having a negative impact on 
our climate.
    Coal combustion is the largest source of CO2 
emissions, both domestically and globally. Therefore, the 
technology needs to be developed that can cost effectively 
capture and store or reuse the CO2 emitted by the 
coal-fired plants and large industrial sources of greenhouse 
gases. My bill, S. 1134 supports the continued research, 
development, and demonstration of CCS technology being carried 
out by the Department of Energy's National Energy Technology 
Laboratory.
    Just quick highlights of the bill. First of all, the bill 
would promote the continued large-scale commercial 
demonstration and, ultimately, the deployment of the most 
promising integrated CCS systems.
    Second, the bill would promote the continued research and 
development of advanced pre-combustion, oxy-combustion, and 
post combustion CO2 capture technology and 
geological storage concepts in order to drive down costs, 
increase performance, and foster innovation. It is critical 
that in addition to the commercial demonstration of current CCS 
technology, we continue to develop and advance new CCS ideas 
and concepts through a robust research and development program 
in order to continue to lower the cost of CO2 
capture and storage.
    Next, the bill will promote the continued research and 
development of other coal power generation technologies, 
including gasification, combustion turbines, fuel cell, and 
hydrogen production.
    Next, the bill will promote the export of U.S. CCS 
technology to those countries such as China and India, which 
rely upon coal as their dominant energy source, ensuring that 
the United States is the leader in developing and exporting 
clean coal technologies and taking advantage of thousands of 
new clean energy jobs such as this industry would create.
    I should point out that a critical outcome of the 
implementation of this bill will be the data necessary to 
support the creation of a framework to address the liability 
and long-term stewardship of commercial geological 
CO2 storage operations. Such a framework was 
introduced last year by Senator Enzi and I in the Carbon 
Storage Stewardship Trust Fund Act of 2009.
    Let me close by saying that I applaud the work of this 
committee and your committee's efforts in particular to 
recognize the important role that coal plays in driving our 
economic engine every day. I look forward to working with you 
to move forward legislation that will accelerate the research, 
development, demonstration, and deployment of CCS and advanced 
coal technology.
    I appreciate this opportunity, and I appreciate the 
willingness of the ranking member to allow me to jump ahead of 
the line. It doesn't happen very often in Washington, but we 
are grateful.
    Thank you, Mr. Chairman.
    The Chairman. All right. Thank you very much for your 
statement. Unless any member has a question, we will allow you 
to get on to your other responsibilities.
    Senator Murkowski, why don't you go ahead with any 
statement you have?

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman.
    I am pleased to be able to provide that opportunity to 
Senator Casey, and I look forward to Senator Barrasso speaking 
to his legislation as well.
    Mr. Chairman, you mentioned in your opening comments our 
bipartisan energy bill that we moved through this committee 
sometime ago. I have stated before that I would like to see us 
take this up, debate it on the floor, and move it to the 
President.
    But hearings like this remind us that there is always more 
that we can do in this committee and to provide an opportunity 
to hear from agencies and stakeholders about the progress that 
we have made. I think we will be getting some of that this 
morning.
    I think CCS is a perfect example. Its applications are 
broad, including enhanced oil recovery, cement mixtures, or 
merely underground injections for the sake of climate. It can 
be applied to a number of fossil feedstocks, but of course, 
coal-fired projects appear to be the most promising to start 
with.
    Carbon sequestration is the newest entrant into how we mark 
the difference between regular coal and clean coal. Over the 
years I think that that definition of clean coal, how we define 
it, has shifted and perhaps dramatically. Where once it meant 
that particulate sulfur dioxide, mercury, and other emissions 
had been reduced, it now means we must separate and sequester 
the carbon building blocks of the fuel itself. It makes sense 
to ask more of a fuel that is already so cheap, so abundant, 
particularly in light of what we are seeing with our changing 
climate.
    Our recent experience has shown what a complicated endeavor 
carbon sequestration can be and the need for the responsible 
policies to promote it. Attempts to deploy this technology have 
raised questions about everything from liability and 
infrastructure to chemical reactions and ownership of pore 
space.
    We have made strides in many of these areas, but hopefully, 
today's hearings will help us advance just a little bit 
further. Ultimately, it is my hope that coal can be used not 
just more cleanly, but more broadly as well. We have some great 
opportunities through gasification for expanding the 
application of this abundant domestic resource to make America 
more secure from an energy standpoint.
    We know that Senator Dorgan is well aware of these 
opportunities, as his State hosts the only facility to convert 
coal into synthetic natural gas there in North Dakota. That 
project makes a number of valuable commodities and sequesters 
much of its carbon dioxide emissions through the enhanced oil 
recovery.
    In my State, we have a project that is being looked at by 
Cook Inlet Region, Inc. This is looking at avoiding the need to 
mine coal seams altogether with a technology called in situ 
gasification. This process could provide synthetic gas to power 
a 100-megawatt generating plant, bring a whole new supply of 
electricity to the region for economic development, and we are 
very intrigued about the prospects.
    So the goalposts are moving for coal, but I think that we 
can keep up with it. I am glad to see both the Interior and 
Energy Departments here this morning. These contributions from 
your departments are essential if we are going to succeed in 
making the best possible use of our domestic coal reserves.
    Whether it is coal and carbon sequestration, rare earths or 
green technologies, or nuclear power and a stable supply of 
uranium, it is essential that agencies coordinate so that their 
policies do not conflict with one another. So I am also glad 
that we are going to have a second panel this morning of 
experts and stakeholders about the progress that can be made in 
advancing carbon sequestration as quickly as possible.
    Again, I would like to thank the sponsors of the 
legislation that we will have here before us this morning, and 
I just appreciate their good work in moving this forward.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Barrasso, do you want to give us a short 
introduction as to your legislation, and then we will go to the 
witnesses?

         STATEMENT OF HON. JOHN BARRASSO. U.S. SENATOR 
                          FROM WYOMING

    Senator Barrasso. Thank you very much, Mr. Chairman.
    I welcome the witnesses. As we have heard from Senator 
Casey and Senator Murkowski, coal is an essential part of 
America's energy future. Right now, half of the electricity in 
the United States comes from coal.
    Coal is affordable, abundant, and reliable. Most 
importantly, coal is an American energy resource, and America 
cannot afford to leave stranded its most abundant, commercially 
viable energy resource.
    Coal creates American jobs. It generates revenues for 
Federal, State, and local governments, and it enhances 
America's energy security.
    So to make commercial-scale carbon sequestration a reality, 
we must provide the legal and the regulatory framework to do 
so. We must address the long-term liability. I want to thank 
Chairman Bingaman for his leadership on the liability issue. I 
am an original co-sponsor of the chairman's bill.
    I introduced legislation clarifying pore space ownership 
under the Federal surface estate. Determining pore space 
ownership is a key aspect of creating the legal framework that 
is needed for carbon sequestration.
    Addressing these questions is essential to ensuring the 
long-term viability of coal. That is why I have introduced S. 
1856, the Federal pore space ownership legislation, which 
essentially defines pore space as the subsurface space of any 
size that can be used to store carbon dioxide or other 
substances. It clarifies that the Federal Government owns the 
pore space below Federal land.
    So, with that, Mr. Chairman, I want to thank the witnesses. 
I look forward to their testimony and have some questions after 
that.
    The Chairman. Thank you very much.
    Our first panel here, as I have mentioned, is made up of 2 
officials--Jim Markowsky, who is the Assistant Secretary of 
Fossil Energy in the Department of Energy, and Ann Castle, who 
is the Assistant Secretary for Water and Science in the 
Department of the Interior. We appreciate both of them being 
here.
    Dr. Markowsky, why don't you start, and we will hear from 
you. Then, Anne Castle, we will hear from you.

 STATEMENT OF JAMES MARKOWSKY, ASSISTANT SECRETARY FOR FOSSIL 
                  ENERGY, DEPARTMENT OF ENERGY

    Mr. Markowsky. Thank you, and good morning, Mr. Chairman 
and members of the committee.
    I appreciate the opportunity to appear before you today. I 
will be addressing the congressional interest in CCS as 
demonstrated by bills introduced by Senators Casey, Barrasso, 
and the legislative action drafted by Senators Rockefeller and 
Voinovich.
    As you consider these proposals and the issues they seek to 
address, I believe it would be beneficial to update you on the 
Office of Fossil Energy's program to advance CCS technology. 
Our CCS program is boosted by receiving $3.4 billion for CCS 
through the Recovery Act. This is complemented by $600 million 
from our CCPI program.
    Our CCS program primarily focuses on coal now, which 
provides nearly half of the U.S. electric generation. But CCS 
will be required for both coal- and gas-fired systems to meet 
long-term CO2 reduction goals. Our research is 
focused chiefly on the technical and economic challenges to 
commercially deploy CCS technologies for use in electric power 
generation and also industrial facilities.
    We have 4 key areas in our coal program, and that is 
developing technologies for global competitive CO2 
capture; establish long-term basis for geological storage and 
CO2 reuse; improve efficiency of both existing and 
new coal-based power plants, which directly reduces the 
CO2 emissions and reduces the requirement for 
capture and storage and also reduces coal use; computer 
modeling and simulation from the molecular level to the 
integrated plant level, along with geological reservoir 
modeling.
    Right now, we are pursuing large-scale demonstrations of 
the current first-generation CCS technologies. We are 
partnering with industry to build large-scale CCS demonstration 
facilities to gain invaluable experiences with integration of 
the CCS operations into power generation facilities and 
industrial plants by 2015.
    We have 3 major programs. The first is our Clean Coal Power 
Initiative 3, which is a coal-based power generation for CCS 
with CO2 storage and beneficial uses, such as EOR.
    The next is our FutureGen program, and we have been working 
with our FutureGen Alliance and currently reviewing the 
continuation application for moving this project forward. We 
also have solicitations that we are reviewing for our 
industrial CCS program, and we are currently reviewing those 
applications with the intent of making final selections in June 
of this year.
    From these programs, we anticipate having 8 to 10 large-
scale CCS demonstration facilities operational in the 2015 
timeframe. First-generation CCS costs are very high. Post 
combustion typically increases COE by--cost of electricity by 
70 to 80 percent. Pre-combustion typically will increase that 
by 30 percent.
    To drive down the costs of CCS, we are pursuing in parallel 
with the first-generation technology demonstrations, research 
and development to increase the power plant efficiency and 
develop advanced second-generation technologies. These include 
advanced carbon capture on retrofit of coal power plants, which 
will increase the efficiency and reduce the cost penalty by 
approximately one-third that of noncapture configurations.
    Advanced gasification increases the efficiency advantage by 
3 percentage points and, again, reduces the cost penalty by a 
third. Ultra supercritical steam cycle, where we are looking at 
temperatures of upwards of 1,300 degrees where currently we 
have 1,100 degrees, efficiency advantage of over 3 percentage 
points and, again, a cost reduction of approximately one-third 
of the penalty.
    Oxy-combustion, we are looking at that also, where you are 
burning pulverized coal in an atmosphere of oxygen where the 
combustion products are primarily CO2 with some 
water, and the cost penalty there is only a third to a quarter.
    We envision a new round of advanced CCS demonstrations in 
the 2015 timeframe, which will position commercial deployment 
of advanced technologies in the post 2020 timeframe.
    We are getting to the cost-effective deployment that will 
require broad-based public and private collaboration on 
investment. With regard to storage, we are pursuing carbon 
storage with our seven regional partnerships. We have made 
great progress. These partnerships are involved in 43 States 
with basically 50 stakeholders.
    We have made great strides in capturing this, but there are 
some obstacles to commercial deployment. That is why the 
President in February this year initiated the Interagency Task 
Force on CCS, the first-ever Government-wide task force to 
develop a comprehensive Federal strategy to address the 
barriers to CCS and also achieve cost-effective deployment 
technologies within 10 years.
    As you mentioned, Mr. Chairman, I serve as the co-chair 
with EPA. We are holding our first public meeting this month, 
this coming month.
    We have had excellent cooperation. We are making great 
strides, and we envision having a report to the President in 
August of this year to overcome the barriers.
    In conclusion, I would like to just say that we are moving 
forward with CCS, the critical aspect of this technology to 
ensure environmentally and commercial sound use of fossil fuels 
including coal. But a viable national CCS approach will be 
possible only with development of a national set of definitive 
policies and incentives that reward technology development and 
encourage investment in CCS.
    I applaud the efforts of this committee and members for 
taking a leadership role in addressing these issues in a timely 
fashion. I also look forward to working with Congress to forge 
a pathway to a viable and effective implementation of CCS and 
ensure a sound, secure energy future.
    With that, Mr. Chairman, I would be happy to answer any 
questions the committee might have.
    [The prepared statement of Mr. Markowsky follows:]

 Statement of James Markowsky, Assistant Secretary for Fossil Energy, 
                          Department of Energy
                         on s. 1856 and s. 1134
    Thank you Mr. Chairman and members of the Committee. I appreciate 
this opportunity to meet with you this morning to discuss carbon 
capture and storage (CCS) legislation before the Committee.
    While this hearing is focused specifically on S. 1856, a bill to 
amend the Energy Policy Act of 2005 to clarify policies regarding 
ownership of pore space, introduced by Sen. John Barrasso (R-WY); 
S.1134, the Responsible Use of Coal Act of 2009, introduced by Senator 
Robert Casey (D-PA); and CCS legislative text drafted by Senators John 
D. Rockefeller (D-WV) and George V. Voinovich (D-OH), I would like to 
take this opportunity to provide an overview of the United States 
Department of Energy (DOE), Office of Fossil Energy's Clean Coal 
Research Program and how our Research, Development and Demonstration 
Program is directly relevant to the legislation being discussed at this 
hearing.
Interagency Task Force on Carbon Capture and Storage
    Before I discuss the Office of Fossil Energy's Clean Coal Research 
Program, I would like to briefly mention the recently announced White 
House Task Force on Carbon Capture and Storage. On February 3, 2010, 
President Obama issued a Presidential Memorandum titled ``A 
Comprehensive Federal Strategy on Carbon Capture and Storage.'' This 
memorandum establishes an Interagency Task Force on Carbon Capture and 
Storage, consisting of fourteen Executive Departments and Federal 
Agencies, which are tasked with developing a comprehensive and 
coordinated Federal strategy to speed the commercial development and 
deployment of clean coal technologies. The co-chairs of the Task Force 
are DOE and the Environmental Protection Agency (EPA).
    The Task Force is charged with proposing a plan to overcome the 
barriers to the widespread, costeffective deployment of CCS within 10 
years, with a goal of bringing 5 to 10 commercial demonstration 
projects online by 2016. Ultimately comprehensive energy and climate 
legislation that puts a cap on carbon will provide the largest 
incentive for CCS because it will create stable, long-term, market-
based incentives to channel private investment in low-carbon 
technologies. The Task Force plan will explore incentives for 
commercial CCS adoption and address any financial, economic, 
technological, legal, institutional, social, or other barriers to 
deployment. The Task Force will consider how best to coordinate 
existing administrative authorities and programs, including those that 
build international collaboration on CCS, as well as identify areas 
where additional administrative authority may be necessary. The co-
chairs will report progress periodically to the President through the 
Chair of the Council on Environmental Quality.
    As the Department's delegate and co-chair of this Task Force, I am 
diligently working with representatives of EPA to assemble the proposed 
plan within 180 days of the release of the Memorandum.
                      clean coal research program
    The Office of Fossil Energy's (FE) Fossil Energy Research and 
Development Program creates public benefits by enhancing U.S. economic, 
environmental, and energy security. The program carries out three 
primary activities: (1) managing and performing energy-related research 
that reduces market barriers to the environmentally sound use of fossil 
fuels; (2) partnering with industry and others to advance fossil energy 
technologies toward commercialization; and (3) supporting the 
development of information and policy options that benefit the public.
    The FE Clean Coal Research Program--administered by the Office of 
Clean Coal and implemented by the National Energy Technology 
Laboratory--supports DOE's overall mission to achieve national energy 
security in an economic and environmentally sound manner. In the Coal 
Program, there are four key priorities: 1) developing technologies for 
globally competitive carbon dioxide (CO2) capture for power 
plants and industrial sources, 2) establishing the basis for long-term 
geologic storage and CO2 reuse, 3) improving the efficiency 
of both existing and new coal-fired power generation plants, and 4) 
implementing computer modeling and simulation to accelerate the 
Research and Development (R&D) path from discovery to commercialization 
and reduce costs.
    Currently, we are pursuing the demonstration of first generation 
carbon capture and storage technologies with existing and new power 
plants and industrial facilities using a range of capture technologies 
and storing CO2 in a variety of geologic formations. The 
goal is to have five to ten large-scale demonstrations in operation by 
2016. In parallel, to drive down the costs of CCS as a potential 
climate change mitigation technology, the FE Coal Program is pursuing 
R&D to increase base power plant efficiency and thereby reduce the 
amount of carbon dioxide that has to be captured and stored per unit of 
electricity generated. FE is developing a spectrum of technologies to 
evolve coal into a low-carbon energy source that is economically 
competitive in 2020 and beyond.
    There are a number of technical and economic challenges that must 
be overcome before cost-effective CCS solutions can be implemented to 
address climate change. Funding from the American Recovery and 
Reinvestment Act (Recovery Act) is helping to address these challenges. 
The Recovery Act provided an additional $3.4 billion for FE R&D to 
expand and accelerate the commercial deployment of CCS technology. The 
experience gained from both the capture and storage demonstrations 
funded by the Recovery Act will be a critical step toward achieving 
widespread, cost-effective deployment of CCS. In addition to the 
Recovery Act projects, the core research, development and demonstration 
activities that leverage public and private partnerships will support 
the goal of broad, cost-effective CCS deployment in the post-2020 
timeframe.
Core Research and Development Activities
    The Clean Coal Research Program is comprised of core research and 
development activities and major demonstration programs. The Program is 
further enhanced through the CCS activities authorized under the 
Recovery Act.
    DOE provides a worldwide leadership role in the development of 
advanced coal technologies. We are moving aggressively to address new 
challenges associated with the reduction of greenhouse gas emissions as 
a climate change mitigation strategy. In partnership with the private 
sector, efforts are focused on maximizing efficiency and performance, 
while minimizing the costs of new CCS technologies. Improving the 
efficiency of CCS systems will help address pollutant emissions 
reduction, water usage, and carbon emissions. The Program strives to 
enable dramatic reductions in emissions and to improve technologies 
applicable to current and future fossil energy plants and industrial 
facilities so they can cost effectively meet emerging requirements for 
an economically secure and environmentally sound energy future.
    The following CCS-enabling R&D activities support the development 
of technologies that can then be tested for commercial readiness in our 
demonstration programs. These R&D activities provide the supporting 
technology basis for all CCS development.
    Carbon Sequestration--The Department's Sequestration program 
focuses on the key technology challenges that confront the wide-scale 
industrial deployment of CCS. These challenges are being addressed 
through industry/government cooperative research on cost-effective 
capture technologies; monitoring, verification, and accounting 
technologies to assess permanence of storage; permitting issues; 
liability issues; public outreach; and infrastructure needs. Developing 
low-cost pre-combustion capture technologies and establishing the 
technical basis for carbon sequestration will lead to a decrease in the 
atmospheric release of CO2, thus allowing us to use our 
domestic fossil fuel resources responsibly by reducing their impacts on 
global climate change.
    Essential to these objectives are the Regional Carbon Sequestration 
Partnerships (RCSP). The Partnerships are a central piece of our CCS 
research efforts that develop the knowledge base and infrastructure for 
the wide-scale deployment of geologic storage technologies. The 
Partnerships address key infrastructure issues related to permitting, 
pore space (underground reservoir) ownership, site access, liability, 
public outreach, and education. The Partnerships also conduct field 
tests across the United States to characterize the geographic 
differences in fossil fuel use, potential storage sites, and different 
regional approaches to addressing CCS. The Partnerships encompass all 
of the geologic storage sites in the country that are potentially 
available for carbon sequestration. The Regional Partnerships represent 
more than 350 unique organizations in 43 States, three Native American 
Indian Nations, and four Canadian Provinces.
    Innovations for Existing Plants (IEP)--The IEP program develops low 
cost, efficient technologies to reduce CO2 emissions from 
new and existing pulverized coal-fired power plants. The program 
focuses on advanced post-combustion ultra-supercritical steam cycle, 
oxy-combustion, and CO2 compression technologies in direct 
response to the priority placed on addressing the existing and new 
coal-fired power plants. Dramatic cost and energy penalty reductions 
for carbon capture are essential for broad deployment of existing plant 
CCS retrofits, both domestically and in developing economies.
    Advanced Integrated Gasification Combined Cycle (IGCC)--Advanced 
IGCC technology utilizes a pre-combustion pathway to convert coal or 
other carbon-containing feedstocks into synthesis gas, a mixture 
composed primarily of carbon monoxide and hydrogen used as fuel for 
power generation. We are developing advanced gasification technologies 
to meet the most stringent environmental regulations and to facilitate 
the efficient capture of CO2 for subsequent sequestration. 
Gasification plants are complex systems that rely on a large number of 
interconnected processes and technologies. Advances in the current 
state-of-the-art, as well as development of novel approaches, are 
required to make these systems affordable and reliable for commercial 
deployment. The program continues to focus on developing the next 
generation technology in gasification systems related to fuel flexible 
gasifiers, coal feed systems, high temperature contaminant removal, 
revolutionary oxygen supply technology, and CO2 capture 
technologies. Specifically, we are targeting improvement in IGCC that 
could yield up to a 5 percentage point efficiency gain while reducing 
the system cost. These added improvements are targeted toward allowing 
IGCC to be deployed as a competitive option in the post-2020 time frame 
by reducing the cost of future systems and improving their reliability.
    Fuels--The Fuels program is focused on reducing technology barriers 
for the reliable, efficient and environmentally friendly conversion of 
coal to hydrogen for utilization in advanced IGCC systems. Efforts for 
hydrogen production focus on generation at the plant for large-scale, 
central power applications and exclude transportation. Activities 
include support for the bench-scale development of hydrogen separation 
technologies and components.
    Fuel Cells--Fuel cell systems when coupled with coal gasification 
for large scale power generation hold great potential for leapfrog 
advances in efficiency. Fuel cells also produce very low emissions, are 
modular in nature, and can be scaled to almost any deployment size. The 
ultimate goal of the program is to develop large (>100 MW) fuel cell 
power systems that produce electric power from coal using integrated 
coal gasification and CO2 separation processes that capture 
at least 90 percent of the CO2 emissions. The program is 
driving to reduce the cost of fuel cell technology by an order of 
magnitude compared to current technology and enable low-cost fuel cells 
scalable to MW class ultra-clean systems with potential for up to 60 
percent electrical efficiency for central power generation.
    Advanced Turbines--The Advanced Turbine program consists of a 
portfolio of laboratory and field R&D projects focused on performance-
improvement technologies with great potential for increasing efficiency 
and reducing emissions and costs in coal-based applications. Future 
gasification based power systems outfitted with CCS will require high 
efficiency hydrogen turbines. Hence, the current focus of the Advanced 
Turbine program is the combustion of pure hydrogen fuels in greater 
than 100 MW size gas turbines and the compression of large volumes of 
CO2. The Advanced Turbines program aims to improve the 
firing temperature and throughput of the next generation of combustion 
turbines for coal-based integrated gasification combined cycle power 
systems that capture and sequester CO2.
    Advanced Research--The Advanced Research Program is a bridge 
between basic research and the development and deployment of innovative 
systems capable of creating highly efficient and environmentally benign 
electricity and power. The objective of the program is to support 
development of critical enabling components that provide cross cutting 
benefits across the entire coal research program. Example developments 
that are being pursued include high temperature materials for ultra-
supercritical plants, enabling efficiency increases up to 3 percentage 
points for coal-fired plants, revolutionary sensors and controls, and 
advanced computing/visualization techniques. The Advanced Research 
Program will continue to push revolutionary advances in efficiency 
improvements, computational analyses and projects aimed at a greater 
understanding of the physical, chemical, and thermo-dynamic barriers 
that currently limit the use of coal and other fossil fuels.
    Additionally in FY 2011, a multi-lab partnership will be initiated 
to develop a comprehensive, integrated suite of computational models 
for accelerating the development of carbon capture technologies. The 
scientific underpinnings of the suite of models will ensure that 
learning from successive generations of a technology or learning from 
even competing technologies is maximized. The simulation-based 
confidence will reduce the risk in incorporating multiple innovative 
technologies into a new plant design, thereby significantly reducing 
the development cycle required to move novel technologies to 
commercialization.
Demonstrations at Commercial-Scale
    Program success will ultimately be judged by the deployment of 
emerging technologies into the marketplace. Both technical and 
financial challenges associated with the deployment of new advanced 
coal technologies must be overcome in order to achieve success in the 
marketplace. Commercial-scale demonstrations help the industry 
understand and overcome component integration and start-up performance 
issues, and by reducing technology and economic risk, improve the 
opportunity for private financing and investment for subsequent plants.
    The Department is implementing large-scale CCS projects through the 
Large-Scale Sequestration Field Tests being performed by the Regional 
Partnerships; the Clean Coal Power Initiative (CCPI); and FutureGen.
    Large-Scale Sequestration Field Tests--A central piece of our CCS 
research is DOE's field test program, which is being implemented 
through the Regional Carbon Sequestration Partnerships. This field test 
program reflects the geographic differences in fossil fuel use and 
potential storage sites across the United States and targets the use of 
regional approaches in addressing CCS. The Partnerships encompass 
essentially all the geologic storage sites in the country that can 
potentially be available for carbon sequestration. It is important to 
note that the non-Federal cost share for the field test program is 
greater than 35 percent, which is a key indicator of industry and other 
partner interests leading to the success of this program. Each 
partnership is focused on a specific region of the country with similar 
characteristics relating to CCS opportunities and needs.
    The Development Phase (Phase III) of the Regional Partnerships is 
focused on large-scale field tests of geologic carbon sequestration up 
to 1 million metric tons of CO2 per year, and addresses the 
liability, regulatory, permitting, and infrastructure needs of these 
projects. The Partnerships have brought an enormous amount of 
capability and experience together to work on the challenge of 
infrastructure development.
    In FY 2011, several of the nine large-scale RCSP CO2 
injection projects are scheduled to begin injecting CO2 for 
large volume (1 million tons/year) geologic storage tests. Most of the 
large-scale field tests will have completed the first stage of the 
projects consisting of site selection and characterization, National 
Environmental Policy Act (NEPA) review, pre-injection monitoring, and 
permitting. One project will have concluded its injection of about 2 
million tons of CO2 and will be conducting post injection 
monitoring at the site. These large-volume injections are needed to 
demonstrate that the formations selected for storage have the 
capability and capacity to store CO2 from coal-based energy 
systems and industrial facilities.
    Clean Coal Power Initiative--The mission of the Clean Coal Power 
Initiative (CCPI) is to enable and accelerate the deployment of 
advanced carbon capture and storage (CCS) technologies to ensure clean, 
reliable, and affordable electricity for the United States. 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 coalbased generation. CCPI 
demonstrations will meet technical requirements set forth in the Energy 
Policy Act of 2005. 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.
    FutureGen--The FutureGen Project intends to conduct novel large-
scale testing to accelerate the deployment of a set of integrated 
advanced coal gasification-based electric power production technologies 
linked with CCS. This project would be the first of its kind to store 
CO2 in a deep saline geologic formation. The Department is 
currently reviewing the renewal application submitted by the FutureGen 
Alliance on March 19, 2010.
              the american recovery and reinvestment act 
                             (recovery act)
    The primary goals of the FE Recovery Act Program are to:

   Demonstrate CCS technology to reduce greenhouse gas 
        emissions from the electric power and industrial sectors of our 
        economy.
   Become the world's leader in CCS science and technology.
   Implement projects to support economic recovery by creating 
        new jobs in pursuit of a secure energy future.

