```

[Senate Hearing 110-343]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 110-343
 
REGULATORY ASPECTS OF CARBON CAPTURE, TRANSPORTATION, AND SEQUESTRATION

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   TO

    RECEIVE TESTIMONY ON THE REGULATORY ASPECTS OF CARBON CAPTURE, 
   TRANSPORTATION, AND SEQUESTRATION AND TO RECEIVE TESTIMONY ON TWO 
  RELATED BILLS: S. 2323, A BILL TO PROVIDE FOR THE CONDUCT OF CARBON 
CAPTURE AND STORAGE TECHNOLOGY RESEARCH, DEVELOPMENT AND DEMONSTRATION 
 PROJECTS, AND FOR OTHER PURPOSES; AND S. 2144, A BILL TO REQUIRE THE 
 SECRETARY OF ENERGY TO CONDUCT A STUDY OF THE FEASIBILITY RELATING TO 
    THE CONSTRUCTION AND OPERATION OF PIPELINES AND CARBON DIOXIDE 
            SEQUESTRATION FACILITIES, AND FOR OTHER PURPOSES

                               __________

                            JANUARY 31, 2007

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

                    U.S. GOVERNMENT PRINTING OFFICE
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                   JEFF BINGAMAN, New Mexico,Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
KEN SALAZAR, Colorado                JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Allred, C. Stephen, Assistant Secretary, Land and Minerals 
  Management, Department of the Interior.........................    24
Anderson, Scott, Environmental Defense, Austin, TX...............    53
Bengal, Lawrence, E., Arkansas Oil and Gas Commission, Little 
  Rock, AK.......................................................    48
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Coleman, Hon. Norm, U.S. Senator From Minnesota..................     7
Domenici, Hon. Pete V., U.S. Senator From New Mexico.............    11
Edwards, Krista L., Deputy Administrator, Pipeline and Hazardous 
  Materials Safety Administration, Department of Transportation..    15
Evans, Ronald T., Denbury Resources, Inc., Plano, TX.............    58
Grumbles, Benjamin H., Assistant Administrator for Water, 
  Environmental Protection Agency................................    20
Kelliher, Joseph T., Chairman, Federal Energy Regulatory 
  Commission.....................................................    12
Kerry, Hon. John, U.S. Senator From Massachusetts................     4
Salazar, Hon. Ken, U.S. Senator From Colorado....................     3
Slutz, James, Acting Principal Deputy Assistant Secretary, Office 
  of Fossil Energy, Department of Energy.........................    27

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    71

                              Appendix II

Additional material submitted for the record.....................    93

REGULATORY ASPECTS OF CARBON CAPTURE, TRANSPORTATION, AND SEQUESTRATION

                              ----------                              

                       THURSDAY, JANUARY 31, 2008

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:05 p.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. All right. Why don't we get started here? I'm 
informed Senator Domenici is on his way.
    We have two of our colleagues here to talk first about the 
legislation that is the subject of our hearing. Let me give a 
very short opening statementand then turn to them.
    I'd like to welcome everybody and thank the witnesses who 
are testifying before the committee. This is a legislative 
hearing on two bills, S. 2144, that Senator Coleman and some 
others have introduced, and S. 2323, that Senator Kerry has 
introduced along with several of our colleagues.
    These two bills focus on important policy aspects of carbon 
dioxide capture, transportation and storage. S. 2144 focuses on 
the issue of expanding the existing carbon dioxide pipeline 
infrastructure. S. 2323 focuses more broadly on carbon capture 
and storage research, development and demonstration projects 
and perhaps more pertinent to today's hearing also focuses on 
developing a policy framework for rapid implementation of 
integrated carbon dioxide capture and storage systems.
    The topic of reducing greenhouse gases, particularly carbon 
dioxide emissions is a topic of great concern to myself and to 
all members of this committee. Carbon capture and geologic 
storage holds promise as a measure that can be used to mitigate 
global climate change while still allowing the use of fossil 
fuels at electricity generating plants and industrial 
facilities. Discussion 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 than other carbon intensive fuels while not 
contributing further to carbon dioxide emissions and global 
warming.
    Last December a historic piece of legislation was passed 
into law, the Energy Independence and Security Act of 2007. It 
included key provisions for expanding critical research and 
development programs aimed at bringing integrated carbon 
capture and storage systems to the full technological 
deployment stage. The new law is important for focusing 
research and development efforts on technologies that are 
essential for reducing carbon dioxide emissions.
    This legislation was a first step, a key first step, in 
advancing carbon capture and storage projects, but additional 
legislation will be needed to advance these storage projects 
into full commercial deployment. The next phase in fast 
tracking deployment of these technologies is establishing a 
policy framework that will assist early industry movers in 
selecting the appropriate geologic storage sites, in operation 
of their facilities and in managing the facilities for decades 
following the closure of a geologic storage operation. The aim 
of this hearing is to receive testimony on these two bills and 
their contribution to developing a carbon dioxide capture, 
transport and storage policy framework.
    Let me defer to Senator Domenici for any comments he has 
before I call on Senator Coleman and Senator Kerry for their 
comments.
    Senator Domenici. Mr. Chairman, considering the time I 
would ask that you let the two witnesses, the two Senators give 
their remarks and then I will give mine.
    The Chairman. Alright. We will proceed that way. There's no 
particular order here. Senator Coleman, you were the first one 
here and Senator Kerry is the taller of the two. Which of you 
would like to go?
    [Laughter.]
    Senator Coleman. I'll certainly defer to my senior 
colleague, Senator Kerry.
    The Chairman. Senator Kerry, go right ahead, please. Thank 
you for being here.
    [The prepared statements of Senators Bingaman and Salazar 
follow:]

 Prepared Statement of Hon. Jeff Bingaman, U.S. Senator From New Mexico
    I'd like to welcome everyone here today and thank the witnesses who 
are testifying before the committee for this legislative hearing on 
bills S. 2144 and S. 2323. These two bills focus on important policy 
aspects of carbon dioxide capture, transportation, and storage. S. 2144 
focuses on the issue of expanding the existing carbon dioxide pipeline 
infrastructure. S. 2323 focuses more broadly on carbon capture and 
storage research, development and demonstration projects, and perhaps 
more pertinent to today's hearing it also focuses on developing a 
policy framework for rapid implementation of integrated carbon dioxide 
capture and storage systems.
    The topic of reducing greenhouse gases, particularly carbon dioxide 
emissions, is a topic of great concern to myself and the members of 
this committee. Carbon capture and geologic storage holds promise as a 
measure 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 discussion 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 December a historic piece of legislation was passed into law, 
the Energy Independence and Security Act of 2007, which included key 
provisions for expanding critical research and development programs, 
aimed at bringing integrated carbon capture and storage systems to the 
full technological deployment stage. The new law is important for 
focusing research and development efforts on technologies that are 
essential for reducing carbon dioxide emissions. This legislation was a 
key first step in advancing carbon capture and storage projects, but 
additional legislation will be needed to advance these storage projects 
into full commercial deployment.
    The next phase in fast-tracking deployment of these technologies is 
establishing a policy framework that will assist early industry movers 
in selecting the appropriate geologic storage sites, operation of their 
facilities, and managing the facilities for decades following the 
closure of a geologic storage operation. The aim of this hearing is to 
receive testimony on S. 2144 and S. 2323 and their contribution to 
developing a carbon dioxide capture, transport, and storage policy 
framework.
    I would like to begin the hearing by welcoming the original bill 
sponsors who have come to speak on the bills today, Senator Kerry will 
speak on S. 2323 and Senator Coleman will speak on S. 2144.
                                 ______
                                 
   Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado
    Thank you Chairman Bingaman and Ranking Member Domenici for holding 
this hearing on the regulatory aspects of carbon capture, 
transportation, and sequestration.
    Capturing carbon dioxide at its source and safely storing it to 
avoid its release into the atmosphere will be essential to reducing 
greenhouse gas emissions. I believe carbon capture and storage (CCS) 
should be a top priority in our nation's energy policy. There is little 
doubt that a successful domestic CCS program will boost our nation's 
coal industry, and that a low-carbon footprint coal industry is 
critical to our nation's energy and environmental security.
    To make CCS an effective, reliable, and cost-feasible reality, we 
need to move forward simultaneously on two fronts: we need to 
aggressively develop both the technical knowledge necessary and the 
regulatory framework for CCS infrastructure development.
    On the technical front, I sponsored the provision of the new energy 
bill that directs the United States Geological Survey and the 
Departments of Energy and the Interior to coordinate a national 
assessment of our carbon dioxide storage capacity. I also fought to 
include the provisions that will expand DOE's CCS research and 
development programs, with a particular eye towards the large-scale CCS 
demonstration projects that are crucial to achieving commercial 
viability. I am looking forward to learning about DOE's most recent 
progress today.
    I am glad that today's hearing will focus attention on the second 
front--the regulatory front. We need to establish a regulatory 
framework for the transport and storage of carbon dioxide. As you know 
I am an original co-sponsor of S. 2144, the Carbon Dioxide Pipeline 
Study Act of 2007, which would instruct the federal agencies present 
today to perform a broad feasibility study of the construction and 
operation of a national CCS infrastructure.
    There are open questions about what it will take to create a 
national CCS infrastructure. We need a thorough assessment of our 
nation's geologic CO2 storage capacity and a critical 
appraisal of the pipeline network required and the issues of 
transporting carbon dioxide from its sources to storage sites. Even 
though short-haul carbon dioxide pipelines already exist in the U.S. 
for the purposes of enhanced oil recovery--we've been employing these 
techniques in my state of Colorado for more than thirty years--a more 
expansive carbon dioxide pipeline network clearly raises new issues 
about pipeline network requirements and regulation, regulatory 
classification of carbon dioxide, and pipeline safety.
    The DOE through its Carbon Sequestration Regional Partnerships, the 
DOT through the independent U.S. Surface Transportation Board with 
regulatory jurisdiction for transporting carbon dioxide, the FERC with 
its experience in the regulation of natural gas and oil pipelines, and 
the EPA through its underground injection control program have the 
necessary expertise to assess the important issues dealing with carbon 
dioxide pipelines that would be needed to handle large-scale carbon 
sequestration in this country.
    We introduced this pipeline study bill because there has been a 
void at the federal level in the attention given to the infrastructure 
needed to bring CCS to fruition. We believe your agencies have the 
regulatory authority to begin such a feasibility study now, but I am 
concerned by the lack of coordinated federal action to answer these 
fundamental questions. I look forward to having a frank discussion 
regarding our path forward.
    Thank you, Mr. Chairman.

          STATEMENT OF HON. JOHN KERRY, U.S. SENATOR 
                       FROM MASSACHUSETTS

    Senator Kerry. Thanks, Mr. Chairman, Senator Domenici and 
the rest of the Senators on the committee. Thank you very, very 
much for giving us an opportunity just to share a few thoughts 
with you. I particularly appreciate the opportunity to talk 
about S. 2323 which is a bill that Senator Stevens and I have 
jointly introduced and I'll say a word about it in a moment.
    But I just want to remind the committee of the underlying 
importance of what drives both pieces of legislation and our 
being here today. We all know that last year the Nobel Prize 
winning intergovernmental panel on climate change issued its 
latest and most comprehensive report reflecting the consensus 
of over 2,000 of the world's most respected climate scientists. 
That report established beyond any reasonable doubt the urgency 
of acting to address climate change.
    I had the privilege of representing the Senate for a brief 
36 hours, because of our votes at the end of the year, in Bali 
at the climate change negotiations. I must say I've been 
attending those conferences since 1992 when Al Gore, Tim Wirth 
and a bunch of us went down to Rio to the Earth Summit. I've 
met with the various delegations over the course of time 
including the Chinese.
    This time I found the Chinese transformed, engaged, 
prepared to discuss how to measure what they do, obviously not 
quite at the same rate and same scale. It was an entirely 
different conversation than any that we have had yet and opens 
the door to what really needs to be done because China will be 
at our levels of emissions within 10 years. So, obviously, 
we're going to have to find a way to achieve this. But this is 
part of that mosaic, if you will, Mr. Chairman.
    The science shows that--and I also found there a sense of 
urgency among finance ministers, prime ministers, foreign 
ministers, environment ministers, trade ministers, presidents, 
an unbelievable sense of urgency about this issue. The science 
also shows that coal combustion is one of the greatest 
contributors to climate change. Those of us that seek to deal 
with this issue understand we're going to have to deal with 
this component of it.
    Coal is not going to go away in the near term, no matter 
how much we wish that in terms of its negative impact. Not the 
positive, but the negative. It's cheap. It's abundant here in 
America. Countries such as China are using it extensively. 
They're building approximately one coal fired plant per week, 
pulverized coal fired plant, without modern technology right 
now. Coal accounts for 80 percent of their CO2 
emissions.
    So they are building infrastructure that's effectively 
going to pollute for years to come. We will get the results of 
that pollution because it blows over us and falls in rain and 
so forth. Frankly it's my judgment, I think the judgment of a 
lot of people that the international community needs to be far 
more concerned about this and urgent about this than it is.
    That's why we have to rapidly develop and implement carbon 
capture and storage technology, which is the purpose of this 
hearing. It was recommended last year in a similar report by 
the Massachusetts Institute of Technology. This technology will 
enable us, providing it works according to all of the designs 
and ways in which they believe it will, to capture the 
emissions from power plants and other industrial facilities and 
permanently bury them in deep saline aquifers and other 
geological formations.