    Recovery Act projects will leverage federal funding, stimulate 
private sector investment, accelerate delivery of CCS technology, and 
demonstrate the integration of coal-based energy systems and industrial 
processes with capture and permanent storage of CO2 in 
geologic formations. Recovery Act projects are logical extensions of 
several important, ongoing Clean Coal Research Program baseline 
activities.
    The FE Recovery Act R&D Program is comprised of five components, 
with the following specific objectives:

   Expand and Extend Clean Coal Power Initiative Round 3 
        (Expand CCPI-3)--Accelerate integrated CCS demonstrations by 
        expanding and extending the opportunity for several additional 
        CCS electricity generation demonstrations for both new and 
        existing plants under DOE's ongoing CCPI-3 competition.
   Industrial Carbon Capture and Storage--Expand DOE's focus of 
        CCS on advanced coal power systems to industrial CCS 
        applications.
   Geologic Sequestration Site Characterization--Accelerate the 
        comprehensive characterization of large-volume geologic 
        reservoirs, thus augmenting existing data under the Regional 
        Carbon Sequestration Partnerships.
   Geologic Sequestration Training and Research--Develop the 
        next generation of scientists and engineers by expanding 
        ongoing training and research efforts conducted primarily 
        through the University Coal Research and Historically Black 
        Colleges and Universities programs.
   Carbon Capture and Storage--Provide a fully integrated, 
        advanced coal gasification-based power plant with utility-scale 
        CCS technology capable of safely and permanently storing 
        1million metric tons of CO2 per year.

    To date, there have been over 90 projects awarded, including the 
following most recent announcements:

   On October 2, 2009, Secretary Chu announced the first round 
        of funding from $1.4 billion from the Recovery Act for the 
        selection of projects that will capture CO2 from 
        industrial sources for storage or beneficial use. The first 
        phase of these projects will include approximately $21.6 
        million in Recovery Act funding and $22.5 million in private 
        funding for a total initial investment of about $44.1 million. 
        The remaining Recovery Act funding will be awarded to the most 
        promising projects during a competitive phase two selection 
        process.
   On November 6, 2009, DOE issued a cooperative agreement with 
        Hydrogen Energy California LLC to build and demonstrate a 
        hydrogen-powered electric generating facility, complete with 
        CCS, in Kern County, California.
   On March 9, 2010, U.S. Secretary of Energy Steven Chu 
        announced that a project with NRG Energy has been selected to 
        receive up to $154 million, including funding from the Recovery 
        Act. The post-combustion capture and sequestration project will 
        demonstrate advanced technology to reduce CO2 
        emissions and will assist with enhanced oil recovery efforts 
        from a nearby oil field.
   On March 12, 2010, DOE announced the award of a cooperative 
        agreement to Summit Texas Clean Energy, LLC, for the Texas 
        Clean Energy Project to design, build, and demonstrate an 
        integrated gasification combined cycle electric generating 
        facility, complete with co-production of high-value products 
        and carbon capture and storage.
   On March 12, 2010, DOE announced the award of a cooperative 
        agreement to American Electric Power for the Mountaineer 
        Commercial-Scale CCS Project to design, construct, and operate 
        a system that will capture and store CO2 at an 
        existing coal-fired power plant.
                      international collaborations
    Recognizing that climate change is a global issue that requires a 
global response, DOE plays an active leadership role in an 
international initiative known as the Carbon Sequestration Leadership 
Forum (CSLF). The CSLF is a voluntary climate initiative of developed 
and developing nations that, collectively, account for 75 percent of 
all anthropogenic carbon dioxide emissions. It is currently comprised 
of 24 members, including 23 countries and the European Commission.
    Formed in 2003, the CSLF marshals intellectual, technical, and 
financial resources from all parts of the world to support atmospheric 
stabilization of carbon dioxide concentrations, the long-term goal of 
the United Nations Framework Convention on Climate Change. Members are 
dedicated to collaboration and information sharing in developing, 
demonstrating, and fostering the worldwide deployment of multiple 
technologies for the capture and long-term geologic storage of carbon 
dioxide at low costs. Additionally, the CSLF is committed to 
establishing a companion foundation promoting legislative, regulatory, 
administrative, and institutional practices for safe, verifiable long-
term storage.
    In addition to the CSLF, the Department is currently cooperating 
with numerous countries through bilateral agreements and multilateral 
activities to identify areas of collaboration in promoting and 
developing clean fossil energy technologies internationally.
                              conclusions
    CCS technologies can play a key role as we transition to the clean 
energy economy of the future. However, cost-effective commercial 
deployment of CCS can only occur in parallel with the development of a 
national set of definitive policies that encourage technology 
development and reward investments in and capital formation around 
improved carbon performance. Passing comprehensive energy and climate 
legislation that puts a price on carbon will provide the long-term, 
market-based incentives to channel private investment into CCS and 
other low-carbon technologies. Time is of the essence. The 
Administration wants to see comprehensive legislation sent to the 
President this year.
    Addressing the barriers to CCS deployment requires a systems-based 
approach that includes not only site evaluation, characterization and 
selection, but also rules for short-, medium-, and long-term liability. 
Market driven CCS deployment will also require infrastructure for 
CO2 transportation and storage and the development of a 
uniform set of measurement, validation and accounting standards, 
practices, and procedures. Finally, whatever structure is created must 
encompass the input of a broad range of stakeholders.
    CCS and other clean coal technologies can play a critical role in 
mitigating CO2 emissions under many potential future carbon 
stabilization scenarios. The DOE program has put us on a path toward 
ensuring that the enabling technologies will be available to effect 
broad CCS deployment within a decade. Continued U.S. leadership in 
technology development and future deployment is important to the 
cultivation of economic rewards and new business opportunities both 
here and abroad.
    I applaud the efforts of this Committee and its Members for taking 
a leadership role in addressing these timely and significant issues. I 
would be happy to respond to any questions from members of the 
Committee.

    The Chairman. Thank you very much.
    Ms. Castle, why don't you go right ahead, please?

  STATEMENT OF ANNE CASTLE, ASSISTANT SECRETARY FOR WATER AND 
              SCIENCE, DEPARTMENT OF THE INTERIOR

    Ms. Castle. Mr. Chairman, Senator Murkowski, members of the 
committee, thank you for asking me to be here today to address 
S. 1856.
    As you mentioned, Mr. Chairman, I am the Assistant 
Secretary for Water and Science at the Department of the 
Interior. With me is Tim Spisak from the Bureau of Land 
Management. Tim is the Deputy Assistant Director for Minerals 
and Realty Management.
    Interior will defer to the Department of Energy on S. 1134, 
as that bill addresses activities within DOE's purview.
    Under Secretary Salazar's leadership, the Department of the 
Interior has made addressing global climate change one of its 
highest priorities, and a key component of working on climate 
change is mitigating the impact of carbon dioxide through 
measures like geologic carbon sequestration in permeable rock 
pore spaces.
    S. 1856 would ensure that the ownership of any subsurface 
pore space located below a Federal surface estate would be 
vested in the Federal Government. Interior supports the goal of 
this bill to clarify policies regarding ownership of pore 
space. We support having clear rules in place before, not 
after, disputes arise.
    But we would like to discuss with the committee some 
concerns that we have related to pore space ownership, 
including what we think are very important liability concerns, 
where the Federal Government manages the subsurface mineral 
estate but does not own the surface, the split estate 
situation.
    At the Department of the Interior, our land and water 
managers are already confronting the impact of climate change. 
Reduced snowpack is leading to decreased recharge of 
groundwater aquifers. We are seeing increased stress on surface 
water systems and public water supplies. We are seeing reduced 
river flows that impact temperature and depth and spawning 
environment for fish. Our scientists are also noting changes in 
the abundance and distribution of species, including changes to 
migration patterns.
    Interior's land managers and scientists have on-the-ground 
expertise in areas that are critical to developing and managing 
carbon capture and storage. The department is sharing its 
expertise with our partner agencies as a contributor to the 
President's Task Force on Carbon Capture and Storage, and the 
task force, as Mr. Markowsky explained, is working on a 
coordinated Federal strategy to speed the commercial 
development of clean coal technology.
    The Bureau of Land Management is entrusted with the 
multiple-use management of 253 million acres of surface land. 
But BLM also manages 700 million acres of subsurface mineral 
estate where the surface owners could be BLM, could be other 
Federal agencies like the Forest Service, sometimes the States, 
and sometimes the surface is in private ownership. That Federal 
mineral estate includes 57 million acres where the Feds own the 
minerals and the surface estate is privately owned.
    BLM worked with other Federal agencies to submit a report 
to Congress last May that was required by the Energy 
Independence and Security Act, and it addressed a wide variety 
of issues related to geologic carbon sequestration. In addition 
to experience administering large-scale mineral leasing 
programs, BLM has the real estate expertise and an existing 
framework for issuing rights-of-way that could serve future 
needs for carbon dioxide pipelines on public lands.
    We believe that BLM's existing authorities could facilitate 
future carbon sequestration demonstration projects, but we also 
think that a more explicit statutory authority would be 
desirable. Again, we would like to discuss this further with 
the committee.
    The United States Geological Survey contributes to better 
scientific understanding of our natural resources, and as part 
of its mission, USGS also conducts assessments of energy 
resources like oil and natural gas both in the U.S. and around 
the world. USGS is currently finalizing the methodology for a 
national assessment of carbon dioxide storage capacity in oil 
and gas reservoirs and saline formations. USGS is also going to 
play an important role in recommending geologic criteria that 
could be incorporated into a set of best practices for geologic 
site selection.
    The Department of the Interior supports the goal of S. 1856 
to provide certainty regarding the ownership of pore space. 
Connecting pore space to surface ownership is a codification of 
what has been called the ``American rule.''
    We do have concerns about the split estate situations that 
are not explicitly addressed in the bill. There are long-term 
liability questions that could arise if the private entity 
holding the surface rights sequesters carbon dioxide in the 
pore space but then is unable to manage the CO2 
properly.
    CO2 is a leasable mineral. The bill addresses 
the ownership of the storage space, but not necessarily what is 
in the storage space, what is stored there. So the department 
would like to work with this committee to address those issues.
    Interior believes that carbon capture and sequestration can 
play a significant role in reducing the long-term effects of 
carbon emissions, and we would like to work with the committee 
on these critical efforts to mitigate the impact of climate 
change.
    Thank you for asking for the department's views, and I am 
available to answer your questions at the appropriate time.
    [The prepared statement of Ms. Castle follows:]

 Prepared Statement of Anne Castle, Assistant Secretary for Water and 
                  Science, Department of the Interior
                         on s. 1856 and s. 1134
Introduction
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to discuss S. 1856, a bill to amend the Energy Policy Act 
of 2005 to clarify policies regarding the ownership of pore space, and 
S. 1134, the Responsible Use of Coal Act. The Department of the 
Interior defers to the Department of Energy on S. 1134 as the scope of 
the bill is limited to activities within the Department of Energy.
    I am Anne Castle, the Department of the Interior's Assistant 
Secretary for Water and Science. I am accompanied by Tim Spisak, the 
Bureau of Land Management (BLM) Deputy Assistant Director for Minerals 
and Realty Management. Under Secretary Salazar's leadership, the 
Department of the Interior has made addressing global climate change 
among its highest priorities. A key component to addressing climate 
change is mitigating the impact of carbon dioxide through energy 
conservation, clean renewable energy, and measures such as geologic 
carbon sequestration into permeable rock pore spaces.
    S. 1856 would ensure that the ownership of any subsurface pore 
space located below a Federal surface estate would be vested in the 
Federal Government. The Department of the Interior supports the goal of 
S. 1856 to clarify policies regarding ownership of pore space. We 
support having clear rules in place before, not after, disputes over 
property rights arise. However, we would like to discuss with the 
Committee concerns related to pore space ownership on split estate 
lands--including important liability concerns--where the Federal 
government manages the subsurface mineral estate but not the surface.
Background
            Climate Change Impacts & the Department of the Interior
    At the Department of the Interior, our land and water and wildlife 
managers are already confronting the impacts of climate change. Reduced 
snowpack is leading to decreased recharge of groundwater systems, 
increasing stress on surface water supplies and public water systems, 
and reducing river flows that impact temperature, depth, and other 
characteristics of spawning environments for fish. Our Arctic parks and 
refuges are seeing some of the earliest impacts of climate change. 
Melting sea ice threatens marine mammals as well as coastal 
communities, and thawing permafrost can destabilize buildings, roads, 
and facilities--disrupting the structural basis of large regions of 
Interior-managed lands.
    Our scientists are also noting changes in the abundance and 
distribution of species, including changes to migration patterns; the 
expansion of pests and invasive species; increased vulnerability to 
wildland fire and erosion; and an overall reduction in carrying 
capacity. Many of the iconic wildlife species that the Department 
manages from the Arctic to the Everglades will see their habitat 
threatened by global climate change.
    To assure that our climate change adaptation strategies are 
grounded in sound science, Secretary Salazar has created a new climate 
change strategy for the Department through Secretarial Order #3289 
(September 14, 2009): ``Addressing the Impacts of Climate Change on 
America's Water, Land and Other Natural and Cultural Resources.'' This 
Order establishes a new Department-wide strategy to address climate 
change, with an emphasis on climate change science, adaptation, and 
mitigation.
    This Order identifies geologic carbon sequestration as a key 
component in the Department's climate change mitigation program--the 
Carbon Storage Project. The Order identifies the U.S. Geological Survey 
(USGS) as the lead agency in administering the Department's Carbon 
Storage Project, and the USGS will work closely with the BLM and 
external partners to enhance carbon storage in geologic formations 
consistent with the Department's responsibility to provide 
comprehensive, long-term stewardship of its resources.
            The Role of the Bureau of Land Management & the U.S. 
                    Geological Survey
    As the Nation's largest land manager, the BLM is entrusted with the 
multiple-use management of 253 million acres of surface land. The 
agency also administers 700 million acres of sub-surface mineral estate 
of which the surface owners are Federal agencies, states, or private 
entities. This Federal mineral estate includes 57.2 million acres 
underlying a privately-owned surface (split estate). The USGS collects, 
monitors, analyzes, and provides scientific understanding about natural 
resource conditions, issues, and problems. As part of its mission, the 
USGS also conducts assessments of energy resources such as oil and 
natural gas of the United States and the world. Because of this 
expertise and experience, the USGS is conducting a national assessment 
of the carbon dioxide storage capacity in oil and gas reservoirs and 
saline formations. The USGS is currently finalizing the methodology for 
this national assessment.
    The Department diligently executes its responsibilities to make our 
Nation's energy resources available in an environmentally-sound manner. 
Within the framework of a transparent public process, we carefully 
consider habitat, groundwater, air and other resources; mitigate 
impacts through best management practices, stipulations and conditions 
of approval; and balance development with other uses across the 
landscape. All of these considerations remain consistent as the 
Department contemplates its role in the use of the public lands to 
sequester carbon dioxide. Additionally, the Department's bureaus have 
the expertise and experience needed to effectively implement carbon 
sequestration programs, from the identification of areas appropriate 
for storage to the deployment of leasing programs.
    The BLM's existing administrative and regulatory framework could 
facilitate future carbon sequestration demonstration projects. However, 
clearer statutory authority specific to carbon sequestration may be 
desirable in some areas in order to move more effectively in 
implementing commercial-scale storage on Federal lands. The 
Administration is currently reviewing these issues, including whether 
additional legislation is desirable, as part of the White House Task 
Force on Carbon Capture and Storage. Issues that we are currently 
discussing include the most appropriate mechanism for longer term 
storage of carbon dioxide (leasing, rights-of-way, or other methods), 
the nature and term of the agreements, and how other uses such as 
future energy and mineral extraction, other subsurface resources, and 
other surface uses that the BLM may authorize could affect longer term 
storage, and liability. We look forward to reporting back to the 
Committee on the results of the Task Force's work in the near future.
    In addition to experience in administering large-scale mineral 
leasing programs, the BLM has the realty expertise and an existing 
framework for issuing rights-of-way on public land that could serve 
future needs for carbon dioxide pipelines across public lands. Other 
programmatic and land management expertise, such as the BLM's 
experience in evaluation of potential environmental impacts of 
projects, will facilitate this effort. In addition, the USGS will play 
an important role in recommending geologic criteria that could be 
incorporated into a set of ``best practices'' for geologic site 
selection.
    A number of challenges will need to be addressed moving forward, 
and we must make use of current information to inform future 
discussions. For example, the Department has the results of research at 
international non-Enhanced Oil Recovery (EOR) sites at which large 
quantities of carbon dioxide have been injected for as long as 12 
years. These sites have operated safely and shown no sign of leakage. 
However, the carbon storage contemplated for the primary purposes of 
sequestration may be for longer terms and larger quantities. We believe 
that the DOI land managers and scientists who are on-the-ground have 
expertise to offer on monitoring carbon dioxide sequestration, and we 
are working with our partner agencies to share their expertise.
            Carbon Capture & Sequestration (CCS)
    Geological storage of carbon dioxide in subsurface rocks involves 
injection of carbon dioxide into the pore space of permeable rock 
units. This principle operates in all types of potential geological 
storage formations such as oil and gas fields, deep saline water-
bearing formations, or coal beds. Most of the potential carbon dioxide 
storage capacity in the United States is in deep saline formations.
    The current atmospheric carbon dioxide concentration is 
approximately 380 parts per million and rising at a rate of 
approximately 2 parts per million annually, according to data collected 
since 1959 by NOAA at the Mauna Loa observatory in Hawaii and the most 
recent information from the Intergovernmental Panel on Climate Change 
(IPCC). The 2005 IPCC Special Report on Carbon Dioxide Capture and 
Storage concluded that in emissions reductions scenarios striving to 
stabilize global atmospheric carbon dioxide concentrations at targets 
ranging from 450 to 750 parts per million, the global storage capacity 
of geologic formations may be able to accommodate most of the captured 
carbon dioxide. However, the extent to which this storage capacity is 
economically viable depends on the price of carbon. Also, geologic 
storage capacity may vary widely on a regional and national scale. A 
more refined scientific and operational understanding of geologic 
storage capacity is needed to address these knowledge gaps.
            Energy Security & Independence Act of 2007(EISA)/Pore Space 
                    Ownership
    Section 714 of the EISA directed the Secretary of the Interior to 
submit a report to Congress containing a recommended framework for 
geological sequestration on public lands. Through the BLM, and in 
coordination with the USGS, the EPA, the DOE, and other appropriate 
agencies, the Department fulfilled this mandate with its May 13, 2009, 
report, Regulatory Framework for Geologic Carbon Sequestration on 
Public Land. This report addressed a wide variety of issues related to 
geologic carbon sequestration and helps inform our response to the 
legislation before the committee.
    The report also included a discussion of pore space ownership. 
Section (6) of the report notes that Interior Board of Land Appeals 
(IBLA) rulings have recognized the ``American Rule,'' which holds that 
subsurface pore space is the property of the surface owner. Various 
state governments are considering legislation that would establish the 
``American Rule'' as state law. Wyoming enacted such a law in 2008; 
Montana and North Dakota enacted similar legislation in 2009.
S. 1856
    The Department supports the concepts of S. 1856, which consists of 
two key provisions. The first, Section (1)(b), clarifies that the 
subsurface pore space is the property of the Federal Government in 
cases where the Federal Government is the surface landowner 
(codification of the ``American Rule''). The second key provision, 
Section (1)(d), establishes the mineral estate as the dominant interest 
when in competition for priority with a pore space interest. Section 
1(d) presents questions related to how mineral interests and those with 
interests in storing carbon dioxide in the pore space would intersect.
    In following the American Rule, S. 1856 provides that the Federal 
government would own the pore space when it owns the surface interests. 
While not addressed in the bill, the American Rule would also hold that 
a private surface owner would own the pore space if the surface/
subsurface estate is split between the private surface owner and the 
Federal mineral estate. In the case of approximately 57 million acres 
of land where the estate is split between a private surface owner and 
the Federal mineral estate, the private surface owner's pore space 
interest could present long-term liability questions. We can foresee a 
situation where a private entity holding split estate surface rights 
sequesters carbon dioxide in the pore space but then finds itself in a 
position of not being able to manage the carbon dioxide or bear its 
liability in perpetuity. It remains unclear who would be liable for the 
carbon dioxide in these situations. Questions also remain as to whether 
carbon dioxide, which is a leasable mineral when naturally occurring on 
Federal lands, could be considered part of the mineral estate when 
transported onsite, injected, and stored long-term. The Department 
would like to engage in discussions with the Committee concerning these 
issues.
Conclusion
    The Department of the Interior believes that carbon capture and 
sequestration can play a significant role in reducing the long-term 
effects of carbon emissions. The Department of the Interior looks 
forward to continuing to work with the Committee on the critical work 
of mitigating the effects of climate change.