    Two recent reports identified carbon capture and 
sequestration as the most promising area for emission 
reductions in the electric power sector. A December 2007 
McKinsey study determined that by 2030, 9 percent of U.S. 
electricity could come from coal plants equipped with CCS. The 
Electric Power Research Institute, the research arm of the 
electric power industry, estimated this number at 15 percent.
    I might say that I hope those figures reflect a growth 
without the level of intervention that ought to take place 
because if it isn't, it isn't going to get the job done. All of 
us need to understand that. If you believe the scientists and 
you heed their warnings and you have to keep the climate change 
to a two degree centigrade level and 450 parts per million of 
greenhouse gases. There is no way to achieve that at that level 
of coal fired growth. So we have an enormous challenge ahead of 
us.
    These studies demonstrate the potential however for the 
application of CCS. The purpose behind our bill and I think 
Senator Coleman's bill is to accelerate this effort so we can 
let the marketplace decide what works. We're not going to pick 
a winner or loser. We want to get the technology out there. Let 
the marketplace decide which technology in fact works the best 
and most effectively.
    Now the energy bill that you passed--that we passed in the 
Senate last summer is a great start. I extend my gratitude to 
this committee for the provisions to inventory the 
sequestration capacity and to conduct essential demonstration 
projects. The legislation Senator Stevens and I have introduced 
which is the Carbon Capture and Storage Technology Act of 2007 
would establish three to five commercial scale sequestration 
facilities and three to five coal fired demonstration plants 
with carbon capture.
    Now there are benefits to these that are not the purpose of 
this hearing today so I won't go into those. But today's 
hearing is specifically, I gather, focused on one provision of 
the bill, which is the regulatory framework that must be 
established to oversee carbon capture and storage activities. 
The regulatory framework is as urgent as getting the technology 
out. Obviously they go hand in hand.
    We have to make sure that we implement these projects 
correctly. We've never conducted sequestration here in the 
United States on the scale that we're contemplating. In fact 
only three sites in the entire world have projects of this 
magnitude.
    First and foremost we need to guarantee the permanent 
storage of the CO2 that we inject in the ground. 
CO2 is naturally buoyant. When it's injected into 
the earth it will seek the earth's surface at all times. So, 
all of our aggressive efforts to develop CCS technology would 
be wasted if we don't make the right choices about where to 
inject the CO2 to avoid leakage that releases the 
CO2 back into the atmosphere.
    Second, as we advance this technology we'll be making site 
specific decisions about appropriate sequestration locations. 
We need to ensure that these injection sites, whether in deep 
saline formations or oil or gas fields are safe, secure and 
permanent. We need to develop national siting guidelines that 
will provide confidence in the injectivity, capacity and 
effectiveness of storage sites. We need to develop consistent 
and reliable monitoring and verification protocols that will 
assist with site assessment and planning and baseline and 
operational monitoring to ensure that the CO2 
remains permanently sequestered. Finally we need an early 
warning system that will alert us to potential leakage or 
failure issues at these sites.
    Now many of these elements are highly technical, but they 
are all essential to ensuring the success of this technology in 
addressing climate change and in providing companies, investors 
and the public with confidence that they're getting what they 
pay for when they invest in carbon credits associated with CCS. 
Siting monitoring and verification regulation are also 
necessary to provide us with certainty they're avoiding any 
potential harmful public health or environmental outcome. For 
example precautions have to ensure that CO2 
injection sites don't result in seepage into drinking water 
aquifers and the release of heavy metals.
    As we think through the regulatory framework for CCS, we 
have to be mindful that any CO2 leakage within a 
contained environment could result in additional health or 
safety risks if not done properly. So for that reason the 
regulatory scheme is going to be critical. It will also 
determine whether or not this is going to work, folks. That is 
going to determine, very significantly, what our options are 
with respect to global climate change. So the faster we get 
about this business and the faster we get the demonstration 
projects out there properly, the better we're going to be able 
public choices for the long term.
    To resolve these issues I've developed a provision in this 
legislation that directs the key agencies, including EPA, DOE 
and Interior to create a task force to develop comprehensive 
regulations to address the issues of leakage, public safety and 
environmental protection. These regulations would establish the 
regulatory framework to oversee the entire CCS process in a 
comprehensive fashion linking the complicated mechanisms for 
capture, transport, injection and storage of CO2. 
The task force is specifically directed to consult with the 
industry as well as the technical experts in developing these 
regulations. The involvement of these experts, who've been 
involved in large scale sequestration projects abroad or 
enhanced oil recovery, which many of you are familiar with.
    We have used this effort to drive oil out and capture oil 
today. So we have it in certain scale. But we need to develop 
the ability for the regulatory scheme to govern this process. 
Many of those individuals, incidentally, are behind me here 
testifying today. I'm eager to learn about their input as to 
how we do this most appropriately. I look forward to working 
with the committee as we try to meet this urgent challenge. 
Thank you, Mr. Chairman.
    [The prepared statement of Senator Kerry follows:]

 Prepared Statement of Hon. John Kerry, U.S. Senator From Massachusetts
    Chairman Bingaman, Senator Domenici and colleagues--thank you for 
inviting me to testify today. I appreciate the opportunity to introduce 
an issue and a piece of legislation that I believe are critical to our 
efforts to combat global climate change.
    Last year, the Nobel Prize-winning Intergovernmental Panel on 
Climate Change issued its latest and most comprehensive report, 
reflecting the consensus of over 2,000 of the world's most respected 
climate scientists. The report established beyond any real doubt the 
urgency of acting to address climate change.
    In the last 250 years, carbon dioxide levels in the atmosphere have 
risen from 280 parts per million to 380--higher today than at any time 
in the past 650,000 years. Scientists tell us that we have to keep 
CO2 concentration below 450 parts per million--which 
corresponds to an increase of 2 degrees Celsius--to avoid a large scale 
catastrophe. And we only have ten years in which to act. But unless we 
take dramatic action, we're expected to reach 600-700 parts per million 
by the year 2100. This is urgent. It is being driven by facts and by 
the alarms that scientists across the planet are sounding today.
    We who seek to fight climate change must face the reality that, in 
the foreseeable future, coal isn't going away. It's cheap and abundant 
here in America and in places like China, which is growing at 11% a 
year and building one coal-fired power plant per week. Today coal 
accounts for 80% of China's CO2 emissions, and they and 
others are building infrastructure that will pollute for decades to 
come.
    That is why it is critical that we run, not walk, to develop and 
implement carbon capture and storage technology, as recommended last 
year in a seminal report by the Massachusetts Institute of Technology. 
This technology will enable us to capture the emissions from power 
plants and other industrial facilities, and permanently bury them in 
deep saline aquifers and other geological formations.
    In fact, two recent reports identified CCS as the most promising 
area for emission reductions in the electric power sector. A December 
2007 McKinsey study determined that, by 2030, 9% of US electricity 
could come from coal plants equipped with CCS. The Electric Power 
Research Institute, the research arm of the electric power industry, 
estimated this number at 15%. These studies demonstrate the tremendous 
potential for the application of CCS. Our government should be making 
significant commitments to advancing this technology.
    The Energy Bill was a very good start--and I would like to extend 
my thanks to this committee for its leadership on key provisions to 
inventory our country's sequestration capacity and conduct essential 
demonstration projects.
    In addition, I have introduced legislation with Senator Stevens--
the Carbon Capture and Storage Technology Act of 2007--which would 
establish 3-5 commercial-scale sequestration facilities and 3-5 coal-
fired demonstration plants with carbon capture.
    I would be happy to discuss the benefits of these projects, but 
today's hearing is focused on another component of the bill--the 
regulatory framework that we need to put in place to oversee carbon 
capture and sequestration activities. My bill establishes an 
interagency task force, chaired by the Administrator of the EPA, to 
develop regulations governing the complicated mechanisms and 
requirements for the capture, transport, injection and storage of 
carbon dioxide. The task force is specifically directed to consult with 
industry, as well as technical and legal experts, in developing these 
regulations--and the individuals who will be testifying this morning 
are some of the leading authorities in the country on these issues. I 
am eager to hear their thoughts.
    I look forward to continuing to work with my colleagues to advance 
carbon capture and storage technology, and I thank you again for the 
opportunity to testify this morning.

    The Chairman. Thank you very much.
    Senator Coleman.

         STATEMENT OF HON. NORM COLEMAN, U.S. SENATOR 
                         FROM MINNESOTA

    Senator Coleman. Thank you, Mr. Chairman. It's a pleasure 
to be sitting by the side of my colleague Senator Kerry. Both 
of our approaches here proceed with a firm belief that it's 
important to get the technology out there. I firmly believe in 
it.
    Thinking about the Chinese experience and what they're 
doing. The country that gets the technology out there, I think, 
is going to dominate the 21st century on economic terms. The 
Chinese are going to have to buy it. They're choking to death 
they're going to have to buy it from us. So we have this, I 
think, huge incentive to move forward and you have to have a 
framework for that incentive.
    When I was a young person I dreamed of being a basketball 
player. My heroes were guys like Bob Cousy, Oscar Robertson, 
Earl the Pearl Monroe. I'm dating myself here by the way. That 
all ended when a coach told me, Coleman, you may be small, but 
you can't jump. It is bad when you have two reinforcing 
problems.
    Our Nation has that. We are highly dependent on foreign 
sources of energy and we produce dangerous amounts of 
greenhouse gases. How do we solve one problem without 
exacerbating the other?
    Mr. Chairman this committee under your leadership and that 
of the ranking member has boldly moved to address both. You've 
crafted two landmark pieces of legislation in the past several 
years: the Energy Independence Security Act of 2007 and the 
Energy Policy Act of 2005. These comprehensive bills address 
numerous critical energy and environmental challenges facing 
our Nation and they establish a firm foundation on which to 
build our Nation's energy future.
    I firmly believe that a big part of that future is going to 
require figuring out how to utilize America's 250 year supply 
of coal in an environmentally friendly manner. By taking 
CO2 produced in coal power plants and piping that 
CO2 to a location where it can be permanently 
stored, I believe we can greatly add to the country's economic 
and even national security. That's why I've introduced the 
CO2 Pipeline Study Act which is another step in this 
committee's efforts to address these issues in an informed and 
timely manner.
    I want to thank a number of members of this committee who 
are original co-sponsors of the CO2 Pipeline Study 
Act for their leadership. Senator Murkowski, who's here today, 
Senator Salazar, Landrieu, Johnson, Martinez and Bunning, your 
guidance and assistance were invaluable in drafting this 
legislation. The fact is we have an immense supply of coal 
available in this country. It is a relatively low cost energy 
source we do not need to import. Accordingly we do not need to 
send our valuable dollars overseas to hostile regimes in order 
to keep the lights on. We simply must find a way to use coal 
without jeopardizing the climate. Indeed coal already supplies 
about half our Nation's electric power.
    The good news is my colleague Senator Kerry has testified 
about in greater detail is that we can take the CO2 
out of the emissions of a coal power plant and store it 
underground. More research needs to be done. But the future of 
CO2 free coal plants looks bright. One of the key 
components of making CO2 free coal is a reality of 
how to transport this gas from the power plant to the ground.
    Currently there are many uncertainties about the rules and 
costs that will exist with the construction and operation of 
CO2 pipelines. The CO2 Pipeline Study Act 
will answer these questions. It will provide certainty to 
industry and to consumers. The CO2 Pipeline Study 
Act seeks the input of a number of Federal agencies and 
departments: the Department of Energy, Interior, 
Transportation, the Federal Energy Regulatory Commission, FERC, 
the Environmental Protection Agency. Each of these has 
expertise about a variety of issues associated with the 
building of pipelines.
    These agencies are required to conduct the study of any 
technical, siting, financing or regulatory barriers that might 
prevent or impede the development of a carbon dioxide pipeline 
industry. They're also asked to address any safety and 
integrity issues associated with constructing carbon dioxide 
pipelines. I anticipate the recommendations in their study may 
well serve as a basis of future congressional action on these 
issues.
    In short, this bill will lay out the groundwork for 
CO2 free coal plants that will allow America to move 
forward quickly, but carefully and responsibly to its piping 
CO2. The CO2 Pipeline Study Act also 
works in tandem with and complements the actions on that 
broader carbon dioxide issue taken in S. 2323, Senator Kerry's 
bill, also the Energy Independence and Securities Act of 2007 
and the Energy Policy Act of 2005. These bills address carbon 
capture at the point of creation, for example at a coal fired 
power plant and the storage of carbon dioxide at an appropriate 
geologic formation.
    However unless the coal fired plant happens to be near a 
suitable storage location, the carbon dioxide will have to be 
piped to an appropriate geologic formation to sequestration. 
That is what the Pipeline Study Act answers. It addresses the 
issues associated with transporting carbon dioxide from its 
point of capture to its point of storage for use in enhanced 
coal recovery.
    We have an enormous potential domestic supply of energy. It 
can be used to cool and heat our homes, power our businesses 
and industries and create enumerable new jobs. However, our 
Nation will only realize these benefits if we can produce and 
use this energy in an environmentally sensitive manner. The 
CO2 Pipeline Study Act is an important step in our 
efforts to develop this energy resource in an environmentally 
responsible way. We need to have the regulatory framework in 
place if we are going to get the technology out in time. 
Senator Kerry's bill and my bill begin that necessary and 
important conversation.
    Chairman Bingaman, Ranking Member Domenici and members of 
this committee, I thank you for this opportunity to speak on 
behalf of S. 2144, the CO2 Pipeline Study Act. With 
your leadership we are turning a national dilemma throwing 
energy dependence and greenhouse gas production into a win-win 
with the help of our people, our economy and ultimately our 
national security. Thank you, Mr. Chairman.
    [The prepared statement of Senator Coleman follows:]

  Prepared Statement of Hon. Norm Coleman, U.S. Senator From Minnesota
    First, I want to thank Chairman Bingaman and Ranking Member 
Domenici for holding this important hearing today and inviting me to 
speak on behalf of the Carbon Dioxide Pipeline Study Act.
    When I was a young person I dreamed of being a basketball player 
like Bob Cousy or Earl The Pearl Monroe. That all ended when a coach 
told me, ``Coleman, you may be small, but you can't jump.'' It's bad 
when you have two reinforcing problems.
    Our nation has that. We are highly dependent on foreign sources of 
energy and we produce dangerous amounts of greenhouse gases. How do we 
solve one problem without exacerbating the other?
    This committee, under your leadership, has boldly moved to address 
both. You have crafted two landmark pieces of legislation in the past 
several years: the Energy Independence and Security Act of 2007 and the 
Energy Policy Act of 2005. These comprehensive bills address numerous 
critical energy and environmental challenges facing our nation, and 
they establish a firm foundation on which to build our nation's energy 
future.
    I firmly believe that a big part of that future is going to require 
figuring out how to utilize America's 250 year supply of coal in an 
environmentally friendly manner. By taking CO2 produced in 
coal power plants and piping that CO2 to a location where it 
can be permanently stored, I believe we can greatly add to the 
country's economic and even national security. That's why I've 
introduced the CO2 Pipeline Study Act, which is another step 
in this committee's efforts to address these issues in an informed and 
timely manner.
    I want to thank a number of Members of this committee who are 
original co-sponsors of the CO2 Pipeline Study Act for their 
leadership: Senators Salazar, Murkowski, Landrieu, Johnson, Martinez 
and Bunning. Your guidance and assistance were invaluable in drafting 
this legislation.
    The fact is, we have an immense supply of coal available in this 
country--it's an energy source we do not need to import, and 
accordingly, we do not need to send our valuable dollars overseas to 
hostile regimes in order to keep the lights on.
    We simply must find a way use coal without jeopardizing the 
climate. Indeed, coal already supplies about half of our nation's 
electric power. The good news, as my colleague Senator Kerry has 
testified about in greater detail, is that we can take the 
CO2 out of the emissions of a coal power plant and we can 
store it underground. More research needs to be done, but the future of 
CO2-free coal plants looks bright. Yet one of the key 
components of making CO2-free coal a reality is how to 
transport this gas from the power plant to the ground.
    Currently, there are many uncertainties about the rules and costs 
that will exist for the construction and operation of CO2 
pipelines. The CO2 Pipeline Study Act will answer these 
questions, it will provide certainty to industry and consumers.
    The CO2 Pipeline Study Act seeks the input of a number 
of federal agencies and departments--the Departments of Energy, 
Interior, and Transportation, the Federal Energy Regulatory Commission 
(FERC) and the Environmental Protection Agency (EPA). Each of these has 
expertise about a variety of issues associated with the building of 
pipelines.
    The agencies are required to conduct a study of any technical, 
siting, financing, or regulatory barriers that might prevent or impede 
the development of a carbon dioxide pipeline industry. They are also 
asked to address any safety and integrity issues associated with 
constructing carbon dioxide pipelines. I anticipate the recommendations 
in their study may serve as a basis for future Congressional action on 
these issues. In short, this bill will lay the groundwork for 
CO2-free coal plants, it will allow America to move forward 
quickly, but also carefully and responsibly toward piping 
CO2.
    The CO2 Pipeline Study Act works in tandem with and 
compliments the actions on the broader carbon dioxide issue taken in S. 
2323, the Carbon Capture and Storage Technology Act, the Energy 
Independence and Security Act of 2007 and the Energy Policy Act of 
2005. These bills address carbon capture at the point of creation--for 
example at a coal fired power plant--and the storage of carbon dioxide 
at an appropriate geologic formation.
    However, unless the coal fired power plant happens to be near a 
suitable storage location, the carbon dioxide will have to be ``piped'' 
to an appropriate geologic formation for sequestration. This is what 
the CO2 Pipeline Study Act answers. It addresses the issues 
associated with transporting carbon dioxide from its point of capture 
to its point of storage or for use in enhanced oil recovery.
    We have an enormous potential domestic supply of energy. It can be 
used to cool and heat our homes, power our businesses and industries 
and create innumerable new jobs. However, our nation will only realize 
these benefits if it can be produce and use this energy in an 
environmentally sensitive manner.
    The CO2 Pipeline Study Act is an important step in our 
efforts to develop this energy resource in an environmentally 
responsible way.
    Chairman Bingaman, Ranking Member Domenici and members of this 
committee--thank you for this opportunity to speak on behalf of S. 
2144, the CO2 Pipeline Study Act.
    With your leadership you are turning a national dilemma--growing 
energy dependence and greenhouse gases production--into a ``win-win'' 
for the health of our people, our economy and ultimately our national 
security.

    Chairman. Thank you both very much. I think you made a 
contribution by the introduction of these bills and the efforts 
you've put into educating us on them.
    Let me now either dismiss these witnesses, unless anybody 
has a question that's burning that they want to ask. We will 
allow you folks to get on with your other activities. But thank 
you again for being here.
    We have two panels. Let me turn to Senator Domenici to make 
his opening statement and then I will call the first panel 
forward.

       STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Domenici. Thank you very much, Mr. Chairman. Good 
afternoon. I want to thank Senator Bingaman for scheduling this 
hearing and the witnesses for appearing. I'd like to thank 
Senators Coleman and Kerry for their work in drafting the 
measures before us.
    Carbon sequestration, Mr. Chairman, holds real promise for 
reducing the emissions of greenhouse gases. Today however, that 
promise is far from realized. The technology has not been 
commercialized and a massive investment in infrastructure, 
pipelines, etc. is needed. As a result carbon sequestration 
must be viewed for what it is; a small piece of the solution to 
what is a larger issue of global climate change.
    The recently passed energy bill included many provisions on 
this subject. It is recognized that an appropriate Federal role 
exists for researching, developing and commercializing cleaner 
technologies. It will be one thing to implement the Federal 
laws that we have passed, but we must also remember the 
economic law of diminishing returns.
    Carbon sequestration as we know it is a classic example of 
that concept. The more aggressively we pursue it, the more it 
will cost. Because climate change is very much a global 
challenge, the benefits we derive will be incrementally 
smaller. America can be a leader in carbon sequestration. We 
have experience in the form of enhanced oil recovery to guide 
our investment and regulatory decisions.
    Yes, if the United States acts unilaterally to reduce its 
emissions we risk saddling taxpayers with a steep price for 
minimal results. Other nations are on the verge of passing the 
United States in annual greenhouse gas emissions on a per 
capita basis, some already have. As greenhouse gas emissions 
decrease here at home increases in developing countries will 
more than offset our progress. Discussions of the carbon 
sequestration process are worthy of our committee's time.
    I'll keep an open mind. I hope to learn what more can be 
done. But I also urge that my colleagues not put the cart 
before the horse. While we can and should advance this 
promising concept, we must know for sure that other countries 
will join us in this effort. I look forward to hearing from the 
witnesses that we have scheduled. I thank you again, Mr. 
Chairman.
    The Chairman. Thank you very much. Let me call the first 
panel forward. First we have Chairman Kelliher from the Federal 
Energy Regulatory Commission. Benjamin Grumbles from the EPA. 
James Slutz, who is the Deputy Assistant Secretary in the 
Office of Oil and Natural Gas in the Department of Energy. 
Krista Edwards, Deputy Administrator with the Pipeline and 
Hazardous Materials Safety Administration in the Department of 
Transportation. Stephen Allred who is the Assistant Secretary 
for Land and Minerals Management in the Department of the 
Interior.
    Thank you all very much for being here. If you could each 
take 5 to 6 minutes and just summarize the main points of your 
testimony for us, we will include your full testimony in the 
record, but I'm sure there will be questions of all of you.
    Let me start with Chairman Kelliher and then Krista 
Edwards, Mr. Grumbles, Steve Allred and Mr. Slutz. So go right 
ahead Mr. Chairman. Thank you for being here.

   STATEMENT OF JOSEPH T. KELLIHER, CHAIRMAN, FEDERAL ENERGY 
                     REGULATORY COMMISSION

    Mr. Kelliher. Thank you, Mr. Chairman. Let me say first of 
all, thank you for the opportunity to be here today and the 
possibility of being here. My term of office would have expired 
at the end of last session. But in the waning minutes of the 
session I was confirmed along with my colleague Jon 
Wellinghoff. It reminded me a little bit like the Georgetown/
West Virginia game the other night except the shot wasn't 
blocked at the last second. So I'm grateful for the support of 
the chairman, Senator Domenici, committee members and the 
staff.
    Mr. Chairman, members of the committee, thank you for the 
opportunity to speak with you today about the regulatory 
aspects of carbon capture, transportation, sequestration and 
related legislation. My written testimony offers comments on 
the legislation before the committee and but in particular I 
want to say that FERC would be pleased to participate in the 
study required by S. 2144. We believe we can contribute to an 
examination of the regulatory barriers and regulatory options 
relating to the construction and operation of carbon dioxide 
pipelines.
    I'm going to focus my oral testimony on the regulatory 
aspects of carbon transportation, the area where FERC's 
experience regarding pipelines may have the most value to the 
committee. While there are questions about carbon capture and 
sequestration technology, carbon dioxide transportation has 
been proven and storage of carbon dioxide has taken place for 
years. A network of carbon dioxide pipelines has been 
developed, mostly since the 1980s to promote enhanced oil 
recovery in declining oil fields. There is also some experience 
with storage of carbon dioxide.
    Now up to this point the injection of carbon dioxide into 
oil production reservoirs has been a means of increasing oil 
production rather than an end unto itself. Storage takes place 
in the oil production fields rather than in reservoirs 
dedicated to carbon dioxide sequestration. Construction of the 
U.S. carbon dioxide pipeline network began over 25 years ago 
and that network now spans more than 3,900 miles. Siting of 
carbon dioxide pipelines has been governed by State law and to 
my knowledge state siting has worked well.
    Under current law there is no Federal role in siting carbon 
dioxide pipelines. While operators of interstate carbon dioxide 
pipelines are free to set their own rates in terms of service, 
the U.S. Department of Transportation's Surface Transportation 
Board may hold proceedings to determine that rates are 
reasonable if a third party files a complaint. U.S. Department 
of Transportation's Office of Pipeline Safety within the 
Pipelines and Hazardous Material Safety Administration 
administers safety regulations governing interstate carbon 
dioxide pipelines.
    The committee expressed an interest in exploring the 
regulatory aspects of carbon dioxide transportation. FERC is an 
infrastructure agency with nearly 90 years of experience 
regulating a broad range of energy infrastructure projects 
including oil and natural gas pipelines and related facilities. 
The United States has used three different regulatory schemes 
for pipeline transportation that might be relevant to 
congressional consideration of the regulatory aspects of carbon 
dioxide transportation.
    First there is the model that has governed the existing 
carbon dioxide pipeline network. Under this approach pipelines 
are sited under State law. Transportation rates are set by the 
Surface Transportation Board when a complaint filed regarding 
rates is filed. The Office of Pipeline Safety ensures safety.
    Second there is the oil pipeline model. Under this model 
oil pipelines are sited under State law. FERC sets the 
transportation rate. FERC has no siting or safety role with 
safety issues being handled by the Department of Transportation 
Office of Pipeline Safety. This model also has worked well for 
decades.
    The third model is the natural gas pipeline model. Under 
the current version of this model FERC both sites interstate 
natural gas pipelines and sets their transportation rates. It 
may be useful to note however, that the original version of the 
Natural Gas Act, the 1938 Act, provided for state siting of 
interstate natural gas pipelines.
    In 1947 however, Congress reached the conclusion that State 
siting of natural gas pipelines had failed and that it was 
necessary to resort to Federal siting. Congress amended the 
Natural Gas Act and provided for exclusive and preemptive 
Federal siting of interstate natural gas pipelines. While the 
Commission, while FERC is responsible for safety issues during 
the siting and construction phases, safety jurisdiction shifts 
to the Department of Transportation through the Pipeline and 
Hazardous Materials Safety Administration once construction is 
complete.
    Now in my view any of these three approaches could prove 
effective in regulating a network of carbon dioxide pipelines. 
I have no reason to believe the existing regulatory scheme 
administered by the Surface Transportation Board is inadequate. 
In particular I would not recommend that Congress preempt the 
states in siting carbon dioxide pipelines by providing for 
exclusive and preemptive Federal siting. The precondition that 
led Congress to such a course for siting natural gas pipelines, 
the failure of State siting, does not appear to exist here. 
Further I would not recommend that Congress alter the safety 
role of the Pipeline and Hazardous Materials Safety 
Administration.
    I appreciate the opportunity to testify here today and 
would be pleased to answer any questions you might have. Thank 
you.
    [The prepared statement of Mr. Kelliher follows:]

  Prepared Statement of Joseph T. Kelliher, Chairman, Federal Energy 
                         Regulatory Commission

    Mr. Chairman and members of the committee, thank you for the 
opportunity to speak with you today about the regulatory aspects of 
carbon capture, transportation, and sequestration and two related 
bills, namely S. 2144, the ``Carbon Dioxide Pipeline Study Act of 
2007'', and S. 2323, the ``Carbon Capture and Storage Technology Act of 
2007''. I commend the committee for holding this hearing.

              carbon capture and sequestration technology

    Development of carbon capture and sequestration technology is an 
important need. There are questions about carbon capture and 
sequestration technology. The two bills that are the subject of this 
hearing address this need by requiring studies and funding research and 
development and demonstration projects. If these efforts are 
successful, carbon capture and sequestration may become a practical 
reality.