    The Chairman. Thank you both very much.
    Let me start. We will just do 5-minute rounds here. Let me 
just start with you on the issue you have been talking about, 
Ms. Castle. I gather from your testimony, you say that the bill 
provides the Federal Government would own the pore space when 
it owns the surface interest. I think that is pretty clear.
    Then you go on to state that the fact that the bill does 
not make the Federal Government the owner of the pore space 
when it owns the mineral estate, as distinct from the surface 
estate. So I am not clear. Does the department have a position 
as to whether it wants to own the pore space in circumstances 
where it owns the mineral estate, but not the surface?
    Ms. Castle. No, sir. I am sorry if our testimony was not 
clear on that point.
    We do support the codification of the American rule, that 
connects the ownership of the pore space to the ownership of 
the surface estate. What we have concerns about is the 
situation where the Federal Government owns the mineral 
interest, but somebody else owns the surface and, therefore, 
owns the pore space.
    The Chairman. Right.
    Ms. Castle. Because of the concerns about long-term 
liability, if the surface owner isn't able to manage properly 
that sequestered CO2. So that is the issue we would 
like to address. We are not suggesting that the pore space 
ownership should be associated with the mineral estate.
    The Chairman. I guess I am just a little unclear. If I am a 
surface owner, and the Federal Government has retained the 
mineral estate, and I am being told now that I own the pore 
space below the surface, what legal right do I have with regard 
to that pore space if the Federal Government has retained the 
mineral estate and perhaps leased that out to someone else?
    Ms. Castle. As I understand it, Senator, the bill would 
make the mineral estate dominant over the ownership of the pore 
space. But I think that you are raising good questions about 
the interaction between the owner of the surface, who is 
utilizing the pore space for sequestration, and the owner of 
the mineral interest.
    As I mentioned, CO2 is a leasable mineral. So 
once you put it in the ground, it is not clear who has the 
ownership to it, whether it is the surface owner or the mineral 
rights owner. So those are the kinds of things that we think 
could benefit from a dialog with the committee, with the 
benefit of the experience that BLM has had in these split 
estate situations.
    The Chairman. So your view is we don't yet know whether we 
ought to codify the American rule, or we do know that we ought 
to codify the American rule? That is the part I am not clear 
on.
    Ms. Castle. The department does support the codification of 
the American rule. The legislation, S. 1856, could benefit from 
additional clarification of those interactions in a split 
estate situation.
    The Chairman. OK. I am not sure that I am still very clear 
on this. But let me ask you, Dr. Markowsky, one issue is these 
large-scale projects that you are standing up. I think you said 
you will have 8 to 10 of those by 2015----
    Mr. Markowsky. That is correct.
    The Chairman [continuing]. In operation. That is one of the 
things that is a priority. You also, I gather here, have basic 
research going on with regard to carbon capture and storage. 
Could you just elaborate a little on what the Office of Science 
is doing in that area with regard to this basic research?
    Mr. Markowsky. Yes, thank you.
    We are working closely with the Office of Science. What we 
identified actually last year, when we knew that we were going 
to have a high cost for the first-generation post combustion 
capture using the mean systems that are available now and 
chilled ammonia and the various types of means, we got together 
with the Office of Basic Science and started looking at 
advanced capture techniques.
    This is advanced sorbents, solvents, and ionic type of 
fluids that could capture the CO2 with very little 
energy and then be regenerated again with very little energy 
needed, which is the key thing. Because what you want to do is 
capture the CO2, and then you are going to take that 
CO2 outside the flow stream, and you are going to 
release it with either a pulse of energy or something and then 
recirculate the solution that is capturing the CO2.
    So we are working closely with them. They are doing 
research on various types of sorbents and solvents along with 
us, and the tie is that they know what our needs are, and we 
have a very tight timeframe. We are also working with ARPA-E, 
the other organization we have. They have solicitations out for 
advanced capture.
    So, actually, we have got 3 entities within DOE that are 
focusing very heavily on advanced capture and post combustion 
treatment.
    The Chairman. Thank you very much.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Dr. Markowsky, I would like to ask you about the 2009 
stimulus funds that DOE received. It is my understanding that 
there was $3.4 billion that went for CCS, and it included 
funding for industrial applications, for R&D, a third round of 
Clean Coal Power Initiative selections. According to DOE's Web 
site, we have just less than a third of the money that has been 
awarded over the last 15 months, it is my understanding that 
just $16 million, or about 0.5 percent, has actually been 
spent.
    So my question to you this morning is what exactly is 
happening with these fossil energy accounts? What are the hold-
ups? Is DOE on track to be spending these stimulus dollars? We, 
of course, had all hoped that these would be targeted, timely, 
and temporary. I mean, it doesn't look like anything is getting 
out the door.
    Mr. Markowsky. Thank you for that question, Senator 
Murkowski.
    What we have is really large-scale demonstration projects 
in 3 areas with the CCPI program we have, with the industrial 
CCS, and also FutureGen. Initially, we sent out solicitations, 
and then we reviewed them, and we selected 4 programs under 
CCPI-3. We are right now down-selecting the programs under the 
industrial CCS solicitation, and we are also working with the 
FutureGen Alliance.
    So we are positioned to make these awards and begin 
detailed engineering. The earlier work was very preliminary 
engineering, which we call ``feed,'' which is a very, very low 
level of expenditures. But we are on track to obligate moneys 
in all 3 of those programs by September of this year. Then 
after we make the awards for detailed design and construction, 
we will have a ramp-up of expenditures, and then we are on 
target for the 2 major programs to have those expenditures 
completed when they come online in 2015.
    Senator Murkowski. Can you give me some parameters? You say 
that you will have these expenditures out there. How much are 
you looking to get out the door?
    We said wanted shovel-ready projects, don't get me wrong, 
we want to encourage the advancement in the CCS. But it doesn't 
sound to me like you are able to expedite much of this in a 
manner as which we had intended.
    Mr. Markowsky. Yes. The shovel-ready projects, when you 
come with a large-scale CCS program, and many times these are 
new facilities, and it typically takes about a year to get all 
the preliminary work done and 3 years for construction and 
begin operation.
    There is a ramp-up of expenditures during that period of 
time, and that is what you are seeing now. This first year is a 
slow ramp-up and where just very, very small amount of money is 
being expended. But in the next quarter, we are going to be 
starting to ramp up with detailed engineering. Then next year, 
in the spring and summer, we are going to be breaking ground on 
these projects, and that is when the large expenditures will 
begin, when you order and pay for the large equipment.
    Senator Murkowski. I mentioned in my opening comments about 
a project that is being considered in Alaska with utilizing the 
in situ gasification, where we can extract from the coal seams 
without digging a mine. Does the Department of Energy 
anticipate providing any assistance, financial or otherwise, to 
project developers in this area?
    I would ask you, Ms. Castle, whether from a scientific 
perspective, do you have the information that you need to take 
a position on in situ gasification? If you can indicate whether 
we have financial assistance coming and then from the science 
perspective?
    Mr. Markowsky. Thank you again, Senator.
    We have not received any requests for participation in the 
programs. The in situ and underground gasification concept, we 
had been exploring that in DOE early on in the 1980s. We have 
had some misfortunes because it wasn't understood exactly how 
that process works. Now there is a number of programs being 
pursued in China, Australia, India, and as you mentioned, in 
Cook Inlet.
    It is a technology that has applications in a particular 
type of seam that typically is unmineable, and there is 
attractive benefits in those kind of seams. But we have not 
been approached for participation in that particular project or 
any project.
    Senator Murkowski. Ms. Castle, on the science?
    Ms. Castle. Senator, I don't know that we have enough 
information currently in order to be able to take a position on 
the feasibility of the in situ gasification.
    Senator Murkowski. Will you let me----
    Ms. Castle. I think----
    Senator Murkowski. Let me just make sure that--this is a 
process that has been around for a considerable period of time. 
Are you suggesting that we just haven't looked at it from a 
U.S. perspective, or when you say you don't have the 
information, what specifically are you lacking?
    Ms. Castle. I think that you were asking for--I was 
thinking that you were asking for our position on the specific 
project in Alaska?
    Senator Murkowski. No. Just whether or not from a 
scientific perspective you think that the in situ process for 
gasification is one that is sound and we should be pursuing, 
whether through incentives or just allowing for facilitation?
    Ms. Castle. Let me just say that I don't have sufficient 
information to answer that question, and if I could answer it 
for the record, I would be happy to do that.
    Senator Murkowski. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much.
    I apologize for being late, but I have read your testimony 
and appreciate both of you being with us today.
    The American Recovery and Reinvestment Act, that was passed 
by Congress last year, included $100 million in funding that I 
secured for projects for the beneficial use of carbon. I mean, 
there are a couple of different ways to deal with carbon. One 
is carbon capture and sequestration through geologic means, 
which is a way to address it as a bridge to continuing to use 
coal in the future.
    Another way is to find beneficial uses for carbon, and we 
had a witness at one point before the Senate Energy and Water 
Appropriation Subcommittee that said to think of carbon as a 
product and that we should find beneficial uses for carbon. 
There are beneficial uses, such as enhanced oil recovery, which 
is a beneficial use that also sequesters the carbon.
    But I want to ask you, let me hold just for a moment. It 
is----
    The Chairman. Why don't--I know. Yes. Did someone send for 
a doctor?
    Senator Dorgan. Dr. Barrasso is----
    The Chairman. Oh, Dr. Barrasso has gone.
    [Paused.]
    The Chairman. OK, I think we are OK to go ahead. Why don't 
you continue with your question, Senator Dorgan?
    Senator Dorgan. All right. Thank you.
    I was talking about carbon capture and sequestration and 
also beneficial uses for carbon. It seems to me that in order 
to provide the funding for the full potential of these 
technologies and to be able to use coal in the future in a 
different way, it is going to require a substantial amount of 
money. The question is how do we raise money for carbon capture 
and sequestration and beneficial use technologies in 
appropriation cycles? My guess is probably not very easily in 
the regular appropriation cycle in the future.
    So it has been supported that there be a small wires charge 
universally applied that would raise the kind of funding 
necessary. I would like to ask for the department's assessment 
of a wires charge approach.
    Mr. Markowsky. Thank you for that question, Senator.
    I think when you look at large-scale demonstrations, the 
one thing that you would like to have is the predictability of 
funding for them. As I mentioned before, these programs 
typically take a number of years. Besides a solicitation, you 
are going to take 4 to 5 years to go through the engineering, 
permitting, engineering design, and construction. So it is good 
to have a basis that you will be able to fund those on a 
multiyear basis.
    So the department would support any program that provides a 
certainty of funding for large-scale demonstration programs.
    Senator Dorgan. My sense is that we are not going to have 
an energy future without the use of coal, but the use of coal 
has to be substantially different than the way we have used 
coal in the past. I understand that reducing carbon emissions 
in a very significant way is important, but my concern is that 
we make sure that we have targets and timetables as well as the 
funding for the scientific inquiry that occurs from now until 
then so that we can continue to use coal in a very different 
way.
    I do think that the science and technology are going to 
unlock many, many opportunities. I think probably all of us on 
this committee could describe a half a dozen proposals out 
there that people are working on that they insist represent 
``the answer.''
    Now, not all of them will be the answer, but there are some 
approaches out there that if we can scale up and demonstrate at 
commercial scale are going to allow us to use coal in a very 
different way. This committee spends a lot of time working on 
other energy policy issues, such as renewable energy, which I 
strongly support, among other issues, but the question is with 
50 percent of the electricity coming from coal, how do we 
manage to continue to use coal in the future?
    Now I think Senator Murkowski mentioned the Dakota 
Gasification plants in North Dakota, we have one of the only 
applications where we take coal and turn it into synthetic 
natural gas. They were going to build a good number of those 
plants many decades ago, and now it sits on the northern 
prairies.
    They turn coal into synthetic natural gas, put it in a 
pipeline, and move it around the rest of the country. They 
capture 50 percent of the CO2 and put that in a 
pipeline and move it to the oil fields of Alberta, Canada, 
where they use the CO2 to enhance oil recovery.
    So it is a project from which we can learn a lot, it seems 
to me. You can have beneficial uses for CO2. But I 
just come back to the pointthat we really do need to have an 
adequate stream of funding over a number of years, perhaps 10 
and 20 years, to unlock the science and the technology which 
will allow us to understand how to capture and sequester carbon 
and to use it for beneficial uses.
    That is why we put $3.4 billion in the economic Recovery 
Act to invest in a range of CCS projects. But that is just a 
start because it is going to cost much more than that. Do you 
have estimates of what you expect is needed over the next 20 
years, either of you, in terms of the funding requirements?
    Mr. Markowsky. We have not developed those estimates at 
this point.
    Senator Dorgan. But if there is a proposal--I happen to 
favor a proposal for a wires charge in order to raise that 
funding. Senator Rockefeller has a proposal. Senator Voinovich, 
I believe they have a joint proposal. I happen to think it 
makes some sense to do that.
    You are saying the department and the administration would 
look favorably upon any reasonable approach that begins to 
accumulate the funding necessary for these investments?
    Mr. Markowsky. No, I think that is correct. I think we know 
that if we are going to continue with the second-generation 
technologies I mentioned and demonstrate those, and of course, 
after you do that, you are probably going to be doing advanced 
research to keep pushing that envelope.
    It is going to require a certainty when you talk about 
large-scale demonstration and to entice investors to 
participate in that, a certainty of funding. So any kind of 
mechanism that gives you a certainty of funding certainly would 
be very positive.
    Senator Dorgan. If I might just ask one quick question, are 
you as excited about beneficial use as I am? I think the 
potential of beneficial use is very substantial.
    Mr. Markowsky. I am. Matter of fact, you mentioned the $100 
million. We have 12 proposals, and we are going to be looking 
at those, and we are going to down-select those to maybe 6 or 
8, and we have got some exciting prospects in it--algae with 
various chemicals, actually making a fuel from it, making a 
cement product from it. So there is a lot of potential besides 
EOR. It is a shame to store that product because you spend a 
lot of money capturing it, and you have got to find a way to 
really use that beneficially.
    Senator Dorgan. Thank you very much.
    The Chairman. Senator Bunning.
    Senator Bunning. Thank you, Mr. Chairman.
    First of all, I would like to thank both you and Senator 
Murkowski for holding this hearing. Several weeks ago, I, along 
with Senators Barrasso and Bayh, sent a letter to the committee 
outlining the importance of having a hearing on clean coal and 
the technologies surrounding carbon capture. That was a letter 
we sent to you.
    While the focus of this hearing is not coal, carbon capture 
and sequestration will play an enormous role in reducing 
CO2 emissions from coal. So while this is not 
specifically a coal hearing, I am approaching it from the 
perspective of how this technology can help us with the use of 
this critical resource.
    Coal is incredibly important to my State, Kentucky. The 
industry provides over 60,000 jobs, including about 15,000 coal 
miners. Those numbers show just how vital coal is to the State 
of Kentucky. If I did not keep that in mind, I would not be 
doing a very good job representing the people of Kentucky.
    However, besides just jobs in my State, coal is essential 
to the American energy needs. As it has been stated before, it 
provides about 50 percent of the country's electricity. No 
matter what some might say or try to do, coal will not just go 
away. It is a clean, abundant, and domestic source of energy.
    In fact, coal makes up about 94 percent of the known energy 
reserves found in the United States of America, 94 percent, 
compared to 4 percent of natural gas and 2 percent for crude 
oil. Thus, we have to live with coal and find a way to use it 
that meets our long-term environmental standards.
    Carbon capture and sequestration can help us do that. That 
is why in the stimulus package, we put $3.4 billion and $600 
million to be used to discover ways to capture carbon, CCS 
technology that you are supposed to be figuring out a way to 
spend. Sixteen million dollars in over a year and 4 months, in 
my opinion, is not acceptable.
    We all know how difficult it is to build out, but if you 
don't get the people to build out with in hand, you never 
accomplish the goal that you set out to do. Certainly, the 
Congress put $4 billion in that stimulus package. I think there 
is a bright future for CCS, but if we don't--Dr. Markowsky, if 
we don't do it and do it quickly and do it right, it isn't 
going to happen.
    I have dealt with the Energy Department now for 12 years 
here in the Senate and 12 years in the House of 
Representatives. If there is one thing I have found out, they 
don't do things very fast. So I am asking you, begging you, to 
get underway and get this technology perfected. We have got 
people spending billions of dollars in the private sector to do 
what the Department of Energy has been given $4 billion to do.
    Just in 2 places--one in Owensboro, Kentucky, one in 
Paducah, Kentucky--we are trying to do exactly what Ms. Castle 
has said. We have a dispute. The Government doesn't own the 
surface, but they want to sequester the carbon underneath, and 
we have a dispute whether they can do it or whether they can't 
do it.
    It is in the Illinois basin in southern Illinois, and the 
Paducah plant wants to liquefy coal and also bring natural gas 
and aviation fuel out of that same coal. But they have to 
capture, and we guaranteed them to capture over 90 percent of 
the CO2. I am asking you, please get those projects 
underway because we are not going to be able to diverse quickly 
enough from coal to produce enough energy for this country to 
run on and stay competitive with those that are not using 
sequestration of CO2.
    In China and India, they are laughing at us as a country. 
They are laughing at us because they told us they are not going 
to do any carbon capture and sequestration. They are going to 
continue to burn coal as we used to.
    So, please, I am asking you to speed up and do it properly.
    The Chairman. Did you want to make any comment in response?
    Mr. Markowsky. Yes, if I may? Yes, I can appreciate the 
frustration of both Senator Murkowski and yourself, Senator 
Bunning. But I can assure you I have spent 30 years of my life 
engineering, designing, and building power plants and the other 
10 of the 40 years pursuing power plants. So I am a fellow who 
likes to build power plants. I am pushing that.
    In parallel with that, we are advancing the technology 
because I don't think we should sit on a technology. We are 
advancing that. We are looking at advanced technologies, the 4 
that I identified, because I think beside demonstrating these 
technologies, which are critical to integrate CCS into 2 types 
of concepts--electric power production and the various 
industrial facilities--we need to get that culture going.
    But we need to accelerate that technology and develop the 
next round of technologies. We are looking at computer 
simulation to basically help us push that even faster. We have 
got a major effort in simulating power plant components and 
systems to accelerate the deployment of CCS.
    We are pushing it, sir, and I will continue doing that.
    Senator Bunning. We are going to keep your feet to the 
fire. I know this committee will.
    The Chairman. All right. Senator Barrasso.
    Senator Barrasso. Thank you very much, Mr. Chairman.
    Ms. Castle, thanks so much for your comments and for your 
support of what I am trying to accomplish with S. 1856. I 
completely understand the concerns that you have raised when 
the surface area is not owned by the Federal Government, what 
the mineral rights are and some of the additional issues that 
you have raised.
    I would say I am committed to working with you to take that 
next step, and I would hope that you would work with my office, 
as well as the committee and the chair and the minority side as 
well, in coming to solutions because some of the key points 
that you have raised are not addressed by this legislation.
    Specifically now, looking at carbon capture and 
sequestration on public lands right now, I think you are 
receiving applications for projects. Could you tell me how you 
are handling those applications to move ahead with projects for 
carbon capture and sequestration?
    Ms. Castle. We are receiving applications for site 
characterization. That is the first step to ensure that 
geologically the sites are suitable for this kind of effort. 
Those applications are currently being processed by the Bureau 
of Land Management, pursuant to their authority for rights-of-
way under the Federal Land Policy and Management Act.
    Senator Barrasso. Do you think Title V of the Federal Land 
Policy and Management Act provides you the necessary authority 
to issue permits then for long-term commercial-scale carbon 
storage facilities?
    Ms. Castle. Senator Barrasso, as I mentioned, we have some 
concerns that it would be--because of the scale and the 
financial investment required for a commercial long-term 
sequestration project, we think that it would be beneficial to 
have more explicit authority. We are operating under the 
authority of the Mineral Leasing Act and FLPMA. Those are from 
1920 and 1976, respectively.
    Carbon sequestration was not contemplated when those laws 
were enacted. So we think that to deal with the issues that we 
can see arising in connection with long-term CCS, that it would 
be desirable to have more explicit authority.
    Senator Barrasso. Thank you.
    As this goes forward, I don't know what kind of public 
participation you are expecting then in the permitting process, 
guidelines that the department would follow when it comes to 
the project's notification of adjacent property owners and 
things like that. Have you given some thought as to what would 
be needed as this goes on?
    Ms. Castle. That has been discussed, and there is a process 
for dealing with public notification and comment within the 
Bureau of Land Management. I can't provide you with the 
details. I would be happy, though, to answer that question in 
writing for the record.
    Senator Barrasso. I have some additional questions for you 
to answer in writing. I don't want to go through all of them 
and take your time. We have a second panel as well.
    Is the process of permitting these projects on Federal land 
consistent not just across your department, but also with, say, 
other land management agencies? Not just the Department of 
Interior, but also with the Forest Service and the Department 
of Agriculture, are you working with others?
    Ms. Castle. Yes, sir. Certainly, in connection with Carbon 
Capture and Storage Task Force, those are issues that are being 
considered by all of the 14 agencies that are involved there. 
The BLM is the agency charged with responsibility for 
management of the entire Federal mineral estate. So that 
encompasses a mineral estate owned by the Forest Service and 
various other Federal agencies.
    Senator Barrasso. So then I can look forward to working 
with you and with the committee as we go forward to address 
some of the additional concerns that you have raised today?
    Ms. Castle. Yes, sir.
    Senator Barrasso. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Let me switch subjects and take the occasion of you being 
here, Dr. Markowsky, to ask about another subject that is in 
your jurisdiction there. That relates to the Strategic 
Petroleum Reserve and the product reserve that we have proposed 
as part of the bill that we have reported out of our committee.
    I think we have got another hurricane season on the 
horizon, and I would just be interested in your thoughts as to 
whether we are doing what we need to do to prepare for that as 
far as maintaining supplies of refined product in areas that 
might be affected by hurricanes?
    Mr. Markowsky. Thank you for that question, Senator.
    Last year, we embarked on a study to scope out the 
desirability of a refined product reserve similar to SPRO. That 
was somewhat inconclusive. We looked at just 2 events this 
year. We embarked on a more definitive study looking at the 
probabilistic nature of hurricanes to try to come up with a 
cost benefit. We hope to have a study completed by June.
    But what we are doing, essentially, last year we looked at 
the consequences of the prior hurricanes, and we saw that we 
needed to harden the systems, the refineries, and the 
pipelines. What the refineries have done is they have elevated 
their electrical switch gear to ensure that they will not be 
damaged by water intrusion.
    We have worked with the local utilities to set up a 
priority to restore refineries and also pipeline pumping 
stations and tank farms along the 2 continental and plantation 
pipelines. They have diesel-powered generators to help the 
pumping facility. So we feel that we are in good shape.
    We looked again this year to look at possible options to 
procure what we call ``tickets,'' options for refined products. 
We looked at all the commercial tankage. It is full. There is 
just no available excess tankage. They are maintaining their 
refined products of gasoline and diesel at a maximum capacity.
    So the way we would take a look at it, we have got the 
refined products there. We have got to make sure that we get 
electric power to it when we have a disruption. At SPRO, we are 
mobilizing. We have diesel generators at Bayou Choctaw. In case 
refineries need crude and we are out of power, we have got 
diesel-powered pumps that will be able to pump water into our 
caverns to extrude the oil to move in the pipeline.
    So I think we are as prepared as we can at this point, 
Senator.
    The Chairman. Thank you very much.
    Let me just see if Senator Murkowski had additional 
questions for this panel.
    Senator Murkowski. Just one last question, Mr. Chairman. 
This relates to the level of coordination between the 
Department of Energy and the Department of the Interior.
    I mentioned in my opening statement that it is important 
that we work together to move these policies. When we talk 
about the location of energy infrastructure and how we are 
going to move this CO2 through pipeline to the 
storage points, the question would be to both of you how your 
agencies are dealing with this as an issue, how you are 
coordinating with other Federal agencies to clarify the roles 
so the project developers know? Then further, whether or not 
the current state of the CO2 pipeline regulation is 
sufficient? Does it need further clarification? Do we need to 
endorse any pending legislation that is out there? Can you give 
me a little bit of status on how we move the CO2?
    Mr. Markowsky. Thank you for that question, Senator 
Murkowski.
    We have those 2 issues on our table with the CCS task 
force, both the pipeline issue and also who regulates the 
pipeline. Right now, we have got just under 4,000 miles of 
CO2 pipelines, extensive network now, and there are 
projections of tens of thousands of miles of pipeline. So the 
issue of who is going to regulate that, which now is not clear. 
It is an issue that is being studied.
    Also the issue of basically putting in pipeline, the safety 
and acquisition. We hope to have that--we will have that report 
ready when the task force submits a report to the President in 
August.
    Senator Murkowski. In August?
    Mr.. Markowsky. Yes.
    Senator Murkowski. OK.
    A final question then is whether or not, and Senator Dorgan 
mentioned the beneficial uses of CO2, should 
CO2 that is clearly a valued commodity for enhanced 
oil recovery, should that be treated the same way as 
CO2 that would be sequestered? Is there any reason 
to treat them differently?
    I mean, one is used to enhance the oil product. The other, 
we are basically just storing. Do we look at them differently 
from a regulatory perspective?
    Mr. Markowsky. We are looking at that issue in terms of the 
regulations with respect to storage. There is an issue in terms 
of there has been extensive amount of CO2 injected 
for enhanced oil recovery, and there are need for regulations 
for geological sequestration. That is an issue that is being 
worked on with EPA----
    Senator Murkowski. Is the task force also looking at this 
as well?
    Mr. Markowsky. The task force is working on that, but EPA 
is also looking at that with respect to injection and 
monitoring. They hope to have a rule--they are going to have a 
rule out by the end of this year.
    Senator Murkowski. Ms. Castle.
    Ms. Castle. As I understand it, Senator, I mean, 
CO2 is a fungible commodity, but the difference with 
sequestration is the injection at pressure, and that generates 
different impacts, different issues. So the regulatory 
structure may be different as a result. But as Dr. Markowsky 
says, that is one of the issues that is being addressed by the 
task force.
    Senator Murkowski. Thank you, Mr. Chairman.
    Thank you.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Let me just make one final point, and it 
relates to something that Senator Bunning said. I think many 
share the urgency that he feels about moving ahead.
    Yet I think it is also important to understand this is not 
formula funding that you have been given. The $3.4 billion is 
funding for which you are going to select some very large 
projects that will be consequential, and it is very important 
that these projects be carefully selected so that they are able 
to accomplish what we want to accomplish. So I want you to do 
it as quickly as we can, but I want you to do it right. I know 
Senator Bunning would want the same thing.
    But it is easier to get formula funding out the door. I 
understand that. When we provide formula funding, we would 
expect that to move out the door. But this $3.4 billion is 
designed to support some very significant, new, cutting-edge, 
large projects. I understand the concern from the Senator from 
Wyoming, that a small percent has gone out the door at this 
point. But having said all that, all of us want you to not only 
do it well and do it quickly, but to do it right.
    Mr. Markowsky. If I could just mention some of the things 
we are doing? In CCPI-3, we selected 2 gasification projects, 
somewhat different. One produces hydrogen for electric power 
generation and also a product, and the second one basically 
will be co-production of urea, again using state-of-the-art 
gasification technology, which I still call ``first 
generation.''
    We also have selected 3 post combustion projects, which 
have different post combustion technologies. That is critical 
that we operate those in an integrated fashion. However, I feel 
that we need to accelerate the development of that to go to the 
next generation, which is going to have significant cost 
reduction.
    On the industrial sector, we are looking at cement kilns. 
We are looking refineries. So we are looking at the spectrum of 
post capture-type of technology.
    Senator, I believe, given the technology we have, we are 
covering the nature of the industry that we need to cover to 
get the integrated information to take the next step.
    Senator Dorgan. Each of these necessarily will be fairly 
large projects?
    Mr. Markowsky. Yes.
    Senator Dorgan. That is why making a mistake on one could 
be very costly for the American taxpayer. So you have a great 
opportunity with this money that comes from the Recovery Act, 
and all of us want you to use this in a very significant way to 
develop the answers that we need as we move forward to 
determine what is the bridge to be able to use coal in the 
future.
    Mr. Markowsky. That is our objective, sir.
    The Chairman. Thank you both very much for your excellent 
testimony.
    Why don't we go ahead and go to the second panel at this 
point?
    Let me introduce the second panel as they are coming 
forward to the witness table. Robert Hilton is vice president 
of power technologies. He is at Alstom Power here in 
Washington. Mark Brownstein is Deputy Director of Energy 
Programs with the Environmental Defense Fund. Adam Vann, who is 
legislative attorney with the American Law Division of CRS, 
Congressional Research Service. Ben Yamagata, who is the 
executive director of the Coal Utilization Research Council. 
Kurt House, who is the chief executive officer with C12 Energy 
in Cambridge, Massachusetts.
    So we very much appreciate all of you being here. Why don't 
we start with you, Mr. Hilton, and just go right across the 
table hear, and each of you take about 5 minutes. We will 
include your full statements in the record as if read. But if 
you could make the main points that you think we need to 
understand, that would be very helpful.
    Mr. Hilton.