S. 2144
    S. 2144 would direct the Secretary of Energy, in coordination with 
the Federal Energy Regulatory Commission (FERC), the Secretary of 
Transportation, the Administrator of the U.S. Environmental Protection 
Agency, and the Secretary of the Interior, to conduct a study to assess 
the feasibility of the construction and operation of pipelines to be 
used for the transportation of carbon dioxide for the purpose of 
sequestration or enhanced oil recovery and carbon dioxide sequestration 
facilities.
    FERC has extensive experience in the siting and regulation of a 
wide variety of energy infrastructure projects, and we would be pleased 
to participate in the study required by S. 2144. In particular, FERC 
can play a helpful role examining regulatory barriers and regulatory 
options relating to the construction and operation of carbon dioxide 
pipelines, as provided by section 2(b) of the bill.
S. 2323
    As I indicated above, there are questions relating to carbon 
capture and sequestration technology. This bill would address those 
questions directly, by funding carbon dioxide capture and storage 
research and development, and both carbon dioxide capture and 
sequestration demonstration projects. The bill has other provisions 
relating to establishment of an interagency task force to develop 
regulations for carbon dioxide capture and storage, an assessment of 
carbon dioxide storage capacity, and technology agreements.

          regulatory aspects of carbon dioxide transportation

    While there are questions about carbon capture and sequestration 
technology, carbon dioxide transportation has been proven and storage 
of carbon dioxide has taken place for years. A network of carbon 
dioxide pipelines has been developed, mostly since the 1980s, to 
promote enhanced oil recovery in declining oil fields. There is also 
some experience with storage of carbon dioxide.
    Up to this point, the injection of carbon dioxide into oil 
production reservoirs has been a means of increasing oil production, 
rather than an end unto itself. Storage takes place in the oil 
production fields themselves, rather than in reservoirs dedicated to 
carbon dioxide sequestration. Enhanced oil recovery results in the 
storage of carbon dioxide in depleted production reservoirs.
    I am not aware of whether any information has been developed 
regarding the leakage of carbon dioxide from the existing pipeline 
network or production fields. This might be an area worthy of research 
and development.
    Besides enhanced oil recovery, carbon dioxide has been used for 
other purposes, including refrigeration and cooling, casting metal 
molds, welding, sandblasting, methanol and urea production, 
carbonation, and medical purposes.
    Construction of the U.S. carbon dioxide pipeline network began over 
25 years ago, and that network now spans more than 3,900 miles. Siting 
of carbon dioxide pipelines has been governed by state law, and to my 
knowledge state siting has worked well. Under current law, there is no 
federal role in siting carbon dioxide pipelines. While operators of 
interstate carbon dioxide pipelines are free to set their own rates and 
terms of service, the U.S. Department of Transportation's Surface 
Transportation Board may hold proceedings to determine that rates are 
reasonable, but only if a third party files a complaint. Under the 
Interstate Commerce Termination Act of 1995, the Surface Transportation 
Board regulates interstate pipelines transporting commodities other 
than water, oil, or natural gas. The U.S. Department of 
Transportation's Office of Pipeline Safety, within the Pipelines and 
Hazardous Materials Safety Administration (PHMSA), administers safety 
regulations governing interstate carbon dioxide pipelines.
    The committee expressed an interest in exploring the regulatory 
aspects of carbon dioxide transportation. FERC has a great deal of 
experience regulating energy infrastructure. The original mission of 
the agency was development of energy infrastructure, specifically 
licensing and regulating non-federal hydropower projects. Our 
infrastructure role has expanded over time to include natural gas 
pipelines and associated facilities, oil pipelines, and more recently 
we have been given a limited role in electric transmission siting.
    The U.S. has used three different regulatory schemes for 
transportation of energy resources by pipeline that might be relevant 
to Congressional consideration of the regulatory aspects of carbon 
dioxide transportation. First, there is the model that has governed the 
existing carbon dioxide pipeline network, namely continuing the current 
regulatory scheme for interstate carbon dioxide pipelines. Under this 
approach, pipelines are sited under state law, transportation rates are 
set by the Surface Transportation Board when a complaint regarding 
rates is filed, and the Office of Pipeline Safety ensures safety.
    Second, there is the oil pipeline model. Under this model, oil 
pipelines are sited under state law and FERC sets the transportation 
rate. FERC has no siting role or safety role (safety issues being 
handled by the Department of Transportation). This model has worked 
well for decades.
    The third model is the natural gas pipeline model. Under the 
current version of this model, FERC both sites interstate natural gas 
pipelines and sets their transportation rates. It may be useful to note 
that the original version of the 1933 Natural Gas Act provided for 
state siting of interstate natural gas pipelines. However, in 1947 
Congress reached the conclusion that state siting of natural gas 
pipelines had failed, and it was necessary to resort to federal siting. 
Congress amended the Natural Gas Act and provided for exclusive and 
preemptive federal siting of interstate natural gas pipelines. While 
the Commission is responsible for safety issues during the siting and 
construction phases, safety jurisdiction shifts to the Department of 
Transportation, though PHMSA, once construction is complete.
    In my view, any of these three approaches could prove effective in 
overseeing a network of carbon dioxide pipelines. I have no reason to 
believe the existing regulatory scheme administered by the Surface 
Transportation Board is inadequate. In particular, I would not 
recommend that Congress preempt the states on siting carbon dioxide 
pipelines, by providing for exclusive and preemptive federal siting of 
carbon dioxide pipelines. The precondition that led Congress to such a 
course for siting natural gas pipelines--the failure of state siting--
does not exist here. Further, I would not recommend that Congress alter 
PHMSA's safety role.
    I appreciate the opportunity to testify before you today and would 
be pleased to answer any questions you may have.

    Senator Domenici [presiding]: Ms. Edwards, you're next, 
ma'am.

STATEMENT OF KRISTA L. EDWARDS, DEPUTY ADMINISTRATOR, PIPELINE 
 AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION, DEPARTMENT OF 
                         TRANSPORTATION

    Ms. Edwards. Ah, yes. Ranking Member Domenici, members of 
the committee, I appreciate the opportunity to discuss the 
safety programs administered by the Department of 
Transportation's Pipeline and Hazardous Materials Safety 
Administration and PHMSA's role in overseeing the safe 
transportation of carbon dioxide.
    First on behalf of Secretary Peters I want to express 
PHMSA's strong support for the committee's efforts. We share 
your commitment to energy security and environmental 
protection. We are pleased to have a seat at the table as the 
committee considers the transportation requirements associated 
with carbon capture and storage.
    DOT has vast experience managing the risks of 
CO2 in all modes of transportation. Under the 
hazardous materials transportation law the Department has long 
overseen the movement of CO2 by rail, highway, air 
and vessel. PHMSA's hazardous materials regulations established 
standards for the design, testing and filling of tanks and 
other packages used to contain and store CO2 in each 
of its physical states as a gas, liquid and solid.
    Since 1991, DOT has also overseen the transportation of 
CO2 by pipeline. Together with our State partners, 
PHMSA currently oversees the operation of nearly 4,000 miles of 
CO2 pipelines. We expect that that number will grow 
as the Nation moves ahead with carbon capture and 
sequestration. So I am pleased to assure the committee that DOT 
existing pipeline safety program will fit new CO2 
pipelines however they may be configured.
    Congress reauthorized the program only a little more than a 
year ago, we thank you for that, reflecting strong support for 
PHMSA's mission and approach. Our approach is performance 
based. We aim to protect people, property and the environment 
by preventing pipeline failures and by mitigating the 
consequences of those that occur. Our integrity management 
programs promote continuous improvement by requiring operators 
to identify all threats to pipeline integrity and to remedy 
safety problems in priority order, worse first. By identifying 
and reducing defects before they grow to failure our integrity 
management programs are driving significant improvement in 
safety performance and reliability.
    Our national pipeline safety program provides seamless 
oversight of pipeline operations through PHMSA's five regional 
offices and strong partnerships with our pipeline safety 
programs. The State programs play a critical role directly 
overseeing the vast share of pipeline infrastructure including 
most intrastate pipelines.
    To meet our goals PHMSA also must be more than a regulator. 
We are supporting the development of new technologies such as 
tools for improving assessment of pipelines and non-regulatory 
initiatives such as the nationwide campaign to promote safe 
excavation practices. We work with all stakeholders who can 
contribute to safety outcomes including communities near new, 
existing and planned pipelines. As part of a comprehensive 
approach to pipeline safety we believe in preparing communities 
to make risk informed land use decisions and in preparing local 
first responders to respond to pipeline incidents.
    Although PHMSA has no authority over pipeline siting we 
work closely with FERC and DOI in reviewing designs for 
pipelines and in responding to local concerns about pipeline 
safety. These efforts are paying off in terms of improved 
safety, reliability of supply and public confidence. The number 
of significant pipeline incidents has reached historic lows 
even as the size of the pipeline network has grown. Within 
these data I'm very pleased to report that the safety record 
for CO2 pipelines is particularly good. There's been 
no loss of life and no injuries on DOT regulated CO2 
pipelines.
    In closing I want to reiterate our strong support for the 
development of new energy solutions. PHMSA is pleased to work 
with the committee, our Federal and State partners and industry 
to prepare for the safe operation of new and expanded 
CO2 pipelines. We offer our agency's expertise and 
experience as the committee considers and addresses future 
requirements for carbon capture and storage.
    Thank you again for the opportunity to testify. I'll be 
pleased to answer any questions.
    [The prepared statement of Ms. Edwards follows:]

Prepared Statement of Krista L. Edwards, Deputy Administrator, Pipeline 
     and Hazardous Materials Safety Administration, Department of 
                             Transportation

    Chairman Bingaman, Ranking Member Domenici, members of the 
committee: Thank you for the opportunity to discuss the safety programs 
administered by the U.S. Department of Transportation's Pipeline and 
Hazardous Materials Safety Administration (PHMSA) and our experience in 
overseeing the commercial transportation of carbon dioxide.
    As the committee considers future requirements for carbon capture 
and sequestration, I am pleased to confirm that large volumes of carbon 
dioxide (CO2) are shipped safely in the U.S. today, 
including by pipeline. PHMSA's existing programs and standards 
governing CO2 transportation provide effective protection to 
life and property, with due regard for the efficiency and performance 
of the transportation system.
    As the DOT agency with jurisdiction over the movement of hazardous 
materials by all transportation modes, PHMSA has extensive experience 
managing the risks of compressed CO2, in each of its 
physical states: gas, liquid, and solid (dry ice). Unlike natural gas 
and other gases regulated as hazardous materials, CO2 is 
noncombustible and nontoxic. A colorless, odorless by-product of human 
respiration, CO2 is present naturally in the environment 
and, at normal atmospheric levels, is vital to plant life and poses no 
immediate hazard to people or animals. In higher concentrations, as 
when CO2 is contained for transport or storage, exposure to 
CO2 can cause respiratory problems, including suffocation. 
CO2 reaches its liquid state at combinations of high 
pressure and low temperature. Both variables affect the consequence of 
a release of liquefied CO2 in each case depending on the 
proximity of people and the location and surrounding conditions. In a 
remote, unpopulated area, even a large release of liquefied 
CO2 will vaporize harmlessly into the atmosphere and is 
unlikely to cause serious injury. By contrast, a large, sudden release 
of liquefied CO2 could have catastrophic consequences in a 
populated area. Because it is heavier than air, compressed 
CO2 tends to pool near the ground, displacing all oxygen, 
and form a vapor cloud as it dissipates.
    Because of these properties when compressed and/or in high 
concentrations, CO2 has long been considered a hazardous 
material subject to the Hazardous Materials Transportation Laws, 49 
U.S.C. 5101 et seq., and DOT's implementing regulations, 49 C.F.R. 
parts 171-180, governing transportation by air, rail, highway, and 
water. PHMSA's Hazardous Materials Regulations (HMR) prescribe a 
comprehensive risk management framework for CO2 transport, 
covering classification, packaging, handling, and hazard communication 
(shipping documentation and labeling). The packaging standards for 
CO2 transport vary based on volume, pressure, and 
transportation mode; in each case, the HMR mandate the use of an 
approved cylinder or tank, subject to specific requirements for design, 
testing, certification, and filling.
    The Department assumed oversight of CO2 pipelines in 
1988, under legislation directing the Secretary to develop regulations 
for the safe transportation of CO2 by pipeline. Pursuant to 
the mandate, in 1991, the Department extended its existing hazardous 
liquid pipeline rules (49 C.F.R. part 195) to these operations. 
CO2 pipelines became subject to additional integrity 
management requirements when the liquid IM program was adopted in 2000.
    As with liquid operations generally, PHMSA shares oversight of 
certain CO2 pipelines with authorized State programs. 
Together with these State partners, PHMSA currently oversees close to 
4,000 miles of CO2 transmission pipelines (as depicted in 
*Figure 1)--amounting to roughly five percent of all hazardous liquid 
pipeline mileage under our jurisdiction. Of these CO2 lines, 
approximately 66 percent are interstate (crossing State borders) 
pipelines with the remaining 34 percent classified as intrastate 
(within State borders). Located primarily in the States of Texas, New 
Mexico and Wyoming, these pipelines deliver CO2 for a 
variety of industrial purposes, including enhanced oil recovery 
activities. Within the national pipeline network as a whole, the 
CO2 lines are relatively new: approximately 91 percent were 
constructed after 1980.
---------------------------------------------------------------------------
    * Figures 1-2 have been retained in committee files.
---------------------------------------------------------------------------
    As the Administration and Congress work to enhance our Nation's 
energy security and protect the environment, we understand the need to 
extend the transportation infrastructure--including the delivery of 
alternative fuels and the transport of CO2 for sequestration 
or use in energy production. And we understand the importance of 
pipeline transportation for safe and efficient movement of large 
volumes of hazardous materials. With the right risk controls in place, 
pipelines can operate safely anywhere--it's not a matter of ``if,'' but 
``how.''
    PHMSA's pipeline safety program aims to promote continuous 
improvement in public safety, environmental protection, and system 
performance by identifying and addressing all threats to pipeline 
integrity and mitigating the consequences of pipeline failures. Our 
regulations cover the design, construction, maintenance, and operation 
of liquefied natural gas (LNG) facilities and hazardous liquid and 
natural gas pipelines, both interstate and intrastate, including the 
gas distribution systems that directly serve homes and businesses. We 
work closely with national and international standards organizations 
and encourage the development of consensus standards complementing our 
performance-based regulations.
    Our integrity management regulations, which currently apply to 
transmission pipelines (liquid and gas), require operators to conduct 
risk assessments of the condition of their pipelines; develop and 
implement risk control measures to remedy safety problems, worst first; 
and evaluate and report on program progress and effectiveness. Under 
integrity management programs, operators are identifying and repairing 
pipeline defects before they grow to failure, producing steady declines 
in the numbers of serious incidents.
    Along with risk-based standards and practices, technological 
advances are driving significant improvement in the control of pipeline 
risks. PHMSA administers a cooperative research program that promotes 
the development of new methods, materials, and tools for improving leak 
detection systems and detecting and preventing corrosion, outside force 
damage, and other threats to pipeline integrity. We work closely with 
informed stakeholders, including other Federal agencies, our State 
partners, and industry, to target our limited R&D funding on promising 
technologies to address the most urgent safety issues. Most recently, 
in preparation for the growing use of alternative fuels, our R&D 
program is focused extensively on technical issues associated with the 
movement by pipeline of ethanol and ethanol-blended fuels.
    As an agency dedicated to the safe transportation of hazardous 
materials, PHMSA must be more than a regulator. Our success depends on 
our ability to leverage non-regulatory solutions and to work closely 
with all stakeholders who can contribute to safety outcomes, including 
communities in the path of existing or new pipelines. Although PHMSA 
has no authority in pipeline siting, we work closely with the Federal 
Energy Regulatory Commission (FERC) in reviewing designs for proposed 
gas transmission pipelines and liquefied natural gas (LNG) facilities 
and in responding to local concerns about pipeline safety. We consult 
with other Federal and State agencies on how our regulatory 
requirements relate to their permitting decisions about pipelines. 
Recognizing that public decisions affecting transportation and energy 
supply often must be made at a national level, we believe a pipeline 
safety program can and must involve local communities, including zoning 
and planning officials and emergency responders. As part of a 
comprehensive approach to pipeline safety, we believe in preparing 
communities to make risk-informed land use decisions and in building 
local capability to respond to pipeline incidents. PHMSA works closely 
with fire service organizations on numerous safety projects, including 
the development of training standards and educational materials 
concerning pipeline incident response.
    To carry out our oversight responsibilities, PHMSA operates five 
regional pipeline safety offices and is authorized to employ 111 
inspection and enforcement professionals for fiscal year 2008. In 
addition to compliance monitoring and enforcement, PHMSA's regional 
offices respond to and investigate pipeline incidents and participate 
in the development of pipeline safety rules and technical standards. 
Our regional offices also work closely with PHMSA's State program 
partners, which employ approximately 400 pipeline inspectors and 
directly oversee the largest share of the U.S. pipeline network, 
including most intrastate pipelines. Under our Congressionally-
authorized Community Assistance and Technical Services (CATS) program, 
PHMSA's regional offices provide safety-focused community outreach and 
education. With the current wave of pipeline expansion, and increasing 
commercial and residential development around existing pipelines, the 
CATS program is serving a vital role in educating the public about 
pipeline safety and encouraging risk-informed land use planning and 
safe excavation practices.
    With safety our top priority, under Secretary Peters' leadership, 
the Department is targeting the prevention of all transportation-
related deaths and injuries. Although further improvement is needed, 
the safety record for hazardous materials transportation is good and 
getting better in all sectors, including hazardous liquid pipeline 
operations. Since the introduction of IM programs in 2000, the annual 
number of serious incidents involving hazardous liquid pipelines has 
reached historic lows, even as the size of the pipeline network has 
grown. Although the data sets are not yet large enough to make 
statistically significant comparisons, the trend line over the past 20 
years (as depicted in *Figure 2) is favorable.
    Within these data, the safety record for CO2 pipelines 
is particularly good. Of the 3,695 serious accidents reported on 
hazardous liquid pipelines since 1994, only 36 involved CO2 
pipelines. Among the 36 incidents, only one injury, and no fatalities, 
was reported. In all other instances, the accidents were classified as 
serious based on the extent of property damage (including damage to the 
pipeline facility) or product loss.
    With the benefit of this experience and record, PHMSA is pleased to 
work with the committee, our Federal and State partners, and industry 
to prepare for the safe operation of new or extended CO2 
pipelines. The existing pipeline safety program administered by PHMSA 
has provided effective oversight of CO2 pipelines since 1991 
and will accommodate new and expanded carbon dioxide pipelines, however 
they are configured. We are happy to work with the Department of Energy 
and other Federal partners to evaluate the feasibility of particular 
pipeline configurations and/or plan for their development.
    Likewise, PHMSA is committed to working with any agency or agencies 
involved in siting CO2 pipelines, just as we work with FERC 
today in connection with the licensing of gas transmission pipelines 
and LNG facilities. We offer our agency's considerable experience and 
technical expertise to the committee as it considers and addresses the 
transportation requirements associated with CO2 capture and 
sequestration.
    Mr. Chairman, I want to assure you and members of the committee 
that the Administration, Secretary Peters, and the dedicated men and 
women of PHMSA share your strong commitment to safe, clean, and 
reliable pipeline transportation. Like you, we understand the 
importance of PHMSA's mission to the Nation's economic prosperity and 
energy security, and we look forward to working with the committee to 
address the current challenges. Thank you.

    Senator Domenici. Thank you very much. Senator, do you want 
me to proceed?
    Senator Dorgan. Why don't you, the chairman will be here 
momentarily.
    Senator Domenici. All right. Let me ask the two of you who 
have already testified, neither of you made a statement about 
quality of CO2. Could I start with you, Mr. 
Chairman? Is CO2 dangerous?
    Mr. Kelliher. Is CO2 dangerous?
    Senator Domenici. I said is it dangerous like natural gas?
    Mr. Kelliher. No, it's not like natural gas storage.
    Senator Domenici. Does it blow up?
    Mr. Kelliher. No, sir.
    Senator Domenici. Will it hurt people?
    Mr. Kelliher. Not in the way a natural gas leak could hurt 
people.
    Senator Domenici. I imagine if you got too much you would 
go to sleep, right? Does it hurt people, ma'am?
    Ms. Edwards. I'm pleased to speak to the hazard, thank you. 
We do regulate CO2 in each of its forms as a 
hazardous material for the purposes of transportation. 
Certainly there are risks and hazards associated with it that's 
why it's under both of our safety programs.
    On the other hand, as you pointed out, the hazards 
associated with this material are different and in many ways 
less than the hazards associated with other materials that are 
part of our--that we manage the oversight of through pipelines 
or significantly CO2 in certain concentrations will 
cause respiratory problems in humans and could cause 
suffocation in a situation in which, you know, a human was 
exposed to intense concentrations. It tends--it's heavier than 
air as a liquid which is the form in which it's transported in 
pipelines so a massive release in a populated area without the 
right conditions and there are variables having to do with 
ventilation and temperature, of course, in terms of its 
vaporization and the rate of vaporization. But, you know, there 
have been, again I reiterate that our safety record for 
CO2 pipelines has been very good. But, you know, it 
is why we oversee its movement in transportation because it 
poses a hazard.
    Congress directed us to take on this oversight in 1988.
    Senator Domenici. Thank you very much, ma'am.
    Proceed, sir.

 STATEMENT OF BENJAMIN H. GRUMBLES, ASSISTANT ADMINSTRATOR FOR 
             WATER, ENVIRONMENTAL PROTECTION AGENCY

    Mr. Grumbles. Thank you, Senator.
    Senator Domenici. You're welcome.
    Mr. Grumbles. Members of the committee I'm Benjamin 
Grumbles. I'm the Assistant Administrator for Water at the U.S. 
EPA. I really appreciate the opportunity to discuss EPA's 
important work on the regulatory aspects of carbon 
sequestration.
    The Administration is committed to taking timely and 
responsible actions to confront the serious challenges of 
global climate change. EPA, in particular, believes innovative 
solutions will be critical to meeting this long term challenge 
including technologies and practices to mitigate greenhouse gas 
emissions. Carbon capture and storage is one of a portfolio of 
innovative technologies that could make a significant 
contribution to reducing greenhouse gas emissions. EPA is 
committed to advancing such efforts in a manner consistent with 
our obligations to safeguard public health and the environment 
as required by the Safe Drinking Water Act.
    Carbon sequestration isn't a silver bullet, but it may be 
an ace in the hole for mitigating greenhouse gas emissions. 
We're very excited at EPA about the recent activities that the 
Administrator announced in October of last year that the Agency 
would move forward with a rulemaking under our authorities of 
the Safe Drinking Water Act. Our current schedule is an 
accelerated schedule. But our schedule is to propose 
regulations under the Safe Drinking Water Act's Underground 
Injection Control Program by the summer of this year.
    The Agency is engaged in many efforts with our partners in 
Federal, State and local government and in the private sector 
on the wide array of carbon capture and storage and 
sequestration matters. But my testimony does focus on the 
regulatory aspects of injection and sequestration. Over the 
past several years we've been coordinating with the Department 
of Energy, the lead agency for research and development, and 
working with them on in support of their efforts on the carbon 
sequestration technology road map.
    In March 2007, EPA issued technical guidance under our Safe 
Drinking Act authorities to help State and EPA regional 
managers in processing permit applications for experimental 
well permits for carbon sequestration. As I mentioned the 
Administrator then followed that up with an announcement in 
October 2007 that we are now fully committed to moving forward 
with a rulemaking, for full scale, not just experimental, but 
for full scale geo- sequestration of carbon dioxide recovered 
from emissions of coal fired power plants and other facilities. 
The proposed regulation which is currently in development will 
take into account our UIC program requirements that we have for 
the existing classes under the UIC program.
    The key components of the proposed regulation will include 
requirements related to geologic site characterization to 
ensure wells are sited in suitable areas to limit the potential 
for migration of injected and formation fluids into an 
underground source of drinking water. The proposed regulation 
that we're working on will include well construction and 
operation requirements to ensure wells are properly constructed 
and managed. Mechanical integrity testing for the wells, 
monitoring for the wells and also, importantly, well closure, 
post closure care and also financial responsibility 
requirements regarding the proper plugging and abandonment of 
injection wells.
    Importantly we will also be discussing long term liability 
and seek further comment on the issue as part of the proposed 
rulemaking. We recognize there will need to be a robust debate 
on this important issue. We're expecting that once this rule is 
proposed that we will take next steps, coordinate with our 
Federal colleagues, review public comments. We're estimating a 
final rule in late 2010 or sometime in 2011.
    The rule will embrace the concept of adaptive management. 
We're using an adaptive approach that will allow the agency to 
collect information and use data from DOE demonstration and 
other early projects to inform the final regulation and any 
subsequent revisions, if necessary. The hallmark of progress 
for us on this is continued coordination at the Federal level, 
but also at the State level with our State partners, whether 
it's IOGCC or the Ground Water Protection Council and at the 
local level and the national laboratories and with the private 
sector.
    Mr. Chairman, I would just underscore the importance of 
this. It's one of the Administrator's priorities in our 
agency's own climate change clean energy strategy. I look 
forward to answering questions members of the committee might 
have. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Grumbles follows:]

Prepared Statement of Benjamin H. Grumbles, Assistant Administrator for 
                 Water, Environmental Protection Agency

    Thank you, Chairman Bingaman and Members of the committee. I am 
Benjamin H. Grumbles, the Assistant Administrator for Water at the EPA, 
and I appreciate the opportunity to describe the Agency's important 
work on regulatory aspects of carbon dioxide sequestration.
    This Administration is committed to taking timely and responsible 
actions to confront the serious challenge of global climate change. EPA 
believes innovative solutions will be critical to meeting this long-
term challenge, including technologies and practices to mitigate 
greenhouse gas emissions. The Administration is actively investigating 
the prospects for carbon capture and storage (CCS), a process that 
involves capturing carbon dioxide (CO2) from power plants 
and other industrial sources and injecting it into deep subsurface 
geologic formations for long-term storage. CCS is one of a portfolio of 
innovative technologies that could make a significant contribution to 
reducing greenhouse gas emissions to the atmosphere and EPA is 
committed to advancing such efforts in a manner consistent with our 
obligation to safeguard public health and the environment as required 
by the Safe Drinking Water Act (SDWA).
    EPA staff are evaluating many aspects of CCS technology and 
deployment, focusing our efforts in two areas: (1) partnering with 
public and private stakeholders to develop an understanding of the 
environmental aspects of carbon capture and storage that must be 
managed for the necessary technologies to become a viable strategy for 
reducing greenhouse gases; and (2) ensuring carbon dioxide storage is 
conducted in a manner that protects underground sources of drinking 
water. My testimony focuses on the second of these two areas, EPA's 
development of a regulation for geologic sequestration (GS) of 
CO2 and the collaboration taking place to support such 
efforts, all of which are relevant to your consideration of Section 5 
of Senate Bill 2323.