 STATEMENT OF ROBERT HILTON, ON BEHALF OF MS. MACNAUGHTON, CB, 
SENIOR VICE PRESIDENT, POWER AND ENVIRONMENTAL POLICIES, ALSTOM 
                             POWER

    Mr. Hilton. Thank you. Good morning.
    I would like to thank Chairman Bingaman and Ranking Member 
Murkowski, as well as the entire committee, for this 
opportunity to address these issues on CCS.
    Alstom is a global leader in the world of power generation 
and transportation infrastructure. We employ more than 81,000 
people in 70 countries, including 6,000 full-time permanent 
employees in 47 States in the United States That number 
virtually doubles when you include workers hired for specific 
projects.
    We are proud of our growth in the U.S., highlighted by our 
nearly $300 million investment in a new turbine manufacturing 
facility in Chattanooga, Tennessee, and a new wind 
manufacturing facility in Amarillo, Texas.
    Alstom is a leader in the field of CCS with 12 pilots, 
demonstrations, and commercial-scale plants in operation or 
design and construction. We are proud to be partnering with AEP 
in operating what is thought to be the only real project 
capturing and storing significant quantities of CO2 
from an existing power plant, namely the Mountaineer plant.
    Alstom is commercializing 3 capture technologies, and these 
will be available commercially by 2015 is the target. All of 
these technologies can be retrofitted to the existing fleet.
    We are here to talk specifically about 3 bills under your 
consideration. The first of these is the draft bill by Senators 
Rockefeller and Voinovich. Alstom strongly supports this bill. 
We believe the funding structure and mechanism proposed in the 
draft will achieve the targeted number of plants which the 
industry, the administration, and Congress have deemed 
necessary for successful implementation of commercial-scale 
technology.
    Alstom suggests a revision to the restrictions on funding. 
Alstom has been a leader in technology development and 
commercialization throughout its history. We have brought many 
technologies to the marketplace. The experience has led us to 
be wary of upfront prescriptive sizing definitions for funding.
    For instance, with over 50 years experience in the air 
pollution control area, we know that plants validated at the 
200 to 300 megawatt level for post combustion CCS are fully 
adequate for unlimited deployment on full industry-wide 
application. Other technologies like oxy-fired boilers will 
take larger demonstrations.
    We need to allow for demonstrations at the 100 to 300 
megawatt level on key applications such as CCS applied to gas 
turbines, an application that will be critical under any 
scenario if we are to reach our goals in 2030 and 2050. Too 
much attention has been focused on identifying CCS with coal. 
The application of CCS to all fossil fuels, particularly 
natural gas, will be absolutely critical to meet these 
reduction targets.
    We reiterate that Alstom sees the Rockefeller-Voinovich 
draft as a critical and comprehensive bill to support the 
commercialization of CCS. The Responsible Use of Coal Act 
provides a necessary additional dimension to the Rockefeller 
and Voinovich draft. Our commitment to innovation means that 
the technology we are commercializing today may well not be the 
ultimate and optimal solutions in the future.
    The Rockefeller-Voinovich bill is valuable for addressing 
the near-term commercialization opportunities. But the Casey 
bill is also valuable in providing support for several levels 
of the next-generation technology, which our country's power 
system will need.
    Alstom urges that consideration be given also to broadening 
the bill to include all fossil fuels, not just coal. As we 
stated earlier, we need CCS to be applied to all fossil fuels, 
gas as well as coal, as well as other industrial processes.
    Finally, Alstom also S. 1856, sponsored by Senator 
Barrasso, as addressing an important prerequisite for making 
CCS a commercial reality. We will have accomplished nothing if 
we commercialize the capture technology and have not addressed 
the ultimate disposition of the CO2.
    Alstom would also take this opportunity to urge the 
committee to consider measures in energy legislation to 
incentivize the industry to upgrade and improve the efficiency 
of the existing fleet on the supply side. The fact is we will 
need to continue to rely on coal and gas plants for a large 
part of our generation well into the future. We need these 
plants to continue to run as optimally as possible.
    Upgrading the efficiency of the existing fleet will prolong 
its life, provide us breathing space to make the needed 
investments in replacement plants, compensate for load growth 
and load loss resulting from additional controls, and finally, 
reduce carbon emissions on a massive scale. One estimate has 
upgrading the existing fleet reducing CO2 by as much 
as 12 percent, a huge step toward our goal, and all this 
technology is now available.
    Last, I would reiterate a call made by Alstom and a broad 
section of business, labor, environmental, and other 
organizations for Congress to pass climate legislation that 
preserves and creates jobs, enhances energy security, and 
enables the U.S. to contribute the clean technology leadership 
that the world needs. To those who would question how soon CCS 
will be available, Alstom is on record as saying 2015.
    All of these bills are important steps in that direction 
and deserve support on their own merit. However, absent the 
certainty that can only come from a broad legislative and 
regulatory framework making clear a price for CO2, 
businesses will not make the substantial investments needed to 
support CCS and other innovative technology options.
    We thank the committee for the opportunity to comment.
    [The prepared statement of Ms. MacNaughton follows:]

  Statement of Joan MacNaughton, Senior Vice President, Environmental 
                         Policies, Alstom Power
    Good morning. My name is Joan MacNaughton. I hold the position of 
Senior Vice President responsible for Power and Environmental Policies 
for Alstom Power. I would like to thank Chairman Bingaman and Ranking 
Member Murkowski as well as the entire Committee for this opportunity 
to address these key issues on Carbon Capture and Sequestration (CCS).
    Alstom is a global leader in the world of power generation and 
transportation infrastructure that sets the benchwork for innovative 
and environmentally friendly technologies. More than 50% of the power 
plants in the United States have Alstom equipment, and 25% of the 
world's electricity is generated on Alstom equipment. Alstom has the 
world's largest service business devoted to the maintenance of power 
generation equipment and is the world's largest air pollution control 
company.
    Alstom employs more than 81,000 people in 70 countries, and had 
sales of $26.7 billion in 2008-2009. In the U.S., Alstom employs 
approximately 6,000 full time permanent employees in 47 states. That 
number virtually doubles when you include workers hired for specific 
projects. We are very proud of our growth in the U.S., highlighted by 
our nearly $300 million investment in a new steam turbine manufacturing 
facility in Chattanooga, TN that will open in a few months; and our 
proposed new factory for wind manufacturing facility at Amarillo, 
Texas.
    Alstom has a broad portfolio of power generation technology 
options: including coal, oil, natural gas, wind, hydro, and nuclear. 
Based on this diversity of offerings, Alstom has been promoting its 
strategy of ``Clean Power Today''. We are clear we will need a balance 
of all these technologies to reach our goals for carbon, both on 
technical and economical grounds. Significant pillars of our program 
are rapid and successful deployment of non-CO2 sources of 
generation, namely nuclear and renewables; reduced CO2 
emissions through more efficient generation; and the capture of 
CO2 from fossil fuel powered generation (CCS).
    Alstom is a leader in the field of CCS with 12 pilots, 
demonstrations, and commercial scale plants in operation or design and 
construction worldwide. We are proud to be partnering with AEP in 
operating what is thought to be the only real project capturing and 
storing significant quantities of CO2 from an existing power 
plant, namely the Mountaineer Plant in West Virginia.
    Alstom is commercializing three capture related technologies: 
chilled ammonia, advanced amine, and oxy-firing, with the focus on 
having the first of these technologies commercially available in 2015. 
All of these technologies can be retrofitted to existing power plants.
    We are here today to specifically address three bills under 
consideration by the Committee on the subject of CCS.
    The first of these is the draft bill by Senators Rockefeller and 
Voinovich. Alstom strongly supports this bill. We believe the funding 
structure and mechanism proposed in the draft will achieve the targeted 
number of plants which the industry, the Administration, and Congress 
have deemed necessary for successful implementation of commercial scale 
capture technology.
    Alstom would offer the following comments as an enhancement to the 
draft bill. We recommend that industry groups representing carbon 
capture technology suppliers be added to either the Partnership Council 
or the Technical Advisory Committee or both. Including these key voices 
would provide important expertise as an input to the decision process.
    Alstom also suggests a revision to the Restrictions on funding. 
Alstom has been a leader in technology development and 
commercialization throughout its history. We have brought many 
technologies to the market place. This experience has led us to be wary 
of upfront prescriptive size definitions for funding. The size of 
demonstration required will vary according to technology type. For 
instance, with over 50 years experience in the air pollution control 
area, we know that plants validated at the 200-300 MW level for post-
combustion CCS are fully adequate for unlimited deployment on full 
industry wide application. But other technologies such as oxy-fired 
boilers will require larger demonstrations because of technical factors 
related to boiler design. On the other hand, we need to allow for 
demonstrations at the 100MW--300MW level on key applications such as 
CCS applied to gas turbines-an application that will be critical under 
any scenario if the world is to reach the levels of reduction proposed 
for 2030 and 2050. Too much attention has been focused on identifying 
CCS with coal. The application of CCS to all fossil fuels, particularly 
natural gas, will be absolutely critical to meet the ultimate future 
emission reduction goals of 50% and 80%. We therefore suggest that the 
restriction of funding for the size range 100MW--300MW be removed. If 
the goal is to ensure adequate funding for larger scale demonstrations 
needed across the broad range of technologies, perhaps the Bill should 
stipulate the attainment of that goal in the remit given to the 
Partnership Council and the Technical Advisory Committee.
    We reiterate that Alstom sees the Rockefeller/Voinovich draft as a 
critical and comprehensive bill to support the commercialization of 
CCS. We strongly welcome it and urge the committee to move forward with 
such legislation, and to do so without delay if we are to build a whole 
new industry and roll out CCS on the scale required by 2030.
    Senate Bill 1134, ``The Responsible Use of Coal Act of 2009'' 
sponsored by Senator Casey, provides a necessary additional dimension 
to the Rockefeller/Voinovich draft. Our commitment to innovation means 
that the technology we are commercializing today may well not be the 
ultimate or optimal solution in the future. Alstom has extensive 
experience with technology development across different fuels. We are 
clear that technology and cost reduction in power generation in any 
field will only be achieved by innovation and the continued funding of 
research, development and demonstration at a significant scale. The 
Rockefeller/Voinovich bill is valuable for addressing the near term 
commercialization opportunities. But the Casey bill is also valuable in 
providing support for several levels of the next generation technology 
which our country's power system will need. Like many technology 
developers, Alstom is already exploring several additional 
revolutionary technologies for CCS in addition to those which are 
nearer to market. Again, however, Alstom urges that consideration be 
given to broadening the bill, to include all fossil fuels and not just 
coal. As we stated earlier, we will need CCS to be applied to all 
fossil fuel power generation, gas and coal, as well as to other 
industrial processes. Technical break-throughs in one fuel may well be 
applicable to others in the case of CCS. This bill would provide 
support for those future technologies and accordingly Alstom sees this 
portion of the bill, widened to include other fuels as well as coal, as 
an essential component of the wider strategy for meeting the goals of 
emission reduction through CCS.
    Finally, Alstom also sees Senate Bill 1856 sponsored by Senator 
Barrosso as addressing an important prerequisite for making CCS a 
commercial reality. We will have accomplished nothing if we 
commercialize the capture technologies and have not addressed the 
ultimate disposition of the CO2 captured. The approach to 
pore ownership on Federal lands in the Barrosso bill is an important 
step towards dealing with storage issues, and Alstom welcomes inclusion 
of such legislation in the developing CCS strategy and legislative 
portfolio. We would also point out that there are other excellent 
examples both from individual States and from the European Union which 
could be considered within this context.
    Alstom would also take this opportunity to urge the Committee to 
consider measures in energy legislation to incentivise the industry to 
upgrade and improve the efficiency of the existing fleet on the supply 
side. Our electricity needs are set to grow--even if we attain the 
ambitious levels of improvement in efficiency on the demand side which 
we and many experts believe are necessary. Nor can we meet these 
growing needs just from increased use of renewables and nuclear, 
valuable though both these sources will be for meeting emission 
reduction targets. The fact is we will need to continue to rely on coal 
and gas plants for a large part of our generation. And we need these 
plants to continue to run as optimally as possible. Upgrading the 
efficiency of the existing fleet will prolong its life; provide us 
breathing space to make the needed investments in replacement with new 
plant; compensate for load growth and load loss resulting from 
additional controls; and finally, reduce carbon emissions on a massive 
scale. Improving efficiency means more megawatts from each ton of 
fossil fuel, thus contributing to improving our security of fuel supply 
as well as ensuring better continuity of electricity supply. One 
estimate has the upgrading of the existing fleet to reduce carbon 
emissions potentially by as much as 12% from the reported current 
baseline--a huge step towards our goals. More importantly, implementing 
efficiency upgrades now actually significantly reduces the levels of 
CO2 reduction needed in future years. And, best of all, the 
technology already exists today, at proven commercial scale.
    Lastly, I would reiterate previous calls made by Alstom and a broad 
cross section of business, labor, environmental, and other 
organizations for Congress to pass climate legislation that preserves 
and creates jobs, enhances energy security, and enables the US to 
contribute the clean technology leadership that the world needs. The 
technologies exist to make such policies achievable. To those who 
question how soon CCS will be available, we say, drawing on experience 
from our extensive demonstration program,that Alstom is on record as 
having the capture process commercially available in 2015. All of these 
bills are important steps in that direction and deserve support on 
their own merit. However, absent the certainty that can only come from 
a broad legislative and regulatory framework making clear a price for 
CO2, businesses will not make the substantial investments 
needed to support CCS and other innovative technology options.
    Such investments risk being held back by current uncertainties over 
the policy framework. By passing practical and well targeted measures 
such as are contained in these three Bills, the Congress will kick 
start the creation of a whole new industry, creating hundreds of 
thousands of high quality jobs and preserving many others in the coal 
mining industry. As the rest of the world increasingly puts these 
policies in place, with huge investments in low carbon technologies, 
for America not to do so would put American competitiveness and 
prosperity at risk. It cannot be right to let current uncertainties 
persist, and that is why we at Alstom support these pieces of 
legislation which we hope will move the country and the industry closer 
to the goal of a competitive and thriving low carbon economy.
    We thank the Committee for this opportunity to comment.

    The Chairman. Thank you very much.
    Mr. Yamagata, go right ahead.

STATEMENT OF BEN YAMAGATA, EXECUTIVE DIRECTOR, COAL UTILIZATION 
                        RESEARCH COUNCIL

    Mr. Yamagata. Mr. Chairman, Ranking Member Murkowski, and 
members of the committee, my name is Ben Yamagata. I am the 
executive director of the Coal Utilization Research Council. A 
list of our membership is included with my written statement.
    I thank you for the opportunity to discuss Title II of 
draft legislation offered for comment by Senators Rockefeller 
and Voinovich. At the outset, let me express our support for 
the 5-title draft legislation that Senators Voinovich and 
Rockefeller have distributed for comment.
    While CURC members differ with specific elements of the 
draft, I want to emphasize that this proposal, in its entirety, 
is the most comprehensive and far-reaching initiative yet 
proposed to address the variety of issues related to the 
successful widespread introduction of CCS technology.
    With my allotted time, let me make 4 points. First, coal 
will be used around the world in the foreseeable future. Let me 
give you some metrics. We emit about 2 billion tons of 
CO2 annually from the U.S. power sector and some 6-
plus billion from the entire U.S. economy.
    China emits 5.6 billion tons annually just from the energy 
sector alone. Left unabated, that number is projected to rise 
to 16.2 billion by 2050. China is building the equivalent of 
one new commercial power plant every week. China is both the 
largest user of coal in the world, as well as the larger 
emitter of CO2.
    To achieve a greater than 80 percent reduction in 
CO2 emissions by 2050, given the projected use of 
coal globally, CCS is imperative. We can't be successful with 
the climate issue without successfully using CCS.
    If we are forced to do so, that is without using CCS, 
according to the International Energy Agency, it will cost at 
least 90 percent more, nearly doubling the cost to achieve the 
level of reductions proposed by mid century.
    Second, the pieces of CCS are available, but we have yet to 
integrate all of those pieces into a demonstrated operating 
whole, at least in the utility sector. Moreover, with our 
current technology and with the lack of economies of scale, CCS 
is expensive.
    We estimate, as does DOE and others, that the 
CO2 capture systems can add a third more cost to a 
power plant when installed, retrofits even more, including 
parasitic use of the power from those plants. That is why 
financial incentives right now are so important.
    President Obama recently reiterated a commitment to make 
sure that 5 to 10 CCS projects are demonstrated and operational 
by 2016. While welcomed, this is also not enough, especially 
with respect to the storage of carbon dioxide in deep saline 
formations.
    The National Research Council, an arm of the National 
Academy of Sciences, the Secretary of Energy's National Coal 
Council, and many others have concluded that many more CCS 
projects beyond the numbers cited by the President will be 
required. It is important to note that in order to ensure 
completed demonstrations by 2016, projects must be underway. We 
must act now.
    Most significant, in our judgment, we are nowhere near the 
level of financial commitment needed to get a sufficient number 
of projects underway and completed before 2025 or 2030, let 
alone 2020. This leads me to the third point. That is general 
comments about the provisions of Title II of the draft proposal 
set forth by Senators Rockefeller and Voinovich.
    While we have significant concerns about several features 
of the Title II proposal, again, we are grateful for this 
important initiative. I outlined in my written statement and 
attachments some of our principal areas of concern. In the 
interest of time, let me simply state the wires charge by which 
industry and its customers would self-finance CCS 
demonstrations would--excuse me, is an important element of the 
proposal. We prefer the provisions that were included in the 
House-passed H.R. 2454 program to the program that has been 
detailed in the Senators' draft.
    We are further concerned that several CURC members that 
have CCS projects underway or under consideration will not be 
eligible for the incentives in the proposed bill as a result of 
the recommended size of the project criteria. Also, there is a 
need to clarify eligibility to ensure that both regulated and 
unregulated electric utilities will qualify.
    We believe that funding incentives for public power 
utilities needs to be added. Finally, we need assurances that 
the funds collected from ratepayers will be available. 
Realistically, that cannot be assured through the annual 
appropriations process.
    All of these issues, in my judgment, are eminently fixable. 
We look forward to working with the Senators and this committee 
to address these concerns.
    Fourth and finally, the other 4 titles of the draft 
legislation presented by Senators Rockefeller and Voinovich 
must also be addressed. CURC has recommended a 5-point program 
similar in many respects to that proposed by the Senators.
    We believe that each element of the program must be acted 
upon. No single element alone is enough. We ask for the 
consideration by this committee and other committees with 
pertinent jurisdiction that you consider and act upon all the 
elements of the Senators that they are proposing.
    To effectively address CO2 emissions while 
continuing use of this country's most abundant fossil fuel, CCS 
is imperative. It will be expensive. Patience must be 
exercised. We cannot succeed without Government assistance, but 
also we cannot succeed without CCS.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Yamagata follows:]

     Prepared Statement of Ben Yamagata, Executive Director, Coal 
                  Utilization Research Council (CURC)
Introduction
    On behalf of the membership of the Coal Utilization Research 
Council (CURC) I thank the Committee for this opportunity to testify on 
Title II of draft legislation distributed by Senator Jay Rockefeller 
and Senator George Voinovich on March 20.
    The CURC is an organization of major U.S. coal producers, electric 
utilities that rely upon coal to generate electricity, major equipment 
manufacturers, state governments and academic institutions. A 
membership list is attached (See: Attachment 1).
    Title II of the Senators' draft would authorize the establishment 
of a twenty gigawatt demonstration and early commercial deployment 
program focused upon carbon capture and sequestration (CCS) technology. 
CURC supports the concepts in this proposed legislation and we look 
forward to working with the Senators and also with this Committee and 
others to refine this draft proposal prior to introduction.
    As requested by Committee staff, this testimony focuses 
specifically upon title II of the draft legislation related to 
incentives for a 20 gigawatts CCS ``pioneer plants'' program.
II. Summary of the important points in this written statement:

   Four key elements of CURC's testimony:

            1. To insure that CCS technology is effective and 
        affordable and to achieve these goals within the mid-century 
        timeframe being discussed for CO2 reductions we must 
        begin the Rockefeller/Voinovich title II program NOW.
            2. The scope of the proposed title II program is broad (20 
        GWs) and will be expensive (as much as $40 billion over a 20+ 
        year period). The National Academy of Sciences, the Senator 
        Byron Dorgan ``Pathways'' initiative comprised of a large and 
        diverse cross-section of interests, including NGOs, industry, 
        academia, as well as the International Energy Agency and many 
        others have concluded that a large-scale CCS demonstration-
        deployment program is essential to the rapid commercialization 
        of CCS. More importantly the IEA has concluded that the 
        successful deployment of CCS could reduce overall costs of 
        reductions by up to 97%!
            3. CURC supports the concepts of title II of the draft 
        legislation and recommends several modifications to the draft 
        including:
            Consideration of an electric utility industry-led 
        accelerated CCS demonstration program similar in scope and 
        administration to the ``wires charge'' authorization included 
        as section 114 of H.R. 2454 in lieu of the 10 GW special 
        funding program proposed in the Senators' draft. While the 
        approaches to a fee on electricity consumption to finance a CCS 
        demonstration program differ and CURC's electric utility 
        members, in particular, have agreed upon the program included 
        in H.R. 2454, the CURC fully endorses the concept of such a 
        fee-based program to support the demonstration of CCS 
        particularly if the program insures that there will be a 
        diversity of CCS technologies demonstrated. This diversity of 
        options will provide industry with the ability to choose which 
        option is most favorable to a particular circumstance.
            The draft legislation sets forth eligibility 
        criteria based, in part, upon the size of demonstration 
        projects. As currently drafted this criterion would eliminate 
        from eligibility certain CCS projects now under consideration. 
        The size limitation must be adjusted. CURC has offered a 
        different size of project criteria which we believe retains the 
        objectives of the proposed program while still insuring that 
        large-scale demonstration projects will qualify. We urge the 
        substitution of this modified size standard.
            Clarification of language in the draft proposal to 
        insure that all of the proposed financial incentives are 
        available to a specific project (e.g. project should be 
        eligible for investment as well as production tax credits) and 
        also to include subsidized bond financing and or tax grant 
        options for not-for-profit public power and electric 
        cooperative utilities not otherwise eligible for the proposed 
        tax incentives.

            4. Finally, Congress is encouraged to adopt the 
        ``comprehensive'' carbon management program for coal as 
        reflected in the Rockefeller/Voinovich discussion draft. Each 
        title of the Senators' discussion draft is vitally important, 
        in the judgment of CURC members, to successful widespread 
        commercial deployment of CCS.

III. Why Coal and CCS technology?
    Coal is an important contributor to the U.S. and global energy 
mixes. In the U.S., coal provided 23% of total energy consumption in 
2008, according to the DOE Energy Information Administration. About 90% 
of coal in the U.S. goes to electric power generation, and that coal 
generates about half of our electricity. Globally, coal is about 27% of 
total energy consumption and 40% of electricity generation. Coal use in 
the U.S. has been relatively constant for several years, and is 
expected to remain so in the future, but globally coal has been the 
fastest growing fuel form for the past decade, in total Btu's. EIA 
projects that 94% of growth in global coal use between 2006 and 2030 
will be in non-OECD countries. Much of that growth will be in China, 
which currently uses about three times as much coal as the U.S. and is 
building approximately one new coal-based power station every week of 
the year.
    Coal provides, and will continue to provide, reliable and low cost 
energy and power to billions of people around the world. But, to 
address the continued and growing need for coal we must address the 
carbon dioxide emissions that result from coal use. CURC is absolutely 
confident that given sufficient time and financial assistance 
technology will be available to address the CO2 emissions 
resulting from the use of all carbon-based fuels, including coal and 
natural gas.
    In the U.S., coal contributes about 31% of total emissions of 
greenhouse gases, according to EPA's latest inventory. That figure is 
exceeded only by petroleum (35%). Without a significant reduction in 
emissions from all fossil fuels, including coal, we have no chance of 
meeting those legislative goals demanded by some like an 83% reduction 
in GHG emissions by 2050. For coal, the only practical ways of 
achieving such results are to either not use it, or to apply CCS 
technology. Given the economic and energy security contributions of 
using coal, and the clear certainty that the developing nations will 
continue and expand their use of coal, CCS appears to be the more 
realistic choice. Others have reached this same conclusion. You may 
recall the oft-quoted statement by former U.K. Prime Minister Tony 
Blair: ``The vast majority of new power stations in China and India 
will be coal-fired. Not `may be coal-fired'; will be. So developing 
carbon capture and storage technology is not optional, it is literally 
of the essence.'' In the International Energy Agency's analysis of GHG 
mitigation options (Energy Technology Perspectives, 2008) the IEA 
concluded that a scenario including the assumption that CCS was 
available and effective was 97% cheaper than a scenario without CCS. 
IEA has concluded that: ``CO2 capture and storage for power 
generation and industry is the most important single new technology . . 
. ''
    The importance of CCS might best be explained when described in the 
context of the various paths that must be pursued to achieve what the 
Intergovernmental Panel on Climate Change (the IPCC) has concluded as 
necessary reductions in global greenhouse gas (GHG) emissions of 50-85% 
below current rates by 2050 in order to limit warming to 2-2.4 C. In 
2008, the International Energy Agency published its analysis of 
measures needed to achieve a 50% decrease below current GHG emission 
rates by 2050.\1\ *Figure ES.2 (below), taken from that report, 
summarizes the report's findings.
---------------------------------------------------------------------------
    \1\ Energy Technology Perspectives, 2008, International Energy 
Agency, OECD, 2008.
    * Figure has been retained in committee files.
---------------------------------------------------------------------------
IV. What is the Current Status of CCS?
    Most of the major components needed for CCS have been used 
commercially. They have not, however, ever been combined on a 
commercial scale power plant anywhere in the world. With respect to 
storage technology, we have extensive experience in the U.S. with 
enhanced oil recovery, which retains a large portion of the 
CO2 injected to produce additional crude oil, but there are 
only a handful of projects globally that are injecting large quantities 
of CO2 into the largest potential ``sink'' for 
CO2: deep saline geological formations (essentially porous 
rocks saturated with brackish water, a mile below the earth's surface). 
The USDOE has two relevant demonstration programs underway--the 
Regional CO2 Sequestration Partnerships program, focused on 
storage of CO2; and, the Clean Coal Power Initiative (CCPI), 
focused on integrated power plant capture and storage projects. In 
addition, the FutureGen project, an integrated gasification combined 
cycle (IGCC) equipped with carbon capture and storage technologies, 
hopefully, will be fully underway with completion of construction and 
initial operation by 2015. This first-of-a-kind project will capture 
and sequester one and one-half million tons of CO2 annually.
    It is important to note that if all the ongoing projects go 
forward, and that is always an uncertainty, in 2016 we will have 
experience with two saline storage projects and four, or more other 
power plant and industrial projects that have the goal of 
CO2 capture and storage in EOR formations, and they are 
important, especially for deploying CCS in the near-term--but they will 
not give us needed experience with saline storage which is necessary 
for unlocking the greater potential of CO2 storage in deep 
geologic formations.
    My point is not one of complaint about the current demonstration 
program--it is the most advanced and aggressive in the world.My point 
is that this is not enough to launch a program critical to the world's 
future in the time frames discussed by the President and in proposed 
legislation. This level of undertaking is further explained and 
amplified by others including the following:

          1. America's Energy Future, a recent report by the National 
        Research Council, concluded that 15-20 CCS projects totaling 10 
        gigawatts (GW) of capacity were needed in the next decade, in 
        order to accommodate broad deployment of CCS in the time 
        thereafter. The NRC report said, ``A failure to demonstrate the 
        viability of these technologies [both CCS and advanced nuclear 
        systems] during the next decade would greatly restrict options 
        to reduce the electricity sector's CO2 emissions 
        over succeeding decades. The urgency of getting started on 
        these demonstrations to clarify future deployment options 
        cannot be overstated.'' [emphasis added]
          2. The total number of projects and scope of demonstrations 
        recommended by the National Research Council study is generally 
        consistent with the conclusions drawn by CURC. Our members have 
        carefully examined the need for a variety of CCS demonstrations 
        to address both technical and financial issues of uncertainty 
        and concluded that it will be necessary to support as much as 
        15 gigawatts of CCS-related capacity. Importantly, this does 
        not need to be electricity generation only. Indeed, many of the 
        early, commercial-scale projects utilizing coal or petroleum 
        coke will convert those fossil fuels to a useful energy product 
        like substitute natural gas (SNG). And, these projects will 
        also capture CO2 emissions. However, at least five 
        gigawatts-equivalent of the CCS projects must have as a part of 
        the demonstration the storage of captured CO2 into 
        deep geologic formations. We cannot emphasize enough the 
        importance of gaining the handling, storage, verification and 
        monitoring experience that will come with this type of 
        permanent storage.
          3. Finally, over the period of several months last year a 
        group of environmental organizations, industry organizations, 
        experts from academia and technology providers convened under 
        the auspices of Senator Byron Dorgan (known as the Dorgan 
        ``Pathways'' initiative) to determine if they could agree upon 
        the need for and amounts of financial support required to 
        encourage the rapid development and deployment of CCS 
        technology. That diverse group of interests was able to achieve 
        some agreement over the need to support CCS deployment and most 
        important, agreed that large amounts of government assistance 
        was essential to early success of CCS (a brief description of 
        the ``Pathways'' project and conclusions are attached to this 
        written statement* as Attachment 2). Much of the financial 
        requirements and timing for CCS development contemplated by the 
        ``Pathways'' participants are reflected in two titles of the 
        draft proposal of Senators Rockefeller and Voinovich.
---------------------------------------------------------------------------
    * Attachment has been retained in committee files.

    These analyses suggest a much more aggressive target than that set 
by the Obama Administration, and greatly exceeds activity now underway. 
It is important to recognize that time is of the essence on moving 
forward with this work.
V. What is our Analysis of the Draft Rockefeller and Voinovich 
        Legislation?
    Committee staff suggested that I focus my remarks on Title II of 
draft legislation released for comment by Senators Rockefeller and 
Voinovich on March 20, 2010. The primary obstacle to more activity 
demonstrating CCS technology is money. Title II of the Senators' draft 
proposes to address this issue by taking the money from two sources. 
Under Subtitle A of Title II, the first 10 gigawatts of CCS-equipped 
capacity would be funded by utilities which use fossil energy to 
produce electricity. A small fee placed on those utilities, and based 
on their total generation by each fossil fuel, would provide a pool of 
about $2 billion per year for 10 years, or $20 billion altogether. The 
second 10 gigawatts of CCS-equipped capacity are governed by Subtitle B 
and would be eligible for a production tax credit for captured and 
stored CO2, loan guarantees, and an investment tax credit 
funded from general tax revenues. Hence, Title II proposes a practical 
solution to the greatest problem in getting more demonstration units 
built in the near term. It has identified a source of funds. In CURC's 
activities in this area, it has become clear that industry will support 
the general concept of a ``wires charge'' to pay for the initial 
demonstration program, and to pay the private sector share of both that 
program and the taxpayer-assisted program. Finally, if the IEA's cost 
projections are even close to correct, electricity consumer and 
taxpayer support of these Pioneer projects will be rewarded with 
electric power which is much less expensive than it would otherwise be, 
if and when a climate program reaches its more aggressive stages.
    The Subtitle A funds would be administered by DOE and used to pay a 
production subsidy, in dollars per ton of CO2 captured and 
stored (or converted). Projects with higher %-capture, or earlier in 
time, would get a higher rate per ton. The details of how much the 
subsidy would be for specific projects or overall are not prescribed in 
the draft. The goal of the program is to provide incentives for at 
least 10 GW of CCS-equipped capacity.
    Subtitle B of Title II provides for amendment of the internal 
revenue code to:

   Extend the current Section 45Q production tax credit to any 
        eligible unit placed in service prior to January 1, 2017. The 
        credit amounts to either $10/ton or $20/ton of CO2 
        captured and stored, with the amount depending on whether the 
        storage in associated with EOR or saline formations, for the 
        first 10 years of unit operation with CCS.
   Provide $20 billion in loan guarantees for up to 10 
        gigawatts of new and retrofit units with CCS is authorized by 
        an amendment to Section 1704 of EPACT-2005.
   Provide that units eligible under Section 1704 may also 
        elect to receive a 30% Investment Tax Credit for the 
        incremental cost of the CCS systems (but not for the basic 
        power plant or industrial process unit).
Key Issues of Concern to CURC
    We applaud Senators Rockefeller and Voinovich for taking a 
leadership position on the advancement of this critical technology. In 
my view, this is the most constructive legislative package supporting 
CCS yet offered, in terms of its ability to generate additional 
demonstration facilities NOW. However, there are several issues that 
require modifications prior to introduction (See: attachment 3 for a 
comparison of the provisions proposed in the draft legislation by 
Senators Rockefeller and Voinovich and recommendations, very similar to 
section 114 of H.R. 2454, that CURC has previously provided).
    The first, and foremost, is the structure of the section 201 
program, the ``Carbon Capture and Sequestration Early and Effective 
Deployment Fund Act of 2010'' which includes the assessment of a fee on 
electricity consumption by certain customers.\2\ Simply stated, we 
believe that the program initially considered and adopted in the House-
passed climate bill related to an industry-funded demonstration 
program, the so-called ``Boucher wires charge'' more clearly reflects a 
suitable structure. I have taken the liberty of attaching a CURC-
prepared document that compares the provisions of the draft legislation 
to provisions that CURC supports. There are immense possibilities in 
the Senators' draft legislation to address our concerns and CURC and 
our members stand ready to offer further, detailed views in this 
regard.
---------------------------------------------------------------------------
    \2\ A structural issue which has been raised regarding the Draft 
Discussion is the exclusion of residential electricity users from the 
lines charge assessment. These customers constitute about one-third of 
electricity use, so their exclusion raises the fee significantly for 
the remaining customers (commercial and residential electricity users). 
Under this construction, the fee could reach burdensome levels, 
particularly for the manufacturing sector, which is struggling to 
survive in the current recession. The basic principle of minimizing the 
fee per payer by having a large base of inclusion is defeated if a 
large segment of the potential payers are excused from the assessment. 
I would urge the authors of the draft proposal and this Committee 
carefully reconsider the issue of ``who pays'' in order the spread the 
cost impacts across all electricity ratepayers.
---------------------------------------------------------------------------
    It is significant that electric utilities, both regulated and non-
regulated, as well as the association of state utility regulators 
(NARUC) have agreed upon the level of fees to be assessed on all 
utility customers as well as the administration of the demonstration 
program. That agreement was reflected in the CCS demonstration program 
included in H.R. 2454, section 114. The Rockefeller-Voinovich 
discussion draft substantially alters critical elements of section 114. 
In addition to conforming the amount of fees to be levied and the 
customer base that would be asked to provide funds for the 
demonstration program to H.R. 2454, the Committee and Senators 
Rockefeller and Voinovich must retain a mechanism that will ensure that 
the funds collected for the program be available only to the program 
and that they not be subject to an annual appropriations process that 
immediately draws into question whether funds will be available from 
one appropriations cycle to the next.
    Second, we are very concerned that the eligibility requirements to 
participate in either the 10 gigawatt demonstration program, funded by 
the assessments on electricity consumption, or the 10 gigawatt pioneer 
plant or ``first mover'' program that provides a variety of tax and 
other financial incentives to early commercial scale projects, are 
overly restrictive. Indeed, several of our members currently engaged in 
first of a kind CCS-related projects have reported that their project 
will not qualify for the proposed programs. We assume that is not the 
intent of the senators to exclude these projects that will pioneer the 
needed experience with CCS technology.
    Specifically, section 205 (i) and section 252 (c) of the draft set 
forth two different size criteria for CCS projects to be eligible for 
the Title II programs. We urge that these criteria be identical and 
that qualifying criteria be premised upon the assumption that the size 
of the project, once successfully completed, will enable that 
technology to thereafter be replicated at commercial scale in some 
instances or scaled-up in other instances to thereafter operate at full 
commercial scale. This size standard will be different based upon the 
technology involved but industry and the Department of Energy, we 
believe, could easily determine standards to define commercial scale 
and also determine if a given project will demonstrate a technology 
that can be subsequently constructed at full commercial scale. To 
account for a variety of circumstances and technologies CURC has 
recommended that the size standard include an absolute size of at least 
200 MWs or equivalent of nameplate capacity to account for CCS 
retrofits for a portion of very large power plants or at least 20 
percent of the total nameplate generating capacity to encompass smaller 
projects. Again, the goal of the Title II program should be to focus on 
the pioneer plants that constitute the first generation of CCS projects 
that will operate in commercial settings. Also with respect to 
eligibility it is important that all electric utilities, those that are 
regulated and those operating in deregulated markets, have 
opportunities to access the variety of financial incentives. Equally 
true, CURC supports changes to Title II that will insure that public 
power entities are also eligible for funding under the programs.
    In addition, subtitle III of the draft bill provides a tax credit 
under new section 45R of the Internal Revenue Code for 62 GWs of 
capacity that are installed with CCS systems. Although very supportive 
of this provision, we have one major concern with an ambiguity with the 
eligibility requirement. Specifically, the requirement can be read to 
require the capture and sequestration of at least 65% of the total 
CO2 emissions from the entire unit. For the same reasons 
already noted above, the application of capture levels to the entire 
will be infeasible at the larger-sized existing coal-fired units and, 
in such cases, only a portion of the flue gas will be treated by CCS 
technology. For this reason, CURC recommends that the 65% capture level 
be measured based on the capture levels achieved by the treated portion 
of the flue gas, instead of all of the flue gas from the unit. This 
approach is consistent with how the CCS bonus allowance program is 
administered under the Kerry-Boxer bill.
VI. The Need for a Comprehensive Carbon Management Program for Coal
    The CURC strongly supports the comprehensive nature of the draft 
legislation proposed by Senator Rockefeller and Senator Voinovich. 
While we have not commented upon other elements of their proposal we 
note the importance of their initiative in seeking to address the 
issues that our membership considers of upmost importance to the 
successful development and, thereafter, widespread commercial 
deployment of CCS.
    Finally, while we have not commented, in this written statement 
upon the other titles of the draft legislation proposed by Senator 
Rockefeller and Senator Voinovich, CURC wishes to state its support for 
these important titles, as well. There are modifications that we would 
recommend and we look forward to working with those senators, as well 
as this and other jurisdictional committees of the Congress to modify 
this important proposal. We thank you for the opportunity to provide 
this statement.

    The Chairman. Thank you very much.
    Mr. Brownstein.

   STATEMENT OF MARK S. BROWNSTEIN, DEPUTY DIRECTOR, ENERGY 
              PROGRAM, ENVIRONMENTAL DEFENSE FUND

    Mr. Brownstein. Thank you, Mr. Chairman, Ranking Member 
Murkowski, members of the committee.
    I am pleased to testify on behalf of the 700,000 members of 
the Environmental Defense Fund. Since 1967, EDF has linked 
science, economics, and law to create practical solutions to 
society's most urgent environmental problems.
    There is no more urgent environmental problem facing our 
world today than global climate change. A changing climate will 
have significant disruptive effects on our economy and the 
environment. Current methods of energy production are a major 
source of the pollution causing climate change. They have 
brought us great prosperity, but that prosperity is not 
sustainable.
    Fortunately, there is a bright economic future for the 
United States in a low-carbon, clean energy technologies. EDF's 
energy program is singularly focused on accelerating our 
Nation's transition to this bright future. The work of this 
committee is critically important to achieving that bright 
future, and we are happy to do all that we can to work with you 
to achieve it.
    EDF strongly believes that the most important thing we can 
do to accelerate our Nation's transition to a low-carbon, clean 
energy economy is to put a price on carbon. Unless and until 
there is an economic reason to avoid dumping greenhouse gas 
pollution into the environment, advanced new technologies that 
excel at delivering clean, low-carbon energy will sit on the 
shelf. There simply will be no market for them.
    A price on carbon, however, by itself, will not achieve 
everything that we would like to achieve in the timeframe we 
would like to achieve it. Limited efforts to remove economic 
stumbling blocks or clarify legal or regulatory relationships 
are, in fact, required.
    We also need to chart a new course for coal. Coal-fired 
power plants are the single largest source of carbon dioxide 
pollution in our Nation today, and current methods of coal 
production and use place a heavy and unacceptable burden on 
public health and the environment.
    However, while we might wish it were otherwise, coal will 
likely play an important role in our economy--and the economy 
of many other industrial nations--for many years to come. 
Therefore, the challenge is to develop and deploy technologies 
and strategies that can substantially reduce or prevent the 
worst consequences of coal production and use. Carbon capture 
and storage is critical to the future of coal.
    As a technical matter, CCS is ready to begin commercial 
deployment today. All of the necessary technologies exist. What 
is missing is the market driver to cause companies put the 
pieces together and invest in deploying them.
    Beyond this, what is needed is a clear legal framework for 
securing subsurface rights for geologic storage of 
CO2, a well-defined liability regime, and judicious 
use of subsidies to accelerate the learning curve on CCS 
deployment and development. On this point, we are encouraged by 
the work of Senators Rockefeller and Voinovich, as well as the 
proposal made today by Senator Casey.
    When taken in context with the work that the House of 
Representatives has already done on this matter, we see a real 
consensus forming on how to move forward with CCS. Based on the 
history of other technologies, we fully expect that the costs 
of CCS deployment will come down, and project development will 
become routine.
    But we caution as CCS develops, specific attention needs to 
be paid to the importance of proper site selection and proper 
site operations. Geologic sequestration is not something that 
can be done just anywhere, casually, or with limited skill. It 
requires sophisticated preparation, execution, and oversight by 
both the companies and regulators involved.
    Government's work with industry should be specifically 
targeted at helping to further develop the appropriate 
analytical and monitoring tools and rigorous procedures for 
achieving this objective.
    Finally, as to Senator Barrasso's bill, we understand it to 
be clarifying basic principles of common law as it pertains to 
Federal property, and we support that.
    EDF appreciates the opportunity to provide testimony on 
carbon capture and storage, looks forward to working with the 
committee on CCS in the context of comprehensive climate and 
energy legislation targeted at accelerating our Nation's 
transition to a clean, low-carbon energy economy.
    Thank you.
    [The prepared statement of Mr. Brownstein follows:]

   Prepared Statement of Mark S. Brownstein, Deputy Director, Energy 
                  Program, Environmental Defense Fund
    Mr. Chairman, I am pleased to testify before the Senate Energy and 
Natural Resources Committee on behalf of the 700,000 members of the 
Environmental Defense Fund. Since 1967, EDF has linked science, 
economics and law to create practical solutions to society's most 
urgent environmental problems.
    There is no more urgent environmental problem facing our world 
today than global climate change. A changing climate will have 
significant disruptive effects on our economy and our environment. 
Current methods of energy production are a major source of the 
pollution causing climate change. They have brought us great 
prosperity, but this prosperity is not sustainable. Fortunately, there 
is a bright economic future for the United States in a low carbon, 
clean energy economy. EDF's Energy Program is singularly focused on 
accelerating our nation's transition to this bright future. The work of 
this committee is critically important to achieving this bright future, 
and we are happy to do all we can to assist you in your work.
    EDF strongly believes that the most important thing we can do to 
accelerate our nation's transition to a low carbon, clean energy 
economy is to put a price on carbon through federal climate and energy 
legislation. Unless and until there is an economic reason to avoid 
dumping greenhouse gas pollution into the environment, advanced new 
technologies that excel at delivering clean, low carbon energy will sit 
on the shelf. There simply will be no market for them. A price on 
carbon creates that market, and will stimulate innovation and 
investment in a wide array of new clean energy technologies and clean 
energy services, at a scale and pace that only the private sector can 
deliver.
    At the same time, we know that a price on carbon, by itself, will 
not achieve everything we would like to achieve in the timeframe we 
need to achieve it. Sometimes limited efforts to remove economic 
stumbling blocks, or clarify legal or regulatory relationships are 
required. The bills that are the topic of this hearing today highlight 
this point.
    The bills before this Committee today deal with largely with the 
challenge of charting a new course for coal. We will not get to where 
we need to go in terms of dramatically reducing greenhouse gas 
pollution and substantially reducing the current environmental foot 
print of our energy economy by continuing on a business as usual path 
with coal. Coal fired power plants are the single largest source of 
carbon dioxide pollution in our nation today, and current methods of 
coal production and use place too often place a heavy and unacceptable 
burden on public health and the environment.
    At EDF, we recognize that coal will likely play an important role 
in our economy--and the economy of many other industrial nations--for 
many years to come. Therefore, the challenge is to develop and deploy 
technologies and strategies that can substantially reduce or prevent 
the worst consequences of coal production and use. Carbon capture and 
storage is critical to the future of coal, and indeed, over the long 
term, natural gas as well.
    Geologic sequestration of carbon dioxide is feasible under the 
right conditions. It has been successfully demonstrated in a number of 
field projects, including several large, ``commercial'' scale projects. 
In 2005, the IPCC Special Report on Carbon Capture and Storage 
concluded that the fraction of carbon dioxide (CO2) retained 
in ``appropriately selected and managed geologic reservoirs'' is likely 
to exceed 99 percent over 1000 years.
    The IPCC also concluded that the local health, safety, and 
environmental risks of CCS are comparable to the risk of current common 
activities such as natural gas storage, enhanced oil recovery, and deep 
underground storage for acid gas, 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.'' The IPCC and others with geology expertise have also 
noted that the risk of leakage will tend to decrease with time.
    As a technical matter, CCS is ready to begin commercial deployment 
today. All of the necessary technologies exist. What is missing is the 
market driver to cause companies put the pieces together. As stated 
earlier, this comes with a price on carbon.
    But beyond this, what can help accelerate the development and 
deployment of CCS technologies is a clear legal framework for securing 
subsurface rights for geologic storage of CO2, and judicious 
use of federal dollars to accelerate the learning curve on CCS 
development and deployment. The bills proposed by Senator Barraso and 
Senator Casey make important contributions in this regard.
    Based on the history of other technologies, we fully expect that 
the costs of CCS deployment will come down and project development will 
become routine. As we understand it, the intent of Senator Casey's bill 
is that the federal government, through the Department of Energy's 
National Energy Technology Lab (NETL) in Pittsburgh, should be a full 
partner with industry in identifying those strategies and practices 
that will yield the best results in terms of safe, effective, and 
efficient capture and storage of CO2 pollution from coal. We 
support this objective.
    As government and industry do this work, we strongly advise that 
specific attention needs to be paid to the importance of proper site 
selection and proper site operations. Geologic sequestration is not 
something that can be done just anywhere, casually, or with limited 
skill. It requires sophisticated preparation, execution, and oversight 
by both the companies and regulators involved.
    In particular, one of the most important objectives in assuring the 
safe, successful geologic sequestration of CO2 is assuring 
that formation fluids--the brines pre-existing in the sandstone 
formations where the CO2 is to be stored ? are not driven 
out of the underground storage area and into an underground source of 
drinking water. NETL, in its partnerships with industry, will want to 
make sure that projects are identified and engineered in such a way 
that:

          1) there are confining zones of sufficient quality and 
        lateral extent to confine both displaced formation fluids and 
        injected CO2;
          2) there is a definition of ``zone of elevated pressure'' 
        that is designated to guard against either CO2 or 
        formation fluids being driven into a drinking water supply;
          3) there is high quality modeling of both the injected 
        CO2 plume and the displaced formation fluids;
          4) where necessary, there is monitoring of ground water 
        quality and any geochemical changes above the confining zone; 
        and.
          5) there are remedial response plans in the event problems 
        appear to be developing.

    We would add that NETL's work with industry should be specifically 
targeted at helping to further develop the appropriate analytical and 
monitoring tools and rigorous procedures for achieving the objectives 
outlined above.
    As to Senator Barraso's bill, it is essential that any federal 
legislation attempting to clarify pore space ownership on federal 
property not disrupt long-standing rules of property. Clear and 
predictable property rules are the cornerstones of free and functioning 
markets. It is our understanding that Senator Barrasso's bill is 
modeled after pore space legislation enacted by the Wyoming Legislature 
for Wyoming, and that the purpose of Wyoming's legislation was to 
clarify Wyoming's rules in relation to past deeds and future 
transactions, without fundamentally changing the long-standing 
relationship between surface and subsurface rights in the state. 
Assuming this is the case, we support Senator Barraso's efforts to 
accomplish a similar purpose for federally owned pore space on federal 
land.
    For further consideration of the pore space ownership issue, I 
recommend to the committee a paper* authored by Ian Duncan and Jean 
Philipe Nicot, of the Bureau of Economic Geology, Jackson School of 
GeoSciences, University of Texas, Austin, and my colleague, Scott 
Anderson of EDF's Austin, Texas office, a copy of which is attached to 
this testimony.
---------------------------------------------------------------------------
    * Attachment has been retained in committee files.
---------------------------------------------------------------------------
    EDF appreciates the opportunity to provide testimony on these two 
important pieces of legislation, and we look forward to working with 
Senator Casey, Senator Barrasso, Chairman Bingaman and the rest of the 
Committee to advance CCS in the context of comprehensive climate and 
energy legislation targeted at accelerating our nation's transition to 
a clean, low carbon energy economy.

    The Chairman. Thank you very much.
    Dr. House.

   STATEMENT OF KURT ZEN HOUSE, PH.D., PRESIDENT, C12 ENERGY 
                      RESEARCH FELLOW, MIT

    Mr. House. Chairman Bingaman, Ranking Member Murkowski, and 
members of the committee, thank you for the opportunity to 
appear before you today to discuss the science, the economics, 
and the industrial development of carbon dioxide capture and 
storage.
    It is a great honor to be able to provide this committee 
with my perspective as a scientist and as an entrepreneur 
working in this field.
    For context, I will provide you with a brief description of 
my activities in this area. In 2008, I received my Ph.D. in 
geoscience from Harvard University, where my doctoral research 
focused on the physics and chemistry of CO2 in the 
subsurface, as well as on chemical processes designed to 
convert CO2 into stable carbonate minerals. Since 
then, I have been a research fellow at MIT, and I have started 
a company to do CCS that is backed by some of the most well-
respected venture capitalists in the world.
    In my testimony, I will make 4 points related to CCS. My 
first and most important point is that CCS is an essential for 
addressing greenhouse gas emissions, while simultaneously 
maintaining a robust and affordable energy supply for the 
Nation. America's coal and natural gas reserves contain nearly 
4 times the energy content of Saudi Arabian oil. But without 
the large-scale deployment of CCS, it is arithmetically 
impossible for us to use those reserves while simultaneously 
making significant cuts in our greenhouse gas emissions.
    Furthermore, the existing industrial infrastructure of 
CO2-emitting facilities represents well over $1 
trillion of invested capital. But again, it is impossible to 
make meaningful cuts in our CO2 emissions without 
either dismantling the majority of that invested capital or by 
doing CCS.
    My second point is that geology matters. The importance of 
getting the geology right is an issue that I actually think has 
not received proper attention to date. The geologic and 
geophysical communities have developed tremendous expertise in 
understanding the behavior of buoyant fluids in the subsurface. 
From this expertise, we can make rigorous assessments of the 
sequestration capability of specific geologic formations.
    Long-term storage reliability is a concern of CCS, and 
indeed, there are many places in which trying to do CCS would, 
in fact, be a bad idea. But there are also many locations where 
CO2 can be permanently stored.
    It is important for the viability of the industry that 
regulatory agencies establish processes to certify specific 
formations as actual sequestration fields. Wyoming and Montana 
have addressed this well by developing in-State processes by 
which the boards of oil and gas conservation can certify 
candidate storage sites.
    My third point is that the CCS industry will only advance 
if the relevant stakeholders are appropriately included in each 
project. Strong stakeholder opposition can kill any energy 
project.
    For example, it is crucial that existing mineral rights 
owners, as well as land owners who we believe own the surface--
own the pore space by precedent, be appropriately communicated 
with and, if necessary, compensated for by developers at an 
early development stage of CCS storage projects.
    I have significant experience working with such 
stakeholders on early stage projects, and with the appropriate 
ground work, it is my that CCS has been welcomed in these 
communities as an industry similar to that of oil and gas that 
is both safe as well as compatible with multiple uses of the 
land.
    My final point is that the major hurdle for moving CCS 
forward is the difficulty associated with securing finance in 
an uncertain regulatory environment. This committee can 
accelerate the CCS industry by addressing CCS legal issues to 
minimize unnecessary risk and, importantly, by providing 
financial incentives for early stage CCS projects. Senator 
Barrasso's bill reduces one item of risk by explicitly 
reinforcing on public lands the common-law precedent that a 
storage space belongs to surface estate, and we support this 
bill strongly.
    The key to jump-starting the CCS industry, however, is the 
passage of incentives for first mover projects. The wind 
industry, for example, installed just 1 megawatt of wind power 
in 1996, but it installed over 10,000 megawatts last year, and 
that growth has been driven almost entirely by State-level 
renewable portfolio standards and Federal-level production tax 
credits.
    So a similar set of incentives for CCS, such as the 
CO2 storage tax credit discussed by Senator 
Rockefeller and others, would accelerate the rate of CCS and 
result in meaningful cuts in CO2 emissions.
    So, in conclusion, I would just reiterate that given the 
appropriate geology, we have the technology as well as the 
industrial know-how to do CCS today. If, however, we fail to 
provide the appropriate financial incentives for doing CCS or 
if we fail to bring stakeholders onboard with early stage CCS 
projects, then the industry will not grow. If the CCS industry 
does not grow, then we will be unable to make meaningful cuts 
in our CO2 emissions, or we will be forced to 
dismantle our country's significant base of CO2-
emitting industrial facilities.
    As such, I urge the committee to move forward with the 
relevant legislation, and I look forward to your questions.
    [The prepared statement of Mr. House follows:]