    Over the past several years, EPA has been coordinating with the 
Department of Energy (DOE), the lead agency for research and 
development of CCS technology. As DOE has developed a Carbon 
Sequestration Technology Roadmap for the development and deployment of 
this technology, EPA has been working to design an appropriate 
management framework for geologic sequestration. By engaging in DOE's 
expansive R&D program early and working with stakeholders on all sides 
of this issue, EPA is well positioned to help in the permitting of 
future carbon dioxide underground injection wells.

                regulatory scope, content, and timeframe

    EPA has statutory authority under the SDWA to carry out the 
UndergroundInjection Control (UIC) program to protect underground 
sources of drinking water from the injection of fluids for disposal or 
storage. In March 2007, EPA issued technical guidance to help State and 
EPA Regional UIC managers in processing permit applications for GS 
demonstration projects under the general UIC regulations. Recognizing 
that the technology is rapidly progressing towards full-scale 
deployment, Administrator Stephen Johnson announced, in October 2007, 
EPA's plans for developing national rules for full-scale GS of carbon 
dioxide recovered from emissions of coal-fired power plants and other 
facilities. EPA will propose regulations in the Federal Register this 
Summer to ensure that carbon dioxide injection is done in a manner that 
does not endanger underground sources of drinking water.
    Under the SDWA, EPA develops minimum requirements for state UIC 
programs. States may develop their own regulations for injection wells 
in their State. These requirements must be at least as stringent as the 
federal requirements (and may be more stringent). Annually, billions of 
gallons of fluids are injected underground through wells authorized 
under State and Federal UIC Programs. This includes approximately 35 
million tons of carbon dioxide that are injected for the purposes of 
enhancing oil and gas recovery. EPA's proposed regulations will build 
on the UIC Program's many years of experience in safely injecting 
fluids, including carbon dioxide, into the subsurface.
    The proposed regulation, currently in development under an 
accelerated schedule, will take into account the EPA's existing UIC 
program requirements. Key components of the proposed regulation will 
include requirements related to: (1) geologic site characterization to 
ensure that wells are sited in suitable areas to limit the potential 
for migration of injected and formation fluids into an underground 
source of drinking water; (2) well construction and well operation to 
ensure that the wells are properly constructed and managed; (3) well 
integrity testing and monitoring to ensure that the wells perform as 
designed; and, (4) well closure, post-closure care and financial 
responsibility to ensure proper plugging and abandonment of the 
injection well. We will also discuss long-term liability and seek 
further comment on this issue as part of the proposed rulemaking.
    Importantly, the proposal will also include public participation 
requirements that would be associated with issuance of permits. We will 
assess the costs of carrying out regulations for geologic sequestration 
programs as part of the economic analysis for the rulemaking.
    EPA is reviewing available data on existing demonstration projects 
to inform our decision-making and development of the rule. Once a 
proposal is published, EPA will review public comments and take into 
account any new data and demonstration project outcomes prior to 
publishing a final rule by 2011. EPA's timeframe for the proposed 
rulemaking is consistent with the time frame for the DOE Roadmap, which 
projects fullscale project deployment to begin in the 2012-2020 
timeframe. To ensure that GS can be deployed as rapidly and safely as 
possible, EPA is using an adaptive approach that will allow the Agency 
to collect information and use data from DOE demonstration and other 
early projects to inform the final regulation and any subsequent 
revisions, if necessary.

                     coordination and collaboration

    Within EPA, the Office of Water and Office of Air and Radiation are 
working together on all activities related to geologic sequestration in 
order to conduct technical and economic analyses, develop risk 
management strategies, collaborate with key stakeholders, and clarify 
the relationships among various statutes (including the Safe Drinking 
Water Act and Clean Air Act) and EPA regulations.
    EPA is working closely with DOE to leverage existing efforts and 
technical expertise. EPA and DOE are coordinating with Lawrence 
Berkeley National Laboratory to answer key technical questions 
regarding impacts on groundwater and underground formations. The Agency 
is also monitoring the progress of research being conducted by 
organizations such as the Pacific Northwest National Laboratory, 
Lawrence Livermore National Laboratory, and international projects such 
as Sleipner, In Salah, and Weyburn to help inform the regulatory 
framework.
    The DOE's Regional Carbon Sequestration Partnerships are conducting 
demonstration projects to gather data on the effectiveness and safety 
of GS. These Regional Partnerships will implement many small and large-
scale field tests of carbon dioxide injection throughout the country in 
a variety of geologic settings. One goal of the technical permitting 
guidance EPA issued in March of 2007 is to promote the exchange of 
information to support the development of a long-term GS management 
strategy.
    EPA will also engage with the Department of Transportation, 
Department of Interior, States, and Tribes during the rulemaking 
process. EPA has worked closely with key organizations such as the 
Groundwater Protection Council (GWPC) and the Interstate Oil and Gas 
Compact Commission (IOGCC), which represent States that implement UIC 
programs, and we will continue to do so throughout the regulatory 
process. For example, the Agency has reviewed the IOGCC report entitled 
``Storage of Carbon Dioxide in Geologic Structures: A Legal and 
Regulatory Guide for States and Provinces.'' The document's discussion 
of issues such as permitting and property rights may be very useful as 
we develop regulations.
    In December 2007, EPA established a workgroup on geologic 
sequestration to provide input to the proposed regulation. The 
workgroup includes EPA and DOE staff, as well as representatives of 
four state agencies, two of whom were recommended by the IOGCC and two 
by GWPC. Thus far, the workgroup has provided input on various aspects 
of the regulatory framework and has begun to draft issue papers on key 
issues.
    Over the past several years, the Agency has been holding workshops, 
attending conferences and meeting with public and private stakeholders 
including industry experts, legal experts, technical experts, and 
environmental advocates to gather useful input. Our past experience 
gives us confidence we can work closely with key stakeholders and 
experts to develop well-designed regulatory approaches.
    This past December, EPA held a meeting that focused on the 
potential regulatory framework for geologic sequestration. The two day 
workshop, held in Washington, DC, was attended by more than 200 
stakeholders representing government, research institutions, industry, 
public interest groups, law firms, and the general public. Another 
stakeholder meeting is planned for February 26 and 27, 2008 in 
Alexandria, Virginia. Additionally, over the past year EPA has held 
technical workshops with researchers and stakeholders to discuss 
technical considerations for establishing a GS framework.

                               conclusion

    EPA is committed to working with our public and private partners to 
accelerate the important work underway to realize the significant 
potential of carbon dioxide capture and geologic storage. EPA will 
continue to engage with other federal agencies and encourage 
participation of states, associations, public interest groups, 
industry, and other stakeholders as the Agency moves forward on this 
critical path towards development of a regulatory framework. Consistent 
with the goal of Senator Kerry's bill, our goal is to develop sound 
regulations that will enable full-scale CCS projects to move forward 
without endangering underground sources of drinking water.
    Thank you, Mr. Chairman and members of the committee for this 
opportunity to describe EPA's important work on carbon sequestration. I 
would be happy to answer any questions you may have.

    Senator Domenici. Mr. Grumbles, I just have one question 
that came to my mind. I don't understand; why does it take 4 
years to make a rule regarding a substance of like 
CO2?
    Mr. Grumbles. We have a lot of experience with 
CO2 already under the UIC program under the class 
two category for enhanced oil and gas recovery. But this is a 
whole new approach, a whole new opportunity when it comes to 
long term storage. It's a complex issue and it requires public 
participation and discussion and also that 4 years will allow 
us to take into account lessons learned as the demonstration 
projects occur, whether they are DOE or other demonstration 
projects through the process.
    Senator Domenici. All right. Thank you.
    Mr. Allred.

 STATEMENT OF STEPHEN ALLRED, ASSISTANT SECRETARY FOR LAND AND 
        MINERALS MANAGEMENT, DEPARTMENT OF THE INTERIOR

    Mr. Allred. Senator Domenici, members of the committee, 
it's a pleasure to be here and to represent the Department of 
the Interior. As you're aware, we deal with oil and gas, coal, 
geothermal and biomass as well as fish and wildlife issues on 
Federal lands and Federal resources. We're involved in a number 
of different strategies with regard to carbon sequestration, 
including the capture and storage through enhanced oil recovery 
of carbon dioxide and into geologic formations and also 
investigating the capture through air and terrestrial biomass, 
soils and trees of carbon dioxide on our lands.
    One of the things that is probably not well known is the 
fact that currently carbon dioxide is a salable commodity under 
the mineral leasing laws of the United States. We currently 
collect revenues in the form of royalties from the sale of 
carbon dioxide produced in connection with oil and gas 
production on public lands. In 2007 the sale of carbon dioxide 
generated over 23 million dollars in royalty revenues in 
Colorado, New Mexico and Wyoming. I mention that because one of 
the things that I think as we look forward to carbon 
sequestration is that it may well be a valuable resource for 
the future that can be recovered as we need it.
    Specifically I would like to talk a little bit more about 
the opportunity I think that we have to investigate and 
understand carbon dioxide sequestration because of the number 
of enhanced oil recovery projects that we have. Some of the 
largest new ones are in Senator Barrasso's area in Wyoming. I 
think we have an opportunity by adding perhaps another purpose 
to those projects to learn a lot from carbon sequestration that 
we can then apply to other areas. It's also interesting to note 
that there are estimates that we have the capacity, based on 
preliminary estimates of carbon dioxide production and volume 
in our oil reservoirs to sequester, if they were in the right 
places, 20 to 40 years of carbon dioxide production.
    Public Law 110-140, enacted last year, gave the Department 
of the Interior a number of different responsibilities. We are 
to develop and are currently involved in the process of 
developing a methodology for and to conduct national 
assessments of geologic capacity for sequestration. We are in 
the process of preparing a national assessment of storage 
capacity of oil and gas and saline reservoirs through the USGS. 
We will conduct that in conjunction with the Department of 
Energy, with the input of the Environmental Protection Agency, 
and equally as important, the State geological surveys that we 
work with.
    It is our intent to convene an independent panel of experts 
and stakeholders to provide a technical review of that effort. 
Upon completion of that review the methodology will be 
published and provided for public use. There are also a number 
of other things that are ongoing efforts that we'll also try to 
answer some of these questions, certainly to identify the 
criteria to determine candidate geologic sequestration sites in 
various different types of geologic settings.
    We will also be involved in looking at a proposed 
regulatory framework for leasing decisions on public lands with 
regard to long term sequestration. We also were mandated to 
determine a means by which we can provide for public review and 
comment and to ensure that we protect the quality of natural 
and cultural resources in those areas. To suggest additional 
legislation that we feel might be important. Again I want to 
emphasize as we go forward with these we will consult with our 
Federal and State partners and the public.
    We believe, in conclusion, that it is extremely important 
to No. 1, understand the effect and to determine the complex 
issues that we will have in sequestration and there are many 
interrelated components to that. Secondly, we believe that it 
is important to use the ongoing activities that are already in 
place to try to enhance the knowledge that we have. The 
Department of the Interior is looking forward to working with 
other agencies and working with Congress to answer these 
important questions. I'd be most happy to answer any questions. 
I have a couple of experts with me if I can't answer those 
today.
    [The prepared statement of Mr. Allred follows:]

Prepared Statement of Stephen Allred, Assistant Secretary for Land and 
            Minerals Management, Department of the Interior

                              introduction

    Mr. Chairman and Members of the committee, thank you for the 
opportunity to provide the Department of the Interior's views on S. 
2323, the ``Carbon Capture and Storage Technology Act of 2007'' and S. 
2144, the ``Carbon Dioxide Pipeline Study Act of 2007.'' As both bills 
vest the Secretary of Energy with primary authority and the Secretary 
of the Interior is identified as a cooperator, I will defer to the 
Department of Energy for specific views on this legislation. My 
testimony today will address the Department of the Interior's 
perspective on carbon capture and storage as it relates to future work 
of the Department's bureaus, specifically the U.S. Geological Survey 
(USGS) and the Bureau of Land Management (BLM).
    The challenges of addressing carbon dioxide accumulation in the 
atmosphere are significant. Fossil fuel usage, a major source of carbon 
dioxide emissions to the atmosphere, will continue for the foreseeable 
future in both industrialized and developing nations. Therefore, a 
variety of strategies are being investigated to reduce emissions and 
remove carbon dioxide from the atmosphere. Such strategies include the 
facilitated sequestration of carbon for the capture and storage of 
carbon dioxide by injection into geologic formations as well as capture 
from the air to terrestrial biomass, including soils and trees.
    Carbon injection techniques also have useful practical applications 
in processes known as enhanced oil recovery (EOR), which currently 
takes place on some public lands managed by the Bureau of Land 
Management. Carbon dioxide is a saleable commodity under the Mineral 
Leasing Act of 1920. The Bureau of Land Management currently collects 
revenues in the form of royalties derived from the sale of carbon 
dioxide produced in connection with oil and gas production on public 
lands. In 2007, for example, the sale of carbon dioxide generated over 
$23 million in royalty revenue in the states of Colorado, New Mexico, 
and Wyoming.
    In addition to enhancing oil recovery, EOR's utilization of carbon 
injection may yield valuable data that will inform efforts to capture 
and sequester carbon dioxide effectively in geologic formations found 
on public lands. A critical issue for evaluation of storage capacity is 
the integrity and effectiveness of these formations for sealing carbon 
dioxide underground, thereby preventing its release into the 
atmosphere.

                       geologic storage of carbon

    The current atmospheric carbon dioxide concentration is 
approximately 380 parts per million volume and rising at a rate of 
approximately 2 parts per million volume annually, according to 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 volume, the global 
storage capacity of geologic formations may be able to accommodate most 
of the captured carbon dioxide. How much of this carbon dioxide storage 
capacity would be economically feasible (assuming some price on 
carbon), however, is not known. Also, geologic storage capacity may 
vary widely on a regional and national scale. A more refined 
understanding of geologic storage capacity is needed to address these 
knowledge gaps.
    Geological storage of carbon dioxide in porous and permeable rocks 
involves injection of carbon dioxide into a subsurface rock unit and 
displacement of the fluid or formation water that initially occupied 
the pore space. 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 U.S. is in deep saline formations.

                            ongoing efforts

    H.R. 6, the Energy Independence and Security Act of 2007 (EISA), 
which the President signed into law last month, includes provisions on 
Carbon Capture and Storage that the Department is working to implement. 
The requirement in Section 7 of S. 2323 directing the Secretary of the 
Interior, acting through the Director of the U.S. Geological Survey 
(USGS), to develop a methodology for and conduct a national assessment 
of geological storage capacity for carbon dioxide is very similar to 
Section 711 of EISA and therefore we believe inclusion of this 
provision in new legislation is unnecessary.
    The Department has developed an implementation plan for Section 
711. In fiscal year 2008, the Department will begin development of a 
methodology that could be used to conduct assessments of carbon dioxide 
storage capacity in oil and gas reservoirs and saline formations 
nationally. The methodology development will be conducted in 
coordination with a number of organizations in order to maximize the 
usefulness of the assessment for a variety of partners and 
stakeholders. These organizations include the Department of Energy, the 
Environmental Protection Agency, and State Geological Surveys. In 
particular, the Department will coordinate its work with Department of 
Energy's National Carbon Sequestration Database and Geographical 
Information System (NATCARB). The purpose of NatCarb is to assess the 
carbon sequestration potential in the U.S. and to develop a national 
Carbon Sequestration Geographic Information System (GIS) and Relational 
Database covering the entire U.S.
    An independent panel, consisting of individuals with relevant 
expertise and representing a variety of stakeholder organizations, will 
be convened to provide a technical review of the methodology. Upon 
completion of the review, the methodology will be published and 
available for public use. The subsequent national assessment called for 
by EISA would need to compete among other administration priorities for 
funding.
    In addition, Section 714 of the EISA directs the Department to 
develop a framework for geological sequestration on public land and 
report back to this committee, as well as the House committee on 
Natural Resources, by December 2008.
    This effort, coordinated among several agencies within the 
Department, is anticipated to result in recommendations relating to:

   criteria for identifying candidate geological sequestration 
        sites in several specific types of geological settings;
   a proposed regulatory framework for the leasing of public 
        land or an interest in public land for the long-term geological 
        sequestration of carbon dioxide;
   a procedure for ensuring any geological carbon sequestration 
        activities on public land provide for public review and protect 
        the quality of natural and cultural resources;
   if appropriate, additional legislation that may be required 
        to ensure that public land management and leasing laws are 
        adequate to accommodate the long-term geological sequestration 
        of carbon dioxide; and
   if appropriate, additional legislation that may be required 
        to clarify the appropriate framework for issuing rights-of-way 
        for carbon dioxide pipelines on public land.

    The report will also describe the status of Federal leasehold or 
Federal mineral estate liability issues related to the release of 
carbon dioxide stored underground in public land, including any 
relevant experience from enhanced oil recovery using carbon dioxide on 
public lands.
    The report will, in addition, identify issues specific to the 
issuance of pipeline rights-of-way on public land and legal and 
regulatory issues specific to carbon dioxide sequestration on land in 
cases in which title to mineral resources is held by the United States, 
but title to the surface estate is not.
    This effort will be undertaken in coordination with the 
Environmental Protection Agency, the Department of Energy, and other 
appropriate agencies.

                               conclusion

    It is clear that addressing the challenge of reducing atmospheric 
carbon dioxide and understanding the effect of global climate change is 
a complex issue with many interrelated components. The assessment 
activities called for in the recently passed Energy Independence and 
Security Act of 2007 should ultimately increase the information base 
upon which decision makers will rely as they deal with these issues, 
and the assessments called for in these bills would duplicate those 
already mandated. In addition to addressing the challenges presented by 
carbon dioxide, we should also recognize that this commodity presents 
certain opportunities for future knowledge and utilization. As a 
leasable commodity, our experience demonstrates that there is a demand 
and a value attributable to this resource. As we examine undeveloped 
oil and gas reservoirs, we should consider the potential benefits of 
accessible sequestered carbon dioxide. It is clear that the discussion 
on this subject will continue and the Department stands ready to assist 
Congress as it examines these challenges and opportunities. Thank you 
for the opportunity to present this testimony. I am pleased to answer 
questions you and other Members of the committee might have.

    The Chairman [presiding]: Thank you very much. Mr. Slut, go 
right ahead.

  STATEMENT OF JAMES SLUTZ, ACTING PRINCIPAL DEPUTY ASSISTANT 
    SECRETARY, OFFICE OF FOSSIL ENERGY, DEPARTMENT OF ENERGY

    Mr. Slutz. Ok. Mr. Chairman, members of the committee, it 
is my pleasure to appear before you today to discuss Senate 
bills 2323 and 2144. I currently serve as the Acting Principle 
Deputy Assistant Secretary for Fossil Energy.
    Balancing the economic value of fossil fuels with the 
environmental concerns associated with fossil fuel use is a 
difficult challenge. Carbon capture and storage technologies 
provide a key strategy for reconciling energy and environmental 
concerns. DOE has assumed a leadership role in the development 
of carbon capture and storage technologies and in fact the 
United States, I would argue, is the global leader in this 
area. Through its carbon sequestration program DOE is 
developing the technologies through which geologic carbon 
sequestration could become an effective and economically viable 
option for reducing CO2 emissions.
    Since DOE first investigation into carbon sequestration 
began in 1997 with a budget of one million dollars, DOE has 
spent a total of 483 million through fiscal year 2008. Our 
fiscal year 2009 budget request of 148 million is a powerful 
sign of the continuing importance of this technology to our 
energy and environmental future. I might add that fiscal year 
2009 we had a 30 million dollar increase over our 2008 request.
    A recent report completed by the National Petroleum Council 
which was a comprehensive landmark study requested by the 
Secretary of Energy titled, ``Facing the Hard Truths About 
Energy''. The NPC's purpose of this report was to increase 
understanding about the scale and significance of the energy 
industries activities and to produce sound, balanced strategies 
to meet today's challenges and benefit future generations. In 
the section of the report dealing with carbon management, the 
NPC recommended and I quote, ``The United States must develop 
the legal and regulatory framework to enable carbon capture and 
sequestration and as policymakers consider options to reduce 
CO2 emissions provide an effective global framework 
for carbon management.'' DOE is doing precisely that as a few 
examples more fully described in my submitted testimony 
illustrate.
    DOE is working to increase the cost effectiveness of carbon 
capture technologies and to prove the viability of a long term 
geologic and terrestrial CO2 storage. DOE's regional 
carbon sequestration partnerships are co-funding field tests 
for large scale CCS demonstrations. DOE is working closely with 
the Environmental Protection Agencies and the states through 
organizations such as the Interstate Oil and Gas Compact 
Commission to establish a standardized regulatory framework for 
CO2 storage in deep geologic formations.
    In December 2007, DOE participated in EPA's first workshop 
in preparation for a proposed rule for large scale injection of 
CO2. Fortunately the United States has a large 
number of geologic formations amenable to CO2 
storage. In fact according to the 2006 carbon sequestration 
atlas of the United States and Canada, aggregate CO2 
sink capacity is estimated to hold several hundred years of 
total domestic U.S. emissions.
    The U.S. Government, DOE and other agencies of the 50 
States, several Canadian provinces, private industry, 
environmentalists and the scientists and the engineers have 
expanded great effort, invested heavily and made remarkable 
progress over the last decade in understanding and preparing 
for an energy and environmental future in which carbon 
sequestration technology will play an integral role. DOE 
believes regarding the specific bills being considered, DOE 
does have some specific positions. DOE believes that the 
research and development and demonstration projects prescribed 
in Sections 3, 4 and 6 of Senate Bill 2323 are duplicative of 
our R&D demonstrations underway in our existing program.
    We also believe that Section 5ive which requires 
interagency task force duplicates the task force the EPA has 
underway. Section 6 of the proposed legislation would shift 
lead responsibility for part of the Department's R&D program 
from Fossil Energy to the Office of Science. DOE opposes this 
provision.
    Senate Bill 2144 would require a feasibility study related 
to the construction and operation of pipelines and carbon 
dioxide sequestration facilities and for other purposes. DOE 
supports this legislation.
    There are many questions and I think it's useful to 
consider the scale of CO2 issues and CO2 
management. Building the infrastructure required to capture and 
store the CO2 emitted by energy producing activities 
requires serious, long term commitment on the part of 
government and industry and the public. As an example, in the 
United States all the CO2 from existing coal fired 
electric generation alone would total, if liquefied, would 
total 50 million barrels per day. That's two and a half times 
the volume of oil handled daily in the United States. Again I 
mention that just to scale the challenge and illustrates the 
urgency of moving forward with some of these issues.
    Mr. Chairman, thank you for the opportunity to testify 
today. I'd be happy to answer any questions.
    [The prepared statement of Mr. Slutz follows:]

 Prepared Statement of James Slutz, Acting Principal Deputy Assistant 
        Secretary, Office of Fossil Energy, Department of Energy

    Mr. Chairman, members of the committee, it is a pleasure for me to 
appear before you today to discuss Senate bills 2323 and 2144.
    I intend, first, to survey The Department of Energy's (DOE) overall 
Carbon Sequestration Research and Development program, our goals and 
our progress to date. I will then describe DOE's collaboration with the 
Environmental Protection Agency (EPA) in carbon capture and storage.
    Complete knowledge of all these efforts already underway should be 
of interest as the Senate bills under consideration go forward.

                 carbon sequestration and fossil fuels

    The availability of affordable energy is a bedrock component of 
economic growth. The use of fossil fuels, however, can result in the 
release of emissions with impacts on the environment. Of growing 
significance are emissions of carbon dioxide (CO2) which 
contribute to global climate change.
    Balancing the economic value of fossil fuels with the environmental 
concerns associated with fossil fuel use is a difficult challenge. 
Carbon capture and storage technologies provide a key strategy for 
reconciling energy and environmental concerns. Geologic sequestration--
the capture, transportation to an injection site, and long-term storage 
in a variety of suitable geologic formations--is one of the pathways 
that DOE is pursuing to allow the continued use of fossil fuels while 
reducing CO2 emissions.
    DOE has assumed a leadership role in the development of carbon 
capture and storage technologies. Through its Carbon Sequestration 
Program--managed within DOE's Office of Fossil Energy and implemented 
by the National Energy Technology Laboratory (NETL)--DOE is developing 
technologies through which geologic carbon sequestration could 
potentially become an effective and economically viable option for 
reducing CO2 emissions. The Carbon Sequestration Program 
works in concert with other programs within the Office of Fossil Energy 
that are developing the complementary technologies that are integral to 
coal-fueled power generation with carbon capture: Advanced Integrated 
Gasification Combined Cycle, Advanced Turbines, Fuels, Fuel Cells, and 
Advanced Research. Successful research and development could enable 
carbon control technologies to overcome various technical and economic 
barriers in order to produce cost-effective CO2 capture and 
enable wide-spread deployment of these technologies.

                   doe's carbon sequestration program

    Since DOE's first investigation into carbon sequestration began in 
1997 with a budget of $1 million, DOE has spent approximately $483 
million through Fiscal Year 2008 (twelve year cumulative total) on 
further research and development, a powerful sign of the importance of 
this technology to our energy and environmental future.
    The Carbon Sequestration Program, with a Fiscal Year 2008 budget of 
$119 million, encompasses two main elements of technology development 
for geologic sequestration: Core R&D and Validation and Deployment. The 
Core R&D element addresses several focus areas for laboratory 
technology development that can then be validated and deployed in the 
field. Lessons learned from the field tests are fed back to the Core 
R&D element to guide future research and development. Through its 
Integrated Gasification Combined Cycle, Fuels, Sequestration, and 
Advanced Research programs, DOE is investigating a wide variety of 
separation techniques, including gas phase separation and adsorption, 
as well as hybrid processes, such as ad sorption/ membrane systems. 
Current efforts cover not only improvements to state-of-the-art 
technologies but also the development of several revolutionary 
concepts, such as metal organic frameworks, ionic liquids, and enzyme 
based systems. The ultimate goal is to drive down the energy penalty 
associated with capture so that geologic sequestration can be done with 
only a moderate increase in the cost of electricity.

               regional carbon sequestration partnerships

    One of the key questions regarding geologic sequestration is the 
ability to store CO2 in underground formations with long-
term stability (permanence); this requires monitoring and verification 
of the fate of the CO2, to ensure that the science is sound 
and ultimately gains public acceptance. DOE's NETL, with the Regional 
Carbon Sequestration Partnerships (RCSPs) are developing and validating 
technology, and national infrastructure needed to implement geologic 
sequestration in different regions of the Nation.
    The RCSPs are evaluating numerous geologic sequestration approaches 
in order to determine those best suited for specific regions of the 
country. They are also helping develop a framework to validate and 
deploy the most promising technologies for geologic sequestration.