  Prepared Statement of Kurt Zenz House, Ph.D., President, C12 Energy 
                          Research Fellow, MIT
    Chairman Bingaman, Ranking Member Murkowski, and Members of the 
Committee, thank you for the opportunity to appear before you today to 
discuss the science, the economics, and the industrial development of 
carbon dioxide (CO2) capture and storage, (commonly 
abbreviated to CCS). I consider it a great honor to be able to provide 
this committee with my perspective as a scientist and as an 
entrepreneur working in this field.
    For context, I will provide you with a brief description of my 
activities related to this area. In 2008, I received my Ph.D. in 
Geoscience from Harvard University, where my doctoral research focused 
on the physics and chemistry of CO2 in the subsurface as 
well as on a variety of chemical processes designed to convert 
CO2 into stable carbonate minerals. Since then, I have been 
a research fellow at MIT, where I have continued to study the behavior 
of CO2 that has been injected into the subsurface, and I 
have started a venture capital backed company that is working on 
several early stage CCS projects.
    In my testimony, I will make five points regarding CCS. These five 
points support the central conclusion that without CCS, it will be 
extremely difficult make significant and affordable cuts in greenhouse 
gas emissions, while maintaining a secure and reliable supply of energy 
for the nation.
    The first and most important point that I wish to make is that CCS 
is essential for addressing greenhouse gas emissions, while 
simultaneously maintaining a robust and affordable energy supply. 
America's coal and natural gas reserves contain nearly 4 times the 
energy content of Saudi Arabian oil; but, without the large-scale 
deployment of CCS, it is arithmetically impossible for us to use those 
reserves-neither the coal nor the natural gas, and certainly not both-
for productive purposes, while simultaneously making significant cuts 
in our greenhouse gas emissions. Furthermore, the existing industrial 
infrastructure of CO2 emitting facilities (e.g., power 
stations, refiners, chemical plants, etc.) represents well over 
$1Trillion of invested capital; but again, it is arithmetically 
impossible to make stated cuts in our CO2 emissions without 
either dismantling the majority of that installed capital or by doing 
CCS.
    Let me give an example to illustrate. The wind industry-which is 
doubtless a success story in the energy sector over the past decade-
currently displaces approximately 50MT of CO2 per year.\1\ 
Retrofitting just six large coal power stations to capture 90% of their 
CO2 would have the same impact. In short, CCS can enable 
both the productive use of America's prodigious energy reserves and the 
continued use of its CO2 emitting infrastructure, while 
simultaneously decreasing our greenhouse gas emissions.
---------------------------------------------------------------------------
    \1\ American Wind Energy Association, 2010.
---------------------------------------------------------------------------
    The second point is that the technology to do CCS is here today. 
There is a persistent notion that the technology for doing CCS is still 
years away. That notion is false. Thanks to the portability of the 
technology from the multi-trillion dollar oil, gas, and chemical 
industries, we know how to separate CO2 from mixed gas 
streams; we know how to move CO2 in pipelines; and we know 
how to inject and store CO2 safely in the proper geologic 
structures. Indeed, essentially every aspect of the CCS process is 
currently being performed at scale in some industrial process.
    That is not to say that CCS will be easy; but it is to say that the 
project risks are not fundamentally technological. Rather, the primary 
project risks involve getting complicated systems integration correct 
and importantly, being able to secure finance for large scale CCS 
investments in an uncertain regulatory environment. Systems integration 
and complex engineering are great strengths of American industry; while 
coping with uncertain regulations can be done-but only at unnecessarily 
increased expense.
    My third point is that geology matters. The importance of getting 
the geology right is an issue that I believe has not received proper 
attention to date. The geologic and geophysical communities-including 
oil & gas operators-have developed tremendous expertise in 
understanding the behavior of buoyant fluids in the subsurface. From 
this expertise, we can make rigorous assessments of the sequestration 
capability of specific geologic formations. The sequestration 
capability of a given geologic formation depends on (1) the rate at 
which CO2 can be safely injected into the formation and (2) 
the ability of the formation to safely confine the injected 
CO2 to a well defined zone.
    Safety remains a major concern of the American public with respect 
to CCS, and there are many places in which trying to store 
CO2 would be a very bad idea; but there are also many 
locations where CO2 can be safely and permanently stored. It 
is important for the viability of the industry that regulatory agencies 
establish processes to certify specific formations as sequestration 
fields. The Montana State legislature has done this very well by 
developing a unitization process by which the state's Board of Oil & 
Gas Conservation will certify candidate sequestration sites. In my 
opinion, state agencies such as that are well-equipped to handle this 
process and should be encouraged to do so.
    My fourth point is that the CCS industry will only advance if all 
the relevant stakeholders are appropriately included in each project. 
Strong stakeholder opposition can and will kill any energy project. As 
such, it is crucial that existing owners of mineral rights as well as 
land owners be appropriately communicated with and compensated at an 
early development stage of any CO2 storage project. I have 
significant experience working with such stakeholders on early stage 
CCS projects in several different communities. Through this experience, 
I have found that face-to-face discussion and honest negotiation have 
been very effective in getting the relevant stakeholders onboard. 
Indeed, with the appropriate groundwork, CCS has been broadly welcomed 
in these communities as an industry similar to oil & gas production or 
natural gas storage that is both safe as well as compatible with 
multiple land uses such as ranching, farming, and recreation. 
Furthermore, the geologic structures being targeted for CO2 
sequestration are often in the vicinity of existing oil & gas 
activities, but if managed properly, the CCS project can occur 
symbiotically with these activities.
    My final point is that the major hurdle for moving CCS projects 
forward is the difficulty associated with financing large industrial 
projects in an uncertain regulatory environment. This committee can 
significantly accelerate the CCS industry by addressing CCS-specific 
legal items to minimize unnecessary risk, and-more importantly-by 
providing a set of financial incentives for early stage CCS projects. 
Senator Barrasso's bill reduces one item of risk by explicitly 
reinforcing, on public lands, the common-law precedent that storage 
space belongs to surface owners; and Senator Rockefeller's bill 
provides valuable startup funds for RD&D.
    The key to jump starting the CCS industry, however, is the passage 
of a set of financial incentives for first mover projects. The US wind 
industry, for example, installed 1 MW in 1996 and over 10,000MW last 
year, and that growth has been driven almost entirely by a combination 
of state-level renewable portfolio standards and federal-level 
production tax credits. A similar set of incentives, such as the 
CO2 storage tax credit proposed by Senator Rockefeller and 
others, would dramatically accelerate the rate of CCS adoption in the 
United States.
    In conclusion, I would like to reiterate that given the appropriate 
geology, we have the technology as well as the industrial know how to 
do CCS today at power-plant scale. If, however, we fail to either 
provide the appropriate financial incentives for doing CCS, or if we 
fail to bring stakeholders on board with each CCS project, then the 
industry will not grow in the US. And, if the US CCS industry does not 
grow rapidly, then we will either be unable to make meaningful cuts in 
our CO2 emissions, or we will be forced to dismantle our 
country's significant installed base of CO2 emitting 
industrial facilities. Furthermore, we will be constrained from 
responsibly harnessing America's prodigious fossil fuel reserves.
    Thank you, and I look forward to your questions.

    The Chairman. Thank you very much.
    Mr. Vann.

 STATEMENT OF ADAM S. VANN, LEGISLATIVE ATTORNEY, AMERICAN LAW 
            DIVISION, CONGRESSIONAL RESEARCH SERVICE

    Mr. Vann. Mr. Chairman, members of the committee. My name 
is Adam Vann, legislative attorney for the Congressional 
Research Service.
    CRS is pleased to be afforded the opportunity to discuss 
the committee's consideration of legislation related to carbon 
capture and sequestration or, if you prefer, carbon capture and 
storage.
    In testimony today, CRS is addressing a legal issue 
associated with CCS projects--who owns or controls the 
subsurface pore space where carbon dioxide would be sequestered 
or stored?
    Of particular concern is whether the property rights to 
this subsurface pore space are conveyed any time mineral rights 
are conveyed. Mineral rights, of course, are an interest in 
something that is generally subsurface.
    As you know, S. 1856 addresses this very issue with respect 
to Federal lands. It is important to do so because of the many 
instances in which the mineral rights on Federal lands are 
leased to private entities.
    Most existing legal instruments related to subsurface 
property rights, including mineral right leases, do not 
specifically address ownership and control of pore space. So in 
order to determine who holds the relevant property rights, one 
must interpret the language found in such legal instruments and 
ascertain how it might apply to subsurface pore space to be 
used for CCS.
    Traditionally, property law issues are addressed by State 
law. So CRS has analyzed relevant State common law precedent in 
similar or analogous situations involving subsurface property 
rights.
    Based on this analysis, a detailed review of which can be 
found in CRS's written testimony submitted to this committee, 
it is the opinion of CRS that the vast majority of relevant 
case law suggests that subsurface pore space is not conveyed in 
typical mineral rights agreements--and that would include 
mineral rights leases on Federal lands--but instead would 
remain with the grantor or holder of the surface rights in most 
cases.
    CRS believes it is likely that even absent any legislation, 
a court would find that the holder of the surface rights, the 
Federal Government in the case of Federal lands, rather than 
the holder of the minerals rights, would have the relevant 
property interest in pore space for purposes of any CCS 
project.
    S. 1856 declares in part that ``the ownership of any 
subsurface pore space located below a Federal surface estate 
shall be vested in the Federal Government.'' Thus, it is the 
opinion of CRS that S. 1856 is in line with the current 
understanding of the law of the United States regarding 
subsurface pore space.
    This rule of property law, stating that pore space is not 
conveyed along with mineral rights, has been referred to as the 
``American rule.'' Other legal commenters have stated that this 
American rule would likely be the majority rule in the States. 
It is, indeed, the opinion of CRS that this rule would likely 
be adopted in virtually every American jurisdiction.
    Indeed, 3 States have enacted legislation declaring that in 
the absence of specific conveyance to the contrary, subsurface 
pore space is vested with the owner of the surface estate, and 
reportedly there are similar bills being considered in 2 other 
States as well.
    Now a vesting ownership of subsurface pore space in Federal 
lands in the Federal Government should not prove controversial 
vis-a-vis mineral rights lease holders. There is language in S. 
1856 that CRS wishes to flag as a potential ambiguity.
    S. 1856 declares that ownership of the subsurface pore 
space is ``vested in the Federal Government.'' However, that 
ownership is not limited by the bill to cases in which the 
Federal Government has conveyed mineral rights, but covers 
subsurface pore space in all Federal surface estates.
    This could prove problematic where the Federal Government 
may have conveyed a subsurface property of interest other than 
mineral rights such that the recipient might be able to claim 
that the conveyance did transfer an interest in the subsurface 
pore space. In such cases, S. 1856 could be considered a taking 
of the property of the grantee who had previously held this 
particular subsurface property interest such that the grantee 
would need to be justly compensated, pursuant to the takings 
clause of the Fifth Amendment.
    Another potential ambiguity is the provision in S. 1856 
concerning the applicable law in construing conveyances that 
have occurred or will occur prior to the enactment date of the 
bill. This is the phrase that begins, ``All conveyances of 
Federal land executed before the date of enactment of the 
section shall be construed in accordance with the provisions of 
this section.''
    This provision may not apply to a claim seeking 
compensation for a taking of a subsurface property right. The 
reason for that is that this type of claim would depend on the 
applicable law at the time of the conveyance, not at the time 
the claim was brought. Also, this language concerning the 
applicable law might not have the intended effect because it 
applies only to ``ownership interests.''
    Mineral rights and other subsurface interests can be and 
often are conveyed as leases or other property interests that 
may potentially not be considered ``ownership interests.'' The 
applicability of the specified language in S. 1856 to these 
interests may be unclear.
    Mr. Chairman, that concludes my prepared statement, and I 
would be happy to answer any question that you or other members 
of the committee might have. CRS looks forward to working with 
the members and staff on this issue in the future.
    [The prepared statement of Mr. Vann follows:]

Prepared Statement of Adam S. Vann, Legislative Attorney, American Law 
                Division, Congressional Research Service
     Mr. Chairman and Members of the Committee: My name is Adam Vann. I 
am a Legislative Attorney with the American Law Division of the 
Congressional Research Service at the Library of Congress, and I thank 
you for inviting me to testify today regarding the Committee's 
consideration of legislation related to emerging carbon capture and 
sequestration (or, as it is sometimes called, carbon capture and 
storage) technology. For purposes of this testimony, I will refer to it 
as ``CCS.'' My testimony will focus on legal issues related to CCS 
technology; specifically, concerns over who maintains ownership and 
control over the ``pore space'' in which the carbon dioxide would be 
stored or sequestered under most of the emerging CCS models.
    At the outset, I should note that as an attorney, my testimony will 
be limited to legal issues related to CCS, including pore space 
ownership and control. I cannot speak to technological, economic, or 
other policy concerns related to CCS. I am certain that my colleagues 
at this hearing or my fellow Congressional Research Service analysts 
can ably field any such inquiries. Furthermore, my testimony will not 
cover other legal issues commonly discussed in the context of CCS 
technology, including, among others, problems related to potential 
difficulty obtaining liability coverage and concerns related to 
trespass of adjacent property.\1\ My testimony will be confined to 
pending legislation and issues associated with ownership of subsurface 
pore space.
---------------------------------------------------------------------------
    \1\ For further discussion of several legal issues related to CCS 
technology, see CRS Report R41130, Legal Issues Associated with the 
Development of Carbon Dioxide Sequestration Technology, by Adam Vann, 
James E. Nichols, and Paul W. Parfomak. See also Philip M. Marston and 
Patricia A. Moore, From EOR to CCS: The Evolving Legal and Regulatory 
Framework for Carbon Capture and Storage, 29 Energy L.J. 421, 475 
(2008).
---------------------------------------------------------------------------
Background
    CCS technology is among the many proposals to address concerns over 
the impact of carbon dioxide emissions from man-made sources on the 
environment. Unlike most other proposals, CCS technology is not 
intended to reduce the quantities of these emissions; rather, it would 
capture these emissions at their source and ``sequester'' or ``store'' 
them at sites with the appropriate geologic characteristics.\2\ Any 
entity wishing to operate a CCS facility must therefore own or control 
the pore space in which the carbon dioxide would be sequestered or 
stored. However, since CCS technology is not yet in existence and was 
not even considered until recently, most existing legal instruments 
related to property rights do not address ownership and control of pore 
space, and to the best of my knowledge, none of them refer to ownership 
and control of pore space for purposes of sequestration or storage of 
carbon dioxide. Therefore, in order to determine who holds the relevant 
property rights, we must interpret the language found in such legal 
instruments and ascertain how it might apply to pore space to be used 
for CCS. In doing so, we can look to interpretations of courts who have 
reviewed similar or analogous property rights disputes.
---------------------------------------------------------------------------
    \2\ For further information on geologic aspects of emerging CCS 
technology, see CRS Report RL33801, Carbon Capture and Sequestration 
(CCS), by Peter Folger.
---------------------------------------------------------------------------
    Traditionally, property law issues are handled at the state level. 
Indeed, most of the analogous disputes regarding subsurface ``pore 
space'' to date have been handled under state law, and presumably would 
be handled under state law going forward. These disputes, and 
subsequent actions by some state legislatures, have produced what I 
will refer to as the ``majority rule'' that holders of mineral rights 
do not, merely by virtue of these rights, have ownership or control of 
subsurface pore space. However, to the extent that CCS projects might 
take place on lands owned or controlled by the United States, 
determinations of pore space ownership and control become an issue for 
the federal government. S. 1856 recognizes this federal role and, as I 
understand it, attempts to resolve the issue going forward by declaring 
that ``[t]he ownership of any subsurface pore space located below a 
Federal surface estate shall be vested in the Federal Government,'' 
unless conveyed along with the surface estate or previously severed 
from the surface ownership.\3\
---------------------------------------------------------------------------
    \3\ S. 1856.
---------------------------------------------------------------------------
    S. 1856, if enacted, would govern subsurface pore space rights on 
Federal lands going forward. However, if any aspect of the bill or 
similar language results in a transfer of existing subsurface rights of 
a private entity to the Federal government, that private entity would 
be entitled to just compensation under the Fifth Amendment of the 
United States Constitution.\4\ Therefore, it is worthwhile to consider 
whether any private entity aside from the owner of surface rights might 
be able to claim ownership of, or control over, the relevant subsurface 
rights. The most obvious candidate would be the owner of ``mineral 
rights'' on/under the Federal land in question, as mineral rights are, 
generally speaking, rights to something that is subsurface.
---------------------------------------------------------------------------
    \4\ The Fifth Amendment to the U.S. Constitution provides in part 
that ``private property [shall not] be taken for public use, without 
just compensation.''
---------------------------------------------------------------------------
            The Majority Rule: Pore Space Control Does Not Transfer 
                    with Mineral Rights
    In order to determine: (1) the extent to which S.1856 would deviate 
from the current understanding of subsurface property interests under 
state and federal law; and (2) whether holders of mineral rights or 
other property interests might be entitled to just compensation for 
loss of their interest in the pore spacepursuant to S. 1856, we must 
look at both state and federal common law and currently existing 
statutes and regulations.
    It is the opinion of CRS that the vast majority of relevant case 
law suggests that a reviewing court would likely find that the pore 
space that would be used in CCS is not conveyed with mineral rights, 
but rather in most cases would remain with the holder of the surface 
rights. The vast majority of legal precedent suggests that the property 
owner, not the holder of mineral rights, would have the relevant 
property interest in pore space for purposes of any CCS project. 
Indeed, most legal experts who have studied this issue have reached a 
similar conclusion.\5\ In the case of Federal land on which the mineral 
rights are leased, this means that, although the holder of the mineral 
rights would of course have certain rights that must be considered in 
using the property, the Federal government would have ownership of, and 
control over, the pore space that would be used for CCS. Experts have 
cited to a number of common law decisions in support of this 
conclusion.
---------------------------------------------------------------------------
    \5\ See, e.g., Owen L. Anderson, Geologic CO2 
Sequestration: Who Owns the Pore Space? 9 Wyoming L. Rev. 97 (2009); 
Ian J. Duncan, Scott Anderson and Jean-Philippe Nicot, Pore Space 
Ownership Issues for CO2 Sequestration in the U.S., GHGT-9 
Energy Procedia, Elsevier V.1 p. 4427-4430 (2009); Philip M. Marston 
and Patricia A. Moore, From EOR to CCS: The Evolving Legal and 
Regulatory Framework for Carbon Capture and Storage, 29 Energy L.J. 
421, 475 (2008).
---------------------------------------------------------------------------
    An instructive precedent to consider from the federal court 
jurisprudence is Emeny v. United States.\6\ In Emeny, the United States 
Court of Claims\7\ was tasked with deciding whether the United States 
had acquired the right to store helium gas within a pore space 
formation on a certain property when the terms of the government's 
lease with the owner of the pore space were limited to the sole purpose 
of mining and operating for oil and gas.
---------------------------------------------------------------------------
    \6\ 412 F.2d 1319 (1969) (Emeny).
    \7\ The U.S. Court of Claims was the original court in which claims 
against the United States were tried. The U.S. Court of Claims was 
abolished in 1982. The court's trial-level jurisdiction was transferred 
to the U.S. Court of Federal Claims and its appellate jurisdiction to 
the U.S. Court of Appeals for the Federal Circuit.
---------------------------------------------------------------------------
    The plaintiffs in Emeny owned a tract of land in Texas which 
contained significant deposits of helium gas. The plaintiffs granted to 
a private gas company ``oil and gas leases covering a total of 
approximately 217,000 acres of land, including the area which contains 
the Bush Dome.''\8\ The United States eventually obtained these oil and 
gas leases from the private oil company, along with the remaining 
mineral rights that had been reserved by the plaintiffs, and 
compensated the respective parties accordingly.\9\ However, in the 
lease with the United States, the plaintiffs expressly reserved for 
themselves the surface of the leased lands, ``including any such 
structure that might be suitable for the underground storage of 
`foreign' or `extraneous' gas produced elsewhere.''\10\
---------------------------------------------------------------------------
    \8\ Emeny at 1321. According to the court's opinion, the Bush Dome 
``is a closed geological structure, or underground dome, in which 
gaseous substances can be stored ... The potential storage capacity of 
the Bush Dome is in excess of 52 billion standard cubic feet of gas.'' 
Id. at 1321.
    \9\ Id. at 1321-1322.
    \10\ Id. at 1323.
---------------------------------------------------------------------------
    Pursuant to the lease agreement, the United States commenced 
operations to extract the helium contained within the Bush Dome, and 
continued to do so for approximately three decades until the Bush Dome 
was empty. After the Bush Dome was emptied, the United States sought to 
store helium gas produced elsewhere inside of the now empty pore 
space.\11\ The plaintiffs argued that they were entitled to just 
compensation for the government's use of the Bush Dome as a helium 
storage facility because pursuant to the language of the lease 
agreement, the government only had a right to extract the gas contained 
within the pore space and no right to use the pore space for storage of 
helium gas produced elsewhere.
---------------------------------------------------------------------------
    \11\ Id. at 1322.
---------------------------------------------------------------------------
    After a consideration of Texas common law, the court in Emeny 
agreed with the plaintiffs that the government's property interest did 
not include the right to use the pore space for gas storage, and 
ordered the United States to pay the plaintiffs just compensation for 
its use of the Bush Dome as a helium storage facility. According to the 
court, ``[t]here is no reasonable basis on which the rights granted to 
the [United States] in the . . . oil and gas leases could be construed 
as including the right to bring to the premises and store there gas 
produced elsewhere.''\12\
---------------------------------------------------------------------------
    \12\ Emeny at 1323.
---------------------------------------------------------------------------
    The West Virginia courts reached a similar conclusion in Tate v. 
United Fuel Gas Company.\13\ In Tate, the highest court in West 
Virginia addressed the question of pore space ownership once the 
minerals contained therein had been extracted. The owner of the land 
deeded the land to another man, but expressly reserved to himself the 
``oil, gas . . . and all minerals . . . underlying the surface of the 
land.''.\14\ The new owner then deeded the surface estate to Virgil 
Tate, subject to the same exceptions in the original deed, including 
the reservation of the mineral estate for the original owner. After 
extracting all of the oil from the pore space, the original owner 
eventually leased his remaining mineral rights to the defendant, United 
Fuel Gas Company. United Fuel Gas Company then used this mineral rights 
property interest to store gas produced elsewhere in the empty pore 
space.
---------------------------------------------------------------------------
    \13\ 71 S.E.2d 65 (1952) (Tate).
    \14\ The pertinent language of the deed stated that ``[t]he oil, 
gas and all minerals . . . underlying the surface of the land hereby 
conveyed are expressly excepted and reserved from the operation of this 
deed . . . it being under-stood [sic] that the term `mineral' as used 
herein does not include clay, sand, stone, or surface minerals except 
such as may be necessary for the operation for the oil and gas and 
other minerals.'' Tate at 67-68.
---------------------------------------------------------------------------
    Plaintiff Tate, the owner of the land subject to the underground 
property interest leased to United Fuel Gas Company, asserted that the 
lease between the original owner and United Fuel Gas Company which gave 
United Fuel the ``remaining'' mineral rights was invalid, since the 
original owner/holder of the mineral rights only had a right to extract 
the contents of the subsurface estate, not the right to use the pore 
space for other purposes. The Supreme Court of West Virginia agreed 
with Tate and held that the express reservation of mineral rights only 
granted to the original owner/mineral rights holder (and his lessee, 
United Fuel Gas Company) a right to exploit the gas and minerals 
contained within the pore space, not a right to use the pore space 
itself for the storage of gas produced elsewhere.\15\
---------------------------------------------------------------------------
    \15\ Id. at 72.
---------------------------------------------------------------------------
    According to Tate, the owner of the mineral rights likely would not 
have the right to the use or lease the pore space for carbon dioxide 
capture and sequestration, unless the owner of the surface estate 
expressly allows the owner of mineral rights to use the pore space. 
This conforms with what is referred to here as the ``majority rule'' 
(and others have called the ``American rule'') that pore space is not 
conveyed with a standard conveyance of mineral rights.\16\
---------------------------------------------------------------------------
    \16\ Some legal writings have referred to this rule as the 
``American rule.'' This terminology is used in contrast with the 
``English rule'' that the mineral rights owner retains the right to the 
subsurface space even after the minerals have been extracted.
---------------------------------------------------------------------------
    Another case that reached a similar conclusion is U.S. v. 43.42 
Acres of Land.\17\ In this case, a federal district court had to 
determine whether the surface owners, mineral owners, or both should 
receive compensation from the government for land acquired for the 
construction of an underground crude oil storage tank.\18\ One 
defendant owned the land under which a crude oil storage tank was to be 
constructed. The other defendant owned the rights to the minerals that 
needed to be extracted to construct the underground storage tank. The 
United States intended to construct this storage tank by extracting the 
salt contained inside of the subterranean geological structure and then 
using the evacuated underground formation as a storage area.\19\ Both 
defendants claimed an exclusive right to be compensated by the United 
States for its taking of the property pursuant to the Energy Policy and 
Conservation Act.\20\
---------------------------------------------------------------------------
    \17\ 520 F. Supp. 1042 (1981) (Acres).
    \18\ In his opinion, Judge Veron writes, ``Simply stated, the issue 
to be decided by this court is: who is entitled to be compensated for 
the value of the hole in the ground to be created by construction of 
the underground storage cavern[:] the land owners or the mineral 
owners?'' Acres at 1043.
    \19\ The process by which crude oil reservoirs are created was 
described in Acres:
    \20\ 42 U.S.C. Sec.  6249(a)-(f).

    Toutilize the subsurface for the extraction of brine and the 
creation of storage facilities[,] a well is drilled so as to penetrate 
the salt formation. Water is forced into the formation through the 
well, the salt is withdrawn as brine, and a cavity is left in the salt 
mass because of gradual dissolving of the salt and a resulting erosion 
by the leaching process. The jug shaped cavity, or `jug[,]' formed by 
this leaching is used for the storage of hydrocarbons. A jug is 100 
feet or more in depth, with capacity for storing over a million barrels 
of one of the various hydrocarbons. A thick barrier of salt must be 
retained around each jug to form a satisfactory wall for the 
---------------------------------------------------------------------------
containment of the stored product.

    Acres at 1043.
    Since Acres was a case of first impression under Louisiana law, the 
court considered common law authority from other jurisdictions to 
inform its opinion, and concluded that ``  . . .  the general rule in 
common law . . . provides that, after the removal of minerals, the 
opening left by the mining operations belongs to the land owner by 
operation of law.''\21\ Since the minerals had not yet been removed 
from the pore space by the United States and since the resulting pore 
space needed to be used by the United States for crude oil storage, the 
court ordered the United States to compensate both the landowner and 
the mineral rights owner.\22\
---------------------------------------------------------------------------
    \21\ Acres at 1045.
    \22\  ``[Owners of a mineral servitude] have no right to claim 
compensation for the value of the cavern to be created by removal of 
the salt. They should be compensated only for the value of the right to 
explore for and reduce to possession the minerals on the land in 
question. [The] land owners . . . own all remaining rights in the land, 
and they are entitled to be compensated for the underground storage 
value of the land.'' Id. at 1046.
---------------------------------------------------------------------------
    Although the question of compensation was the primary focus of the 
court in Acres, the determination that both the surface and mineral 
estate owners should be compensated by the government was based on the 
rationale that the mineral estate owner has an interest in the minerals 
contained within a pore space, while the surface estate owner retains 
an interest in the pore space itself.\23\ While virtually all authors 
and scholars have concluded that the case law clearly favors a rule 
attaching pore space ownership and control to the surface estate or 
remaining estate over the holder of mineral rights, some have noted 
that the precedent is far from unanimous.\24\ Two cases commonly cited 
in support of the argument that a mineral rights conveyance also 
conveys ownership and control of pore space are Mapco v Carter\25\ and 
Central Kentucky Natural Gas Co. v. Smallwood.\26\
---------------------------------------------------------------------------
    \23\ Id. at 1045.
    \24\  See, e.g., Elizabeth J. Wilson and Mark A. Figueiredo, 
Geologic Carbon Dioxide Sequestration: An Analysis of Subsurface 
Property Law, 36 Environmental L. Rev. 10114 (2006).
    \25\ 808 S.W.2d 262 (Tex. 1991) (Mapco).
    \26\ 252 S.W.2d 866 (Ky. 1952) (Smallwood).
---------------------------------------------------------------------------
    In Mapco, multiple parties had interests in the surface and mineral 
rights of a parcel of land in Texas. As a result of a previous court-
ordered partition, the surface and mineral rights were divided among 
the various co-owners. Despite the fact that the co-owner Mapco only 
possessed a minority interest in the mineral rights in addition to the 
surface rights, Mapco decided to extract and sell the salt contained 
beneath its portion of the partitioned land without the consent of the 
other co-owners.\27\ When the salt was completely extracted, Mapco 
``plugged'' the empty cavern with concrete and abandoned it, thereby 
rendering it unusable as storage space for gas or petroleum 
products.\28\
---------------------------------------------------------------------------
    \27\ Mapco at 267.
    \28\ Id. at 268-269.
---------------------------------------------------------------------------
    Ultimately, the Court of Appeals of Texas ordered Mapco to 
compensate the co-owners of the mineral rights because, as mineral 
rights co-owners, they were also entitled to an amount of the proceeds 
from Mapco's sale of the salt equal to their respective interests in 
the partitioned land.\29\ The court held that under Texas law, ``this 
interest in minerals is an interest in real property. Thus, the fee 
mineral owners retain a property ownership, right and interest after 
the underground storage facility . . . had been created.''\30\
---------------------------------------------------------------------------
    \29\ Id. at 278-279.
    \30\ Id. at 274-75.
---------------------------------------------------------------------------
    This result suggests that mineral rights are not merely a right to 
extract the minerals in question and an ownership right in said 
minerals, but also grant an ownership right in the subsurface formation 
left behind. However, in the opinion of CRS, this fact pattern may be 
distinguished from any hypothetical claim that mineral rights include 
an interest in subsurface pore space. In Mapco, the subsurface storage 
area was created by the excavation of the mineral. In contrast, pore 
space contemplated for use in CCS technology is naturally occurring, 
not created by the mineral extraction. Furthermore, the storage area in 
Mapco was actually comprised of the mineral in question (salt). Again, 
this would presumably not be the case with respect to pore space used 
for CCS.
    In Central Kentucky Natural Gas v. Smallwood,\31\ the property 
owner executed an ``oil and gas production and storage lease'' 
conferring the right to drill for oil and gas and to store gas of any 
kind regardless of source in the subsurface.\32\ The lessee did not 
produce any gas, but gas that was removed from wells on adjacent lands 
in the area was stored under the surface and rentals were paid. The 
lessee paid the lessor only half of the rental fees, under the 
assumption that the rentals should be paid to the holder of the mineral 
rights, not the surface rights (the lessor had retained a 50% interest 
in the minerals).\33\ The lessor claimed that the rent should be paid 
solely to him, as the owner of the surface estate and thus the 
subsurface formations in which the gas was stored.\34\ The court ruled 
in favor of the lessee, finding that the stored gas was equivalent to 
``native'' gas and that therefore revenue therefrom was attributable to 
the owner of that gas, i.e. the holder of the mineral rights.\35\
---------------------------------------------------------------------------
    \31\%2 S.W.2d 866 (Ken. 1952) (Smallwood).
    \32\ Id.
    \33\ 33 Id. at 867.
    \34\ Id.
    \35\ Id. at 867-868.
---------------------------------------------------------------------------
    However, the court's decision was based solely on the 
classification of the stored gas as equivalent to the native gas. In 
fact, the court clarified that ``[i]n reaching the conclusion that we 
reach, it is not necessary to determine whether the cavern or strata 
from which a mineral has been removed becomes the property of the 
mineral or surface owner.''\36\ Indeed, the court references the 
``English rule'' that subsurface spaces are owned by the mineral rights 
holder and then notes that ``[t]he general rule in the United States 
seems to be otherwise.''\37\ Thus, Smallwood does little to establish 
precedent contrary to the ``majority rule'' or the ``American rule.''
---------------------------------------------------------------------------
    \36\ Id. at 868.
    \37\ Id.
---------------------------------------------------------------------------
    Finally, it should be noted that some states have enacted 
legislation establishing default rules for pore space ownership and 
control. Three states have enacted relevant legislation: Montana, North 
Dakota, and Wyoming. In each of these states, the state legislature 
decreed that the surface owner, not the mineral rights owner, is the 
owner of the pore space to be employed in CCS technology.\38\ Further, 
in the two states that are currently considering relevant legislation 
(Michigan and New York), the pending legislation reportedly would also 
declare that pore space does not belong to the mineral rights holder 
but remains with the surface estate.\39\
---------------------------------------------------------------------------
    \38\ Mont. Code Ann. Sec.  82-11-181(3); N.D. Cent. Code Sec.  47-
31-03; Wyo. Stat. Ann. Sec.  34-1-152(a).
    \39\ Southern States Energy Board, ``Carbon Capture and 
Sequestration Legislation in the United States of America,'' March 
2010, available at http://www.sseb.org/documents/CCSLegMatrixshort.pdf 

---------------------------------------------------------------------------
    It is worth pausing briefly to consider why this ``majority rule'' 
or ``American rule'' has been so widely adopted. There is a general 
principle in property law that any property right not expressly 
conveyed is retained by the owner or grantor.\40\ Accordingly, courts 
have tended to interpret limited property grants (like mineral rights) 
from a fee simple owner narrowly, with the fee simple owner retaining 
all property rights not explicitly granted in the document. Thus, a 
grant of mineral rights would grant only what is explicitly granted in 
the ``four corners'' of the document. In the case of federal mineral 
rights leases, the conveying language usually is something similar to 
this: ``This lease is issued granting the exclusive right to drill for, 
mine, extract, remove and dispose of all the oil and gas (except 
helium) in the lands described . . . together with the right to build 
and maintain necessary improvements thereupon.''\41\
---------------------------------------------------------------------------
    \40\ See, e.g., Davis v. Peavy-Moore Lumber Co., 144 S.W.2d 878, 
880 (Tex. 1940).
    \41\ U.S. Department of the Interior, Bureau of Land Management, 
Form 3100-11 (October 2008): Offer to Lease and Lease for Oil and Gas. 
CRS has also reviewed several other lease forms dating back to 1984, 
and all of them contain substantially similar language.
---------------------------------------------------------------------------
    Courts would thus likely be inclined to find that anything not 
explicitly mentioned, e.g. subsurface pore space or similar formations, 
would not be transferred, but would remain with the grantor, as the 
cases described above illustrate.
S. 1856
    Given the aforementioned, S.1856 probably would not disrupt the 
current understanding of the ownership rights of the Federal government 
and mineral rights leaseholders in subsurface pore space, at least in 
the context of mineral leases. The latest draft of the bill that CRS 
has seen would establish that, as a rule, subsurface pore space below a 
surface estate owned by the Federal government would be owned by the 
Federal government. With respect to mineral leases, this is clearly in 
line with the ``majority rule'' or ``American rule'' that appears to 
have been adopted by virtually every court (and every state 
legislature) that has considered the question, as described in detail 
above; although, of course, no court has yet ruled on this issue with 
respect to use of subsurface pore space for CCS. Similarly, by 
establishing that ``a conveyance of the surface ownership shall include 
the conveyance of the Federal pore space in all strata below the 
surface of the Federal land'' unless previously reserved,\42\ the bill 
effectively clarifies that the application of the ``majority rule'' or 
``American rule'' extends not just to exclude subsurface pore space 
from mineral rights conveyances, but in fact to attach such rights to 
the surface estate.
---------------------------------------------------------------------------
    \42\ S. 1856
---------------------------------------------------------------------------
    However, aspects of S. 1856 could prove controversial in other 
respects. First, the declaration that ownership of the subsurface pore 
space is ``vested in the Federal Government'' is not limited to cases 
in which the Federal Government has conveyed mineral rights, but in 
fact covers all Federal surface estates. This could prove problematic 
where the conveyances are for a property interest other than mineral 
rights, in which the grantee might be able to claim that the subsurface 
pore space was conveyed. In such cases S. 1856 might trigger a 
requirement that the grantee be justly compensated, as discussed in 
more detail below. Indeed, the testimony to this point should only be 
considered applicable to the extent that the property interests in 
question are mineral rights on the one hand, and the remaining estate 
on the other. The rights and obligations of any other conveyances would 
need to be considered on a case by case basis.
    Another concern is the statement concerning the ``applicable law'' 
in construing conveyances prior to the enactment date of S. 1856. The 
provision would likely not be applicable to a claim seeking 
compensation for the ``taking'' of a subsurface property right under 
the terms of S. 1856, as such a claim would depend on the applicable 
law at the time of the conveyance, as discussed in more detail below. 
Also, the language might prove troubling because it applies only to 
``ownership'' interests. Mineral rights and other subsurface interests 
can be, and often are, conveyed as leases or other property interests 
that may not be considered ``ownership'' interests. The applicability 
of this language to those interests may be a concern.
Takings Concerns
    If S. 1856 is enacted, and subsequently it is determined that a 
private party previously had a property interest in the subsurface pore 
space located below a Federal surface estate, such a finding would not 
likely invalidate the enacted law. Instead, the party would likely be 
entitled to just compensation pursuant to the ``Takings Clause'' of the 
Fifth Amendment to the U.S. Constitution.
    A takings claim resulting from S. 1856 or similar legislation would 
likely be in the form of a ``physical/appropriations'' takings 
claim.\43\ Indeed, ``[t]he paradigmatic taking requiring just 
compensation is a direct government appropriation or physical invasion 
of private property.''\44\ Thus, in the case of a hypothetical loss of 
a real property interest in subsurface pore space, there is little 
question that the interest represents ``property'' that would require 
just compensation. The main question, therefore, would be whether S. 
1856 or similar legislation would in fact divest a real property 
interest from any potential party.
---------------------------------------------------------------------------
    \43\ For a more detailed discussion of the Takings Clause, the 
various types of Takings claims, and the applicable legal standards, 
see CRS Report RS20741, The Constitutional Law of Property Rights 
``Takings''. An Introduction, by Robert Meltz.
    \44\ Lingle v. Chevron USA, Inc., 544 U.S. 528, 537 (2005).
---------------------------------------------------------------------------
    As explained in detail above, a mineral rights holder on Federal 
lands would have difficulty arguing that the mineral rights interest 
included a property interest in the subsurface pore space. Therefore, 
it is unlikely that a party that holds only a mineral rights lease on 
Federal lands would have a compensable Takings claim as a direct result 
of S. 1856 or similar legislation. However, the expansive language in 
S. 1856, which preempts any claim to subsurface pore space property 
rights located below a Federal surface estate, is more likely to create 
a compensable taking. The Federal government grants leases, easements 
and rights of way, and other real property interests on (and under) 
Federal lands in many forms and for many purposes. It is not possible 
to conduct a comprehensive review of all such property interests. 
However, the possibility exists that some of these may encompass an 
interest in subsurface pore space (in whole or in part). If such a 
property interest does exist, the party holding the interest may well 
be entitled to Takings compensation upon the passage of S. 1856 or 
similarly worded legislation.
    Also, it should be noted that this taking analysis addresses only 
potential physical/appropriations takings claims; that is, a claim that 
the legislation results in the loss of a real property interest in the 
subsurface pore space. Consideration of ``regulatory'' or other takings 
claims, in which the aggrieved party would argue that the law or 
regulation results not in a total loss of a property interest but 
rather in the reduction of the value of a property interest that the 
party continues to hold, are outside the scope of this testimony. 
However, the language in S. 1856 does provide that ``[n]othing in this 
section alters any laws or case law in existence on the date of 
enactment of this section relating to the rights belonging to, or the 
dominance of, the mineral estate.'' This language may provide 
additional assurance to those concerned that mineral rights on Federal 
lands might be taken. Also, S. 1856 does not authorize CCS projects or 
any other activity. It simply attempts to classify ownership interests 
in real property. Because it does not authorize new activity, it likely 
would not, by itself, give rise to any regulatory or other partial 
takings claim.
Conclusion
    As described above, S. 1856 likely would not represent a 
significant deviation from the current understanding of the real 
property rights associated with ownership and control of the subsurface 
pore space that would likely be employed in CCS technology. Common law, 
legal scholars, and state legislatures have, for the most part, agreed 
that subsurface pore space is owned and controlled by the holders of 
surface rights, not mineral rights. As a result, this legislation, or 
similar legislation, would likely not result in a compensable takings 
claim from a holder of mineral rights on Federal lands. However, there 
are some concerns about the breadth of the language in S. 1856 and 
potential takings of property interests other than mineral rights.
    Mister Chairman, that concludes my prepared statement. I would be 
happy to answer any questions that you or other Members of the 
Committee might have, and I look forward to working with all Members 
and staff of the Committee on this issue in the future.

    The Chairman. Thank you all for your excellent testimony.
    Let me ask a few questions. Dr. House, let me start with 
you. I guess I would just be interested in any thoughts you 
could give us as to the challenges involved in acquiring access 
to lands for CCS projects when the lands are public versus when 
the lands are private.
    I mean, what is the current circumstance that exists in 
that regard? Is it possible to acquire or to pursue projects 
where you have public ownership of the land as well as private 
ownership today, or is one easier than the other?
    Mr. House. That is an excellent question, Senator.
    The best way to think about it, I guess, from our 
experience is private transactions are very effective, very 
efficient. Sort of independent negotiations between private 
entities can occur quickly and fast, and all the interests are 
clear. So, in many cases, that is the best way to go to 
identify sequestration potential that is owned for which the 
surface right and, if possible, the mineral right is well 
understood, and you can sign leases and move forward.
    There is a geologic and geographic complexity that comes 
into account when you go specifically in the Mountain West 
regions, where the Federal Government owns tremendous amounts 
of land, and that land tends to be checkerboarded. It literally 
looks like a checkerboard if you look at sections and townships 
on maps.
    So you can go and sign all the appropriate legal documents 
with all the appropriate private entities, but if you were to 
inject CO2 in wells drilled even on the private 
lands, the CO2 would flow in the subsurface as it 
does in the appropriate geologic structure underneath, in some 
cases, some of the checkerboarded public lands.
    So the public lands, if the surface is State public 
ownership, then they own the pore space there. So, you would 
need public--you would need a lease from the Government to 
complete that sequestration project.
    So, for that reason, I think there is, unfortunately, in 
the basically west of the Mississippi, it would be very, very 
difficult to do projects without some degree of sort of public 
lands involvement, although, in many cases, a majority of the 
ownership can be private.
    Now the situation changes when you get into the Midwest 
regions where there is very little Federal lands, and most of 
the lands are State lands, as well as private lands, in which 
case there are many projects in which you could go forward with 
entirely private leases.
    The Chairman. Let me ask, and I haven't really studied 
this. But if the Federal Government owns the surface and the 
subsurface of land, why wouldn't the Federal Government want to 
retain the ability to lease the surface, lease the minerals, 
and lease the pore space in 3 separate transactions? Wouldn't 
that be the most beneficial thing from the point of view of the 
taxpayer or the Federal Government?
    Mr. House. Yes, absolutely. Excellent point. So in the case 
where the Federal Government has what we call ``fee simple'' 
land, which means they own everything, which does occur in many 
places, then they would own the surface lands. They own the 
mineral estates, and then they own the pore space. So they 
could sign both mineral extraction leases, as well as 
CO2 storage leases.
    There are geologic situations in which that could be 
incredibly beneficial. So let me give you an example. If there 
are, say, there is oil deposits in shallow stratigraphic 
layers. So say 500 meters deep you have oil. Then maybe at 800 
meters deep or 1,000 meters deep you have natural gas. Then 
maybe at 2,000 meters deep you have what we call a basal 
sandstone, or a reservoir layer that doesn't involve any 
hydrocarbon deposits.
    In that case, you could actually have 3 different leases. 
You could have an oil operator removing the oil. These would be 
stacked vertically. You could have a gas operator removing the 
gas. You could have a sequestration operator injecting 
CO2 beneath both of those operations all in a very 
symbiotic way. That would be a tremendously efficient use of 
sort of space, if you think about it.
    The Chairman. Let me just ask one other question. Then my 
time is up. I am just concerned if we adopt or codify the so-
called American rule, are we, on behalf of the Federal 
Government, giving up the ability to separately lease the pore 
space in land where we have already leased the surface?
    Mr. House. If the Federal Government--yes, that is true. I 
mean, if the American rule is sort of considered the law of the 
land through the courts or through the legislature, then, 
indeed, in a case where the Federal Government would own the 
mineral rights, but not the surface rights, they would not have 
the right to lease the pore space. The private owner of the 
surface would, in fact, have that right.
    It is important to note 2 things, though. First, from the 
point of view of the sequestration industry, that is not 
necessarily a bad thing. I mean, the lease can be signed with 
the Government, and the lease can be signed with private 
entities. In many cases, it is faster to sign them with private 
entities.
    Then the second point is that, and this is extremely 
important, is that if it appears pretty strong that the mineral 
estate, in precedent, the mineral estate has sort of a 
superiority, which means that a sequestration operator could 
not develop a site, even if they got a lease from a private 
owner, that would damage a mineral estate property.
    So you couldn't, in other words, inject CO2 into 
a natural gas reservoir if the physical activity of doing it 
would sort of weaken the value or diminish the value of the 
natural gas. So you can only go forward with the operation if 
you could show in a scientific way that the operations of the 
sequestration occurs in a separate geologic stratum and would 
not negatively impact the natural gas reserve.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    I am pleased that all of you on the panel this morning have 
indicated that you believe that CCS is essential. If we are 
going to get to that low-carbon future, clean energy future, we 
have to figure out how we make CCS a reality.
    So there were at least 3 of us here this morning who 
expressed a level of frustration with the stimulus funds, $3.4 
billion, that is directed to help facilitate it and just about 
0.5 percent that has moved forward at this point in time. So we 
are frustrated, but I would have to imagine that you all are 
doubly frustrated that it is not moving quicker. But hopefully, 
we will see something on that.
    Dr. House, you mentioned that we have to get the geology 
right, and I would think that this is something that, again, we 
need to know and understand with a little bit more certainty.
    There was an issue over in Germany, I guess this was last 
summer, where there was some local opposition to a 
demonstration project there. Apparently, instead of 
sequestering underground due to opposition from the local 
residents, they apparently wound up venting the carbon dioxide 
into the atmosphere rather than storing it beneath the ground. 
Instead of ``not in my backyard,'' it is ``not under my 
backyard.''
    I don't know whether we have seen any opposition rising to 
even the concept of CCS and the concerns. Senator Barrasso, 
from Wyoming, has been dealing with this for years. But I think 
this is one of the instances where when we do our homework 
correctly and we identify where those appropriate geologic 
deposits are, then the concerns that some may have, that would 
be unfounded because you have repositories that allow for a 
level of safety and security.
    This is a general question, and I will throw it out to all 
of you on the panel. Are we seeing or do you foresee any 
resistance to CCS here in the United States? What kind of 
educational effort do we need to give people a level of 
security or comfort that this is a process that we know and 
understand?
    Mr. Hilton, if you want begin?
    Mr. Hilton. Senator Murkowski, if I could clarify one 
thing? On that project in Germany, the resistance wasn't to the 
sequestration.
    Senator Murkowski. OK.
    Mr. Hilton. The resistance was actually to a bad plan by 
the utility who elected to truck the CO2 through the 
small villages, and that is what the people objected to.
    Senator Murkowski. Okay.
    Mr. Hilton. It wasn't the pipeline. It was trucking. So 
they were OK with putting it in the ground. They were OK with 
it being captured, but the method of transportation wasn't well 
thought out.
    Senator Murkowski. That is an important aspect of it. I 
appreciate you pointing it out.
    Mr. Hilton. What we have been doing is, for instance, at 
Lacq, where we take a pipeline and go to depleted gas fields, 
the people of Lacq are extremely encouraged. Part of that is 
putting the deal together, if you will.
    Senator Murkowski. Right.
    Mr. Hilton. Basically, TOTAL offered them back the 
royalties that they got when they used to have gas in the 
field, and this made the town extremely happy. Everybody is 
very happy with pipelines and that.
    So your point is very well taken. It is education. It is 
understanding that this is not a risky proposition, that we 
understand sequestration. We understand pipelines, and we 
understand capture and getting the public to accept that. It is 
an educational process because this is something they don't 
know a great deal about.
    So I think we as an industry have to do that and get the 
proper I will say information in front of people, to have their 
confidence in what we are doing. But as I said, so far, we 
haven't run into, at least in any of the projects Alstom has 
been involved with, any opposition. We do know there was 
opposition in Rotterdam, but that was directly under the town 
and you know----
    Senator Murkowski. Mr. Yamagata, on behalf of the Coal 
Utilization Research Council, is this an issue that you 
consider?
    Mr. Yamagata. It is. It is, Senator. It is an issue that we 
have spent a great deal of time trying to deal with other than 
to echo the points that Mr. Hilton has made, and that is that 
it is very much an education process. The flip side of that 
being a numby-like reaction, and that comes mostly, I think, 
with not understanding what the technology is or what we are 
capable of doing.
    Another point worth mentioning I think is just the enormous 
potential for deep storage even in the North American 
continent. Let me just give you a couple of examples. This 
comes from Battelle and DOE. Between 2050 and 2100, you would 
project about 330 gigatons of CO2 that would 
otherwise be emitted. If you think about, that is 6 gigatons 
per year now.
    The repositories, if you will, in the North American 
continent just in saline formations alone is something on the 
order of 3,600 gigatons. So, number 1, we have plenty--we 
believe we have plenty of storage capability. So that is 
probably not the issue if we do it right.
    I do think, in sum, that the real issue here is education. 
Don't be flip about this because you will get the other side, 
the numby side of it. It will take the efforts of industry and 
Government to educate land holders and others on the safety of 
what we are trying to do here.
    Senator Murkowski. Let me ask you, Mr. Brownstein, because 
within the environmental community, I think EDF has taken a 
position that is somewhat different than some of the other 
organizations. You have stated that you believe CCS is 
critical.
    Is this an issue where we need to ensure that there is 
sufficient education and understanding about the process and 
the safety and security?
    Mr. Brownstein. There is no question, Senator, that 
education is critically important. This is an issue that 
members of the committee, those of us on the panel are very 
used to discussing.
    We have become very conversant with the technology and how 
it works. To the average American, this is something very new. 
So, there is a lot of work that needs to be done to educate the 
public about what the technology is and what the process is for 
doing this correctly.
    But let me also say 2 other things. First of all, it 
becomes incredibly important that, in fact, we do do it 
correctly. That requires good rules to be in place so it is 
very clear to operators what is expected of them. It becomes 
incredibly important to have good regulatory oversight.
    Both on the industry and the regulator side, we need to 
make sure that we have well-trained people. Investment in good 
education for geologists and engineers and making sure that 
they are part of this becomes incredibly important. We need to 
have qualified people.
    The last thing that I would suggest is that I personally 
believe that some of the resistance to CCS goes to the larger 
question of the role of coal. In that regard, I believe that 
the coal industry and the utilities that depend on coal have a 
particular responsibility to make sure that if we are to move 
forward with continuing to use coal as part of our energy 
economy that we really are looking at the entire value chain 
and that we are doing everything that we can not only with 
regard to CO2, but also how we mine it, how we deal 
with the waste and so on, to do it as environmentally 
responsible as absolutely possible.
    Senator Murkowski. I thank the members of the panel.
    Thank you, Mr. Chairman.
    The Chairman. Thank you all very much. I think it has been 
good testimony and a good hearing. We appreciate your input.
    Oh, I am sorry. Senator Barrasso, I didn't see you come 
back in. Go ahead if you have any questions.
    Senator Barrasso. Thank you, Mr. Chairman.
    I had some constituents from Wyoming who were visiting, and 
I went to the library to visit with them. But I was trying to 
listen to some of the answers.
    Mr. Hilton, if I could, your company, Dr. House's company, 
I mean, you are at the forefront of carbon sequestration. You 
are going to make this a reality. You will be on the ground 
doing that. Obviously providing legal certainty is critical, 
and you are addressing that.
    In Wyoming, over half of the land is owned by the Federal 
Government. As I think Dr. House mentioned, we have some of the 
work done on the geology. I believe we have some of the best 
geologic structures and the best geology for long-term carbon 
sequestration.
    When you are out there selecting potential sites for long-
term carbon storage, can you give us a little bit of your 
thought process on Federal land versus private land and how you 
make some of those decisions?
    Mr. Hilton. Normally, Alstom does not do sequestration. We 
basically do the capture portion. But I think the key issue is 
going to be where the plan is, obviously. I mean, you are east 
of the Mississippi, you are on private property.
    It is going to be a question of transportation. What is it 
going to cost us, and how difficult is it going to be to put 
pipeline to get to places where you really have choice? I think 
that is really going to be the core issue, the ease of that.
    I do think, just to comment on something that was said 
earlier, private--sequestration on private land will be quite 
complicated. If you look at the facility that we are involved 
with at Mountaineer, there are 2,000 private land owners 
immediately around the plant. To get mineral rights or to get 
pore space from all, if necessary, 2,000, it is going to be a 
very complicated issue, and it is going to be a very difficult 
issue.
    That is why we are encouraged by seeing some States start 
to alter their view of ownership of pore space. I think it is 
absolutely critical, and it is something that has to happen to 
make this happen.
    Senator Barrasso. Dr. House, did you want to comment on 
that in terms of your making financial decisions and 
commitments?
    Mr. House. Yes, absolutely. Certainly, we look at geology, 
``geology geology,'' so to speak. Because the geology really 
does matter in terms of the reliability and the permanency of 
the storage. So that is critical. Obviously, proximity to 
sources is important, and then who owns--the complexity of the 
sort of legal access required is also important.
    I would add, and this also goes to something Senator 
Murkowski asked earlier about sort of public acceptance. In our 
experience, people view these as oil and gas transactions, as 
things they are familiar with, as things they understand.
    It is an industrial operation. It happens in the 
subsurface. It doesn't have a great surface impact. So it is 
compatible with ranching or farming, et cetera. These leases 
are happening in very big, large ways, and so I actually think 
it is a very tractable thing and something that we are 
addressing actively.
    I think there has been some discussion of police action 
around pore space, and I actually would--that really scares me, 
to be honest with you. I think if there was a broad attempt at 
sort of national eminent domain, that would create a million 
enemies immediately, whereas if it is their resource and if it 
is an arm's length negotiation between private entities, then 
they become associated with the project. They are invested in 
the project. They want it to go forward.
    They can benefit from it, as opposed to some sense that 
their assets are being stolen and that their homes are being 
put at risk. So I think maintaining, as your bill does, that 
the pore space goes to surface estate I think is the right 
approach.
    Senator Barrasso. Mr. Vann, following up on Senator 
Bingaman's question earlier, would S. 1856 preclude the Federal 
Government from leasing the surface and leasing the subsurface?
    Mr. Vann. I don't think so, no.
    Senator Barrasso. Yes, I agree.
    Mr. Vann. In the case in which it owns both? No, I don't 
see anything.
    Senator Barrasso. OK. So it wouldn't. Then in instances of 
private surface ownership and Federal mineral ownership, to me, 
S. 1856 does not apply. So there would be no impact?
    Mr. Vann. I agree. It is not relevant.
    Senator Barrasso. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Again, thank you all very much. I think it 
has been a useful hearing.
    That will conclude our hearing.
    [Whereupon, at 12:01 p.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

   Responses of Mark S. Brownstein to Questions From Senator Bingaman
    Question 1. Your written testimony discusses some important issues 
with adequate site characterization and maintenance of geological 
sequestration sites. Do you feel that the current direction of the DOE 
CCS regional partnership's research projects adequately address the 
sequestration component of CCS?
    Answer. DOE's CCS regional partnerships are providing a useful 
forum for developing and implementing pilot projects that will help 
commercialize carbon capture and storage (CCS) processes and 
technologies. Of particular importance is that partnerships are taking 
place in several regions across a wide variety of geologies. This is 
important because the viability of CCS will vary across geologies, with 
some geologic formations being more suitable for sequestration than 
others, and some proving unsuitable at all. Going forward, increased 
priority should be given to characterizing the geology of various 
regions, particularly where the costs and technical challenges of 
sequestration are likely to be relatively higher. In addition, there is 
an ongoing need for public outreach and education, with a particular 
focus on environmental regulators and public utility commissioners, 
both of whom will require current and complete information to be able 
to assess the environmental and economic viability of CCS projects, 
respectively.
    Question 2. Your testimony did not discuss the draft legislation 
proposed by Senators Rockefeller and Voinovich that would provide 
substantial funding for commercial deployment efforts of CCS 
technologies. Does EDF have an opinion on this draft legislation? We 
would appreciate your thoughts and/or comments on that legislative 
draft.
    Question 3. Can you provide a brief comparison of coal/CCS 
incentives in ACELA, ACES and Rockefeller/Voinovich and indicate the 
preferred approach from EDF's perspective?
    Answer. Questions 2 and 3 are interrelated; and so, below, we 
combine our answers to those questions.
    The most important difference between the approaches to CCS 
commercialization taken in the Rockefeller/ Voinovich discussion draft 
and those taken in HR2454, the American Clean Energy and Security Act, 
is that the Rockefeller/Voinovich provisions are designed to operate 
independently of an energy policy that places a cap on greenhouse gas 
pollution.
    It should be recognized at the outset that, without a mechanism 
that places a price on CO2 emissions and that creates a 
market for avoiding those emissions, even the bestdesigned policies and 
programs are unlikely to result in broad deployment of CCS 
technologies. Without a price on carbon, there is simply no economic 
reason to do CCS.
    That critical point aside, the Rockefeller/Voinovich draft in many 
ways reflects an emerging consensus on the key policy pathways that are 
needed in order to support development, commercialization and broad-
scale deployment of carbon capture and sequestration technologies at 
coal-fired facilities.
Early Deployment
    Both Rockefeller/Voinovich and HR2454 create early deployment 
programs that would operate for 10 years and fund CCS projects with 
revenue collected from utility ``wires charges.'' Utility assessments 
would be based on the fossil-fuel generation mix of each utility, with 
the assessments under Rockefeller/Voinovich set at levels to bring in a 
total of approximately $2 billion annually and assessments under HR2454 
set to generate approximately $1 billion annually. The Rockefeller/
Voinovich draft states that the program should, to the maximum extent 
practicable, deploy projects capturing emissions from at least 10 GW of 
generating capacity.
    This is in contrast to a more limited approach established under 
S.1462, the American Clean Energy Leadership Act. Under S.1462, DOE 
would provide technical and financial support to no more than 10 CCS 
demonstration projects, with the key support mechanism being the 
indemnification of the 10 project operators from liabilities that may 
arise from the projects. The question of how to best address risk 
management is addressed below in our response to question #4. So, here 
we will focus on the major differences between Rockefeller/ Voinovich 
and HR2454, neither of which address the liability question.
    The Rockefeller/Voinovich draft builds off the CCS early deployment 
program established in HR2454 (which in turn was taken from Rep. 
Boucher's HR1689). Under both versions, new entities are established to 
administer the program--including the approval of projects and 
disbursement of funds. Under HR2454 this entity, the Carbon Storage 
Research Corporation, is made up of utility associations and public 
interest groups and operates as an arm of EPRI.
    This structure raises governance questions, in that private 
entities are given full authority over the management and use of funds 
raised from electricity consumers for a public purpose. Rockefeller/
Voinovich deftly resolves this issue by creating an entity, the CCS 
Program Partnership Council, made up of largely the same industry and 
public-interest actors but over which DOE maintains an important 
oversight role. The Council would review and recommend projects for 
financial assistance, but awards would ultimately be made by the 
Program Manager, who is appointed by the Secretary of Energy. In this 
way, the Rockefeller/Voinovich draft strikes a balance by relying on 
industry expertise to provide direction over the investments while 
making public officials accountable for final funding decisions.
    The other key difference between the two approaches is the size of 
the programs. As mentioned, Rockefeller/Voinovich would raise $2 
billion annually for 10 years; and HR2454 would raise half that amount. 
The question of whether it makes sense to double the size of the early 
deployment program, as originally negotiated with industry, rests 
largely on two issues: 1) concerns over consumer impacts, and 2) the 
efficacy of the commercial deployment programs contemplated in both 
Rockefeller/Voinovich and HR2454.
    Clearly, doubling the costs imposed on electricity consumers--
relatively minor though those costs may be for any given ratepayer--is 
a proposition that will be given close scrutiny. Under both 
Rockefeller/Voinovich and HR2454, 60% of state public utility 
commissions must approve the early deployment program before it can be 
established and utility assessments can commence. Ever conscious of 
consumer rate impacts, it's conceivable that the difference between a 
$1 billion and $2 billion annual program may be enough to cause a 
significant number of PUCs to balk.
    However, because Rockefeller/Voinovich is appears to be designed to 
operate in the absence of a price on carbon pollution, the success of 
the overall CCS deployment program becomes all the more dependent on 
funds generated from mandatory charges placed on consumers in the early 
deployment program--as opposed to the incentivebased mechanisms used to 
promote CCS development under the subsequent commercial deployment 
program. So, in this sense, doubling the size of the early deployment 
program almost becomes a necessity under Rockefeller/Voinovich.
Commercial Deployment Program
    Both Rockefeller/Voinovich and HR2454 establish commercial 
deployment programs that take effect as the early deployment programs 
wind down. HR2454 incentivizes broad deployment of CCS by providing 
emission allowances for tons of CO2 captured and 
sequestered, with bonus amounts given on a sliding scale for higher 
rates of capture and sequestration. The program is broken into two 
tranches, with the first 6 GW of capacity using CCS being guaranteed 
the bonus allowances and the next 66 GW of CCS being eligible for 
allowances under a reverse auction or other method.
    Rockefeller/Voinovich mimics this structure, incentivizing the 
first 10 GW of CCS through loan guarantees and a 30% tax credit on the 
incremental costs associated with adding CCS technology to a project. 
For the next 62 GW of capacity, Rockefeller/Voinovich provides slide-
scaling tax credit for tons sequestered, with higher amounts given for 
higher rates of capture. The Rockefeller/Voinovich approach can be seen 
as an elegant way of devising a similar structure to achieve similar 
ends as those contemplated in the HR2454 commercial deployment 
program--and doing so without the having the benefit of emission 
allowances as a resource to fund incentives. However, we are mindful of 
the difficult budgetary environment in which Congress currently 
operates and have concerns about whether the program would be fully 
funded to achieve its optimal ends.
    In contrast, done within the context climate/energy legislation 
that caps and places a price on carbon, the CCS commercial deployment 
program could go forward under a revenueneutral approach that has both 
the benefit of being able to use emission allowance values to subsidize 
CCS deployment and a long-term price signal that will broadly 
incentivize industry to invest in CCS deployment.
Standards for New Coal-Fired Power Plants
    Both Rockefeller/Voinovich and HR2454 set CO2 emission 
limits for new-coal fired power plants. Rockefeller/Voinovich requires 
plants that are initially permitted before 2020 to achieve a 
CO2 emission limit that reflects a 50% reduction from the 
carbon content of the fuel by the time there is 10 GW of CCS capacity 
in operation or by 2030 at the latest (or possibly later if a DOE 
report required under the legislation determines that CCS won't be 
commercially available until later).
    Rockefeller/Voinovich is silent on what happens with plants that 
are initially permitted from 2020 onward. Presumably this question will 
be addressed as the bill authors further refine their discussion draft.
    HR2454 requires plants that are initially permitted by 2020 to 
achieve a 50% reduction in CO2 emissions by the time there 
is 4 GW of CCS capacity in operation or by 2025 at the latest (with EPA 
being given authority to extend the deadline). Plants initially 
permitted from 2020 onward must achieve a 65% emission reduction upon 
commencing operation.
    EDF prefers the approach taken under HR2454, as it is more 
reflective of the standards recommended by the U.S. Climate Action 
Partnership in its ``Blueprint for Legislative Action.'' The blueprint 
presents consensus recommendations that were negotiated among a broad 
group of industry and environmental stakeholders and, as such, is 
provides a solid representation of what is both technically and 
economically achievable.
National Strategy
    Finally, we would note that Rockefeller/Voinovich could benefit 
from the addition of language directing relevant federal agencies to 
develop a national strategy, including the promulgation of necessary 
rules, to address legal and regulatory barriers to CCS deployment and 
to ensure that CCS activities are held to standards that will be fully 
protective of public health and the environment. In particular, we 
would highlight the importance of developing strong standards for 
assessment and selection of geologic sequestration sites.
    Language to this effect is included in HR2454. The coal working 
group lead by Senator Carper also produced national strategy language, 
which was included in S.1733, the Clean Energy Jobs and American Power 
Act, by Senators Kerry and Boxer.

    Question 4. There have been many proposals introduced recently by 
various stakeholder groups concerning CCS liability and indemnity 
programs, what is EDF's opinion on how liability and indemnity should 
be addressed? Is there any one preferred approach?
    Answer. For the past several months, EDF has been in a dialogue 
with Southern Company, Duke Energy, Zurich and a variety of other 
environmental and business stakeholders on the question of CCS 
liability and indemnity. From the start, the working assumptions of 
this dialogue have been:

          1) that the best legal liability regime for CCS is one that 
        ultimately place the full cost of CCS liability insurance and 
        remediation costs firmly in the private sector and assures that 
        individual developers will remain responsible for their 
        actions;
          2) at the outset of CCS commercialization, when there is a 
        lack of operational experience and data upon which the private 
        sector risk management services (e.g., insurance markets) can 
        develop accurate actuarial data, a certain amount of limited 
        government support will be necessary to facilitate CCS 
        commercialization; and,
          3) whatever federal government support is offered, it should 
        be structured in a way that facilitates development of a 
        commercial market for liability and risk management services.

    We believe the first two assumptions are broadly reflected in S. 
1462, and our ideas are intended to build on this work. Our goal is to 
develop a risk management program for early deployment of CCS, and an 
infrastructure maintenance program for CCS site post closure. In 
summary fashion the ideas we have developed to date would attempt to 
achieve the following:
          1) Limited relief provided to CCS sites. Site operators take 
        on ``first dollar'' liability on a per site, per-occurrence 
        basis up to a certain amount. Then each site must contribute to 
        an industry pool, also on a-per site, per-incident basis. Then 
        the government assumes a portion of liability beyond the 
        industry pool up to a fixed amount for each site. Any remaining 
        liability beyond the government's share reverts back to the 
        site operator. The earlier a CCS site commences operation 
        (i.e., in which tranche it is located), the more assistance it 
        receives.
          2) To be eligible for this program, the project developer of 
        a proposed CCS sites apply to the Secretary of Energy to enter 
        into a cooperative agreement. The Secretary is not compelled to 
        enter into any cooperative agreements, thus placing the burden 
        on the applicant to justify its project to the Secretary. 
        Eligibility will depend in part on meeting underwriting 
        criteria that are established for other sites participating in 
        the program.
          3) The program is limited. The Secretary can enter into 
        cooperative agreements until a maximum of 40 GW of generating 
        capacity in the United States is equipped with CCS. This 
        equates to 12% of today's coal capacity. The Secretary is 
        required to halt entering into new cooperative agreements, 
        after 15 GWs of capacity (roughly 5% of current coal capacity) 
        have been enrolled in the program, and at that point must 
        undertake a review and determine that that the program is 
        working and still needed to support commercialization of CCS.
          4) Participants in the program, as a condition of receiving a 
        cooperative agreement, to agree to pay into a trust fund to 
        cover post-closure infrastructure maintenance and monitoring, 
        measurement and verification costs associated with sites in the 
        program. The trust fund will be funded through a fee per ton of 
        carbon dioxide injected at a site participating in the risk 
        management program. The draft authorizes the Secretary of 
        Energy to recognize a Carbon Sequestration Management Authority 
        (CSMA) to collect and manage the funds. The CSMA will not be a 
        government entity, nor will the funds be government funds.
          5) Establish a mechanism to deal with `orphan' sites. Collect 
        a 5-10 cent per ton fee from all CCS sites, regardless of 
        whether they are participating in the risk management program, 
        to cover remediation, infrastructure maintenance, and 
        monitoring, measurement, and verification for sites where no 
        responsible entity remains with the obligation and financial 
        ability to perform such activities. Our ideas stand in contrast 
        to other proposals that would relieve CCS site owners of all 
        liability once closure of a site is achieved. We believe 
        proposals that contain such blanket liability relief create the 
        risk of moral hazard by offering the promise that at some point 
        in the future, the site would become the sole responsibility of 
        a third party.

    EDF, and its partners welcome the opportunity to discuss these 
ideas with the committee.
                                 ______
                                 
      Response of Robert Hilton to Question From Senator Bingaman
    Question 1. In your written testimony, you mentioned the need to 
broaden the scope of CCS deployment to other fossil fuels and 
industrial processes. Is Alstom partnering with any non-coal types of 
CCS projects at present? If so, could you please elaborate?
    Answer. To achieve the targets for GHG CO2 emissions set 
forth in draft legislation (e.g. Waxman Markey) of 50% in 2030 and 83% 
in 2050, we will need to place CCS on power generation from all types 
of fuel, particularly natural gas plants. Depending on the evolution in 
the next months and years with plant permitting, all studies show CCS 
on gas as critical. So far, this need for demonstration has been 
substantially ignored in decisions on public funding.
    Alstom has seen the need and has a series of demonstrations aimed 
at fuels and applications other than coal. We are currently operating a 
5Mw Chilled Ammonia Process demonstration pilot at E.On's Karlshamn 
Plant in Sweden. This unit is running on oil as the fuel for the 
boilers. We developed the program on the concept that the unit would 
later be moved to a combined cycle natural gas power plant located 
nearby.
    We currently have under construction a 40MW Chilled Ammonia Process 
demonstration plant at the Mongstad refinery in Norway. This project is 
funded by the TCM Consortium made up of Statoil (refinery owner), 
Gassnova and Shell. The CCS plant will initially operate on a combined 
cycle natural gas plant and then on flue gas from a refinery catalytic 
cracker unit. The Norwegian Parliament is expected to take an 
investment decision on the plant in 2014.
    Alstom also had a contract with ADM under the Industrial ARRA work 
from the Department of Energy at its plant in Decatur, IL for our 
advanced amine technology. However, we have completed the phase I study 
and, due to uncertainty of legislation, ADM has elected not to proceed 
with the phase II implementation of the CCS.
    We continue to look for additional non-coal opportunities but 
uncertainty of the regulatory/legislative process for CO2 
control combined with no available government funding for the 
foreseeable future has essentially frozen the demonstration 
opportunities.
    As we all know, the presumed goals mentioned above can only be 
achieved by application of CCS on all fuels, and with a wide deployment 
in the early 2020's. For that to be feasible requires a significant 
level of projects built and operational by 2015 or 2016 at the latest. 
This would provide the demonstration experience necessary to give 
industry the confidence to deploy and the suppliers of technology the 
confidence to make commercial offers. Without government subsidies this 
will not happen and under the current budgets for DOE there will be no 
more than the 5-6 commercial scale demonstration projects currently in 
design. Congress needs to act based on the legislation under the 
purview of the Energy and Natural Resources Committee review to fund a 
broad spectrum of demonstrations now.
                                 ______
                                 
     Response of Kurt Zenz House to Question From Senator Bingaman
    Question 1. Can you elaborate on how you have been working to 
acquire private lands? Has that process of securing legal access to 
lands for CCS projects been any more or less challenging for public 
lands than for private lands? If so, could you please highlight any 
potential issues or challenges that you may have encountered?
    Answer. It was an honor to testify to your committee, and I would 
like to request that you and your committee encourage the Secretary of 
the Interior to issue an interim CO2 capture and storage 
(CCS) policy to help clear the path for industrious American 
entrepreneurs to invest in site characterization and eventually 
sequestration site construction. By expeditiously issuing such a 
policy, through which the study and commercial development of carbon 
sequestration sites involving federal lands can happen, the Department 
of Interior (DOI) will help to realize President Obama's stated goal of 
having CCS commercially deployed within 10 years.
    I have been studying the physics, chemistry, and geology of CCS for 
nearly 7 years as an academic and as an entrepreneur. From this 
experience, I am confident that public lands will be part of many of 
the best carbon sequestration sites in the country, and as such there 
is a need for land management policy which balances the benefits of 
moving quickly to characterize those lands against the risks of making 
inadequately informed public commitments regarding new commercial 
activity on the land.
    Fortunately, existing federal policy under the Federal Land Policy 
Management Act (FLPMA) provides the DOI with the necessary authority to 
act promptly and appropriately. Specifically, FLPMA authorizes DOI and 
other relevant agencies to expeditiously grant site characterization 
rights to private developers, while the granting agency withholds full 
authorization of any development rights until costs, benefits, and 
local impacts are fully evaluated. This type of two-step protocol has 
been applied to wind power development as well as to other emerging 
natural resource.
    The use of such a process will enable carbon sequestration site 
developers to invest the tens of millions of dollars necessary for site 
testing and environmental analysis, and it will give those developers 
the confidence that if the resource is proven-and the public benefits 
justify the inclusion of public land in further development-then, the 
developers will have the opportunity to recoup their substantial 
investment. By advancing this process, the DOI will enable rapid 
investment in the early stage development work as well as public 
confidence that the appropriate care will be taken such that the public 
interests to be comprehended and evaluated.
    In all CCS projects, acquiring the legal access to the geologic 
reservoir is an essential first step. As I mentioned previously, my 
company is dedicated to making CCS an integral part of our nation's 
low-carbon, affordable, and reliable energy future. We are working in 
more than half a dozen different states, and our development work is 
financed 100% by private investors.
    As I said in my testimony, private transactions are often the 
preferred route for resource development projects because they can be 
executed quickly and because the interests of relevant parties can be 
addressed through direct and private negotiation. In addition to 
private lands, federal and state lands are essential to the development 
of CCS projects in the United States because significant portions of 
private land in the Mountain West region are checker-boarded with 
federal land. Although regulatory clarity regarding development rights 
on public lands would speed up development, the type of uncertainty 
involved in the usual FLPMA two-step grant is manageable.
    For the past year, the Bureau of Land Management (BLM) has been 
conducting an internal policy review. Recently, this policy review 
appears to have been slowed down by two legal questions that, in the 
opinion of experienced legal experts, are settled law.
    The first question involves the BLM's authority under the FLPMA to 
lease lands for CO2 sequestration. Indeed, the Department of 
Interior (DOI) does have the authority to allow a broad range of energy 
development activities on Federal lands, including carbon 
sequestration, under the FLPMA (See the first attached legal opinion). 
The Congressional Research Service testimony to your Committee on April 
20th agrees significantly with this conclusion.
    The second legal question that BLM appears to be considering is 
whether or not CO2 that is sequestered on public lands 
becomes a natural mineral that the BLM can then lease for extraction. 
This question is not as central to the development of the industry as 
the first question, but again, it appears to be a settled question. The 
majority rule codified by statute in many states and previously 
recognized by BLM for natural gas storage, provides that the storage 
operator retains title to injected gas (See the second attached legal 
opinion). Because ownership of injected gas remains with the storage 
operator, BLM would not have authority to grant third parties the right 
to produce injected carbon dioxide. Although this rule was developed 
with ownership of valuable minerals such as natural gas in mind, in the 
context of CO2 it guarantees that responsibility continues 
to reside with the storage operator. That is that liability-and the 
asset-belongs to the operator.
    I believe strongly that (1) CCS is an essential element of any 
strategy that has the goal of simultaneously making significant cuts in 
greenhouse gas emissions, while maintaining a robust and affordable 
energy supply, and (2) the CCS industry can only grow if land and 
mineral owners are appropriately brought into all projects. As the 
largest landowner in the country, the Federal government should move 
quickly to ensure that it does not become an obstacle to the creation 
of carbon sequestration projects ready to serve the public good.
                                 ______
                                 
    Responses of James Markowsky to Questions From Senator Bingaman
    Question 1. Just last week, as I understand, the U.S. government, 
led by our Trade and Development Agency, signed an agreement to help 
design the first large-scale IGCC power plant in China. With U.S. 
government assistance, General Electric Energy will work in cooperation 
with the Chinese to develop the configuration and design parameters for 
this cutting-edge CCS-ready facility. Is the Department of Energy 
involved in that project, or others like it, in China and other rapidly 
emerging economies?
    Answer. The Department of Energy is not involved in the IGCC 
project or any others like it in any rapidly emerging economies.
    In 2007, NEIL provided technical oversight for a $2 million IGCC 
feasibility study, without CCS, in India funded by the U.S. Agency for 
International Development (USAID). This study resulted in a recommended 
gasification technology as being the most commercially ready for a 
large-scale (100-MW) demo project using typical high-ash coals. 
Subsequently, during the U.S.-Indo Energy Dialogue in 2007 in New 
Delhi, DOE committed to participating on an IGCC Task Force with 
India's Ministry of Power, NTPC Ltd., and Bharat Heavy Electricals, 
Ltd. (BHEL). The IGCC Task Force will be discussed during a meeting of 
the Power & Energy Efficiency Working Group in New Delhi, in early May 
2010.
    Question 2. Please describe the efforts being taken to ensure that 
water rights and water quality will be protected in connection with 
development of policies and technology relating to carbon capture and 
sequestration.
    Answer. The DOE is working through the Regional Carbon 
Sequestration Partnerships and its 30 field projects to demonstrate 
that underground sources of drinking water (USDWs) will not be 
adversely impacted by CO2 injection operations and long term 
storage. Sixteen of these projects have completed their injections, and 
three are currently injecting CO2 in deep saline formations, 
depleted oil fields, and deep unmineable coal seams. All of these 
projects are permitted under the U.S. EPA's underground injection 
control (UIC) permitting process which is designed to protect USDWs. To 
date, all of these projects have demonstrated that CO2 
injection into geologic formations is a secure and safe technology to 
mitigate greenhouse gas emissions. The DOE is also working through the 
Partnerships' field projects and several NGOs to address water rights 
and pore space issues. These field projects are all required to obtain 
leases for mineral, water, and/or pore space rights prior to project 
operations. The DOE is also working to address these issues through the 
interagency task force on CCS and engaging with stakeholders from 
industry and the states to better understand issues regarding water 
rights and water quality.
                                 ______
                                 
    [Responses to the following questions were not received at 
the time the hearing went to press:]

            Questions for Anne Castle From Senator Barrasso
                              notification
    Question 1. Public participation is a key part of the permitting 
process. What guidelines does the Department follow when it comes to 
carbon storage projects on public land?
    Question 2. Is notice given to adjacent property owners, mineral 
leaseholders, and people with surface use permits?
                           agency cooperation
    Question 3. Federal lands are managed by various agencies within 
the federal government. There are different statutory chapters that 
apply to each agency and that cover different aspects of federal land 
management. Are the processes for reviewing, permitting, and overseeing 
carbon storage projects on federal land consistent across the various 
land management agencies within the Department of the Interior?
                             mineral rights
    Question 4. S. 1856 makes clear that the mineral estate is 
dominant. Under existing law and regulations, how does the Department 
ensure carbon storage on public lands does not impact existing mineral 
leasing rights?
    Question 5. Concerns have been raised regarding carbon 
sequestration's impact on ongoing mining activities. Mining lease 
holders use underground mining spaces as part of the ventilation system 
as mining continues. Does the Department recognize that these 
underground cavities are part of the mineral lease as long as mining 
operations continue?
    Question 6. Would S. 1856 impact the Department's rules in this 
regard?

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