                         a three-phase approach

    NETL's three-phased approach began with a Characterization Phase in 
2003 that focused on characterizing regional opportunities for carbon 
capture and storage, and identifying regional CO2 sources 
and storage formations. The Characterization Phase was completed in 
2005 and led into the current Validation Phase, which focuses on field 
tests to validate the efficacy of geologic sequestration technologies 
in a variety of storage sites throughout the U.S. Using the extensive 
data and information gathered during the Characterization Phase, NETL 
identified the most promising opportunities for carbon storage in their 
regions and commenced geologic field tests. In addition, NETL is 
verifying regional geologic sequestration capacities initiated in the 
first phase, satisfying project permitting requirements, and conducting 
public outreach and education activities.
    The third phase, or Deployment Phase, for large-volume testing is 
intended to demonstrate the feasibility of CO2 capture, 
transportation, injection, and storage at a scale comparable to future 
commercial deployments. DOE has in recent months awarded funds to 
initiate five large-volume demonstration projects. Depending on the 
results of a scientific needs assessment being conducted in FY 2008 and 
the ability of additional project proposals to meet those needs, 
additional large-scale projects may be initiated. In October, 2007, DOE 
announced awards totaling $318 million for two projects with the Plains 
Carbon Dioxide Reduction Partnership, and one project each with the 
Southeast Regional Carbon Sequestration Partnership and Southwest 
Regional Partnership for Carbon Sequestration. In December, DOE 
announced a $66.7 million award for a project with the Midwest 
Geological Sequestration Consortium.
    The geologic structures to be tested during these large-volume 
storage tests will serve as potential candidate sites for the future 
deployment of technologies demonstrated in FutureGen and the Clean Coal 
Power Initiative, which plans to complete a solicitation for carbon 
capture technologies at commercial scale in 2008.
    The NETL, with the RCSPs and the National Carbon Sequestration 
Database and Geographical Information System (NATCARB), has created a 
methodology to determine the capacity for CO2 storage in the 
United States and Canada and an Atlas from data generated by the RCSPs 
and other databases, including the United States Geological Survey's 
(USGS) National Coal Resources Data System, USGS National Water 
Information System Database, and EROS Database. Based on data displayed 
in the 2006 Carbon Sequestration Atlas of the United States and Canada, 
the aggregate CO2 sink capacity--including saline 
formations, unmixable coal seams, and oil and natural gas formations--
is estimated to hold several hundred years of total domestic U.S. 
emissions.

                  moving toward commercial deployment

    Carbon capture and storage can play an important role in mitigating 
carbon dioxide emissions under potential future stabilization 
scenarios. The United States has a large capacity of geologic 
formations amenable to CO2 storage. DOE's Carbon 
Sequestration Program will continue to help move geologic sequestration 
technology toward readiness for commercial deployment.
 epa's role in the deployment of carbon capture and storage technology
    Complementing DOE's carbon capture and R&D research program is the 
EPA program for ensuring that underground injection of CO2 
is conducted in a manner that is protective of underground sources of 
drinking water (USDWs) in accordance with section 1421(d)(2) of the 
Safe Drinking Water Act (SDWA). EPA is initiating work to develop 
proposed regulations to ensure consistency in permitting commercial 
scale geologic sequestration projects. It plans to propose regulations 
in the summer of 2008. EPA is also responsible for reviewing and 
commenting on environmental impacts statements under the National 
Environmental Policy Act (NEPA).
    As DOE moves forward with its R&D program and geological storage 
projects, EPA is focused on: evaluating risks to human health and the 
environment; providing guidance on permitting CO2 injection 
wells for pilot-scale projects; identifying technical and regulatory 
issues associated with field tests and commercial projects; and 
developing an appropriate management framework for permitting.
    DOE-sponsored and industry-sponsored research will help develop 
data and tools to address these issues. It is anticipated that EPA will 
aggregate and analyze the information generated from those efforts and 
initiate new research where there are gaps.
    DOE has also sponsored a five-year, two-phase study by the 
Interstate Oil and Gas Compact Commission (IOGCC), which is reported on 
in the publication a Model CO2 Storage Statute and Model 
Rules and Regulations. The report provides industry perspective on 
development of regulations governing the storage of CO2 in 
geologic media and an explanation of those regulatory components. EPA 
will consider these and other viewpoints in its regulatory development 
process.

                          program coordination

    EPA coordinated with DOE in the preparation of its research plan, 
and is working closely with DOE, state regulators and other 
stakeholders on all geological storage activities so as to leverage 
resources, clarify key questions and data gaps, and ensure that work is 
complementary and not duplicative.
    EPA and DOE, for example, hold quarterly coordination meetings (at 
both the staff and managerial level) to share progress and discuss key 
issues.
    EPA, in coordination with DOE, organized a series of technical 
workshops in 2007 to help define future research needs. The workshops 
were focused on technical issues that need to be addressed in order to 
design, operate, and permit CO2 injection wells. Attendees 
included EPA and state regulators, DOE project managers, and DOE-funded 
researchers.
    In addition, EPA has and will continue to be involved in major DOE/
NETL activities such as the National Conferences on Carbon 
Sequestration and the Regional Partnership Annual Review Meetings.

       s. 2323: carbon capture and storage technology act of 2007

    The U.S. Government, DOE and other agencies, the 50 states, several 
Canadian provinces, private industry, environmentalists, and scientists 
and engineers have expended great efforts, invested heavily and made 
remarkable progress over the last decade in understanding and preparing 
for an energy and environmental future in which carbon sequestration 
technology will play an integral role.
    The Administration strongly supports research and development of 
carbon capture and storage technology as a solution to reduce carbon 
dioxide emissions and address global climate change. The Administration 
is currently performing the research and development needed to 
successfully develop this technology. DOE has numerous initiatives 
looking at decreasing the cost of carbon dioxide capture and proving 
the permanence of carbon dioxide storage in geologic formations and has 
success with its current structure. DOE believes that the research, 
development and demonstration projects prescribed in Sections 3, 4 and 
6 of Senate Bill 2323 are generally duplicative of the R&D and 
demonstrations underway in our existing program. DOE is currently 
evaluating some of details of this bill within the context of its 
existing program, such as the use of competitive grants to fund 
commercial demonstration of carbon dioxide sequestration and the number 
of projects needed.
    Section 5 of this bill would require an interagency task force to 
develop regulations for the capture and storage of carbon dioxide. This 
task force was officially established last year, and is chaired by EPA, 
with considerable support from DOE. Therefore, we believe that this 
section of the bill is also redundant.
    For the past 10 years, DOE's Sequestration Program within the 
Office of Fossil Energy has funded research in areas of carbon dioxide 
capture, storage, monitoring, mitigation, and verification (MMV), 
breakthrough concepts, and infrastructure development through its 
Regional Partnership Initiative. NETL is researching the most suitable 
technologies, informing regulatory development, and evaluating 
infrastructure needs for carbon capture, storage, and sequestration in 
different areas of the country. The RCSPs are conducting much of these 
efforts, and include 41 states and over 350 distinct organizations 
working together for the most cost-effective solutions. Additionally, 
the Clean Coal Power Initiative and FutureGen are providing the 
demonstration platform for testing larger carbon dioxide capture 
methods at power plants. These activities are currently providing the 
plan forward and should continue along their current path to produce 
the best results at the earliest time so that this technology can be an 
important option to cost-effectively reduce greenhouse gas emissions.

           s. 2144: carbon dioxide pipeline study act of 2007

    This bill would require the Secretary of Energy, in consultation 
with the Federal Energy Regulatory Commission, the Secretary of 
Transportation, the Administrator of the EPA, and the Secretary of the 
Interior to conduct a feasibility study relating to the construction 
and operation of pipelines and carbon dioxide sequestration facilities, 
and for other purposes. It also requires that the Secretary provide 
this report to Congress no later than 180 days after the enactment of 
this bill. DOE supports this legislation and notes that, although it is 
the study lead, it will work closely with the other agencies in 
conducting this study, and in particular with DOT's Pipeline and 
Hazardous Materials Safety Administration (PHMSA), which will have a 
leading role in evaluating plans for construction and operation of 
pipelines for carbon dioxide. Mr. Chairman, and members of the 
committee, this completes my prepared statement. I would be happy to 
answer any questions you may have at this time.

    The Chairman. Thank you all very much. There are a lot of 
questions, obviously. One of the questions that occurs to me is 
what we are talking about when we talk about permanent 
CO2 storage. I know Senator Kerry referred to 
permanent CO2 storage.
    Mr. Grumbles, I was not here during your testimony. I had 
to step out, but is this an issue? Is EPA planning to clearly 
define the required length of storage time for CO2 
in the regulatory work that you're working on these days?
    Mr. Grumbles. Senator, I know we will certainly address 
that issue. That is one of the key areas, long term liability, 
financial responsibility and duration of requirements. So we do 
intend to seek comment on questions such as those about the 
duration and also on the responsibility, financial 
responsibility requirements.
    Currently much of the UIC program, Underground Injection 
Control Program, has in place for other types of injections of 
fluids, financial responsibility requirements that last 
typically 30 years. So one of the questions that is very much 
going to be at the forefront of our debate and discussion is 
duration. How long of a period to ensure that there's 
monitoring and responsibility, financial responsibility.
    The Chairman. Let me ask you, Chairman Kellier, what road 
do you see FERC as appropriately performing here? Is FERC the 
appropriate entity to regulate transportation rates? Is that 
something that you think is clearly FERC's responsibility?
    Mr. Kelliher. I think we could regulate the rate. There are 
three really existing models on how to regulate pipeline 
transportation either of energy resources or CO2. In 
two of the three existing models FERC does set the 
transportation. In the other one the rate is--can be set by the 
Surface Transportation Board upon complaint. Otherwise it's set 
through a contract between parties. But FERC certainly has set 
the rate for oil and gas pipelines for decades.
    The Chairman. Let me ask you, Mr. Allred, if you could just 
elaborate a little bit on what responsibility you would see in 
your agency for the site selection on Federal lands to the 
extent that someone were to determine that they wanted to 
pursue a carbon storage sequestration project on Federal lands. 
How far are you from having in place a regulatory framework 
that would tell them how to proceed?
    Mr. Allred. Mr. Chairman, members of the committee, I think 
that at this point in time we would have the basic rules that 
we could use in a sequestration project. There will be lots of 
questions as we go forward. One of the things that we have 
thought about are some demonstration projects that would, 
associated with enhanced oil recovery, help us answer some of 
those questions.
    But I think the leasing rules and the Mineral Leasing Act 
and the laws that we have with regard to the management of 
Federal lands provide us the basics that we would need. That 
does not mean that as we go forward there won't need to be 
enhanced and changed.
    The Chairman. All right. Let me go ahead and call on the 
next Senator on this.
    Senator Barrasso.
    Senator Barrasso. Thank you very much, Mr. Chairman, and I 
want to first commend Senators Coleman and Senator Kerry for 
bringing this legislation before us today. The carbon capture, 
transmission and sequestration are enormously important to the 
people of Wyoming. Mr. Allred made some comments about that.
    Wyoming produces about 38 percent of our Nation's coal. 
This coal provides a substantial portion of America with 
affordable electricity. Wyoming holds promising geologic 
formations for coal sequestration. Wyoming has experience in 
safely moving carbon dioxide and effectively using it for our 
enhanced oil recovery. Since emissions are not always located 
near appropriate geologic voids, carbon dioxide may need to be 
transported through States like Wyoming.
    So I think we need some additional research to inform us on 
these issues. Congress and State Legislatures must fully 
explore any gaps in the existing legal and regulatory 
frameworks. The Wyoming Legislature is doing that when it meets 
next week in Cheyenne for this session.
    I concur with Senator Coleman and Kerry on the urgency of 
this problem--and certainly in light of the current climate 
change debate and the potential of Congress imposing a price on 
carbon in one form or another. I am hearing a lot about this 
around the State of Wyoming. I'm hearing it from workers, from 
consumers, and also from industry.
    Many of my constituents are increasingly concerned that the 
Federal Government will impose a cap on carbon before we've 
developed the appropriate legal and regulatory framework to 
address carbon dioxide. They're concerned that Congress is 
going to act on those issues before we act on the technology. 
So I applaud what Senators Coleman and Kerry are trying to do.
    If anything I'm going to be pushing to do more research and 
more analysis, find more certainty for markets and to delve 
deeper into the important areas such as liability of 
CO2 as it's transported and stored and some of the 
things that we've heard from the Honorable Edwards and to 
accomplish all of this in a shorter period of time. I'm 
distressed when I hear it's going to take till the year 2011 
before regulations can be written. I want to thank the Chairman 
for calling this meeting.
    I do have a question or two for Mr. Slutz. It really has to 
do a little bit with something along this line but a little 
different and that's the Future Gen issue from the Department 
of Energy. We talk about public/private partnerships, and when 
private entities put up money and make decisions, business 
decisions, that they want to have confidence that they're going 
to have a good partner in the U.S. Government. With this change 
for Future Gen, I think that confidence is eroding.
    My question is how can we make sure that commitments by the 
Federal Government are really commitments that the private 
enterprises can depend upon and rely on?
    Mr. Slutz. Thank you, Senator. You know and the, I should 
say the Future Gen decision that was announced yesterday was a 
very challenging and difficult decision. But part of that 
commitment is a partnership and you have to have both--there's 
the Federal Government and the industry partners. Both of those 
have to have agreements that they can work through and when a 
project doubles in cost it's a time to sit down and rework 
those agreements. In the details of that it was decided that 
the current agreement was not in the best interest of the 
American people and there were--the requirements that would 
have been in place to go forward would have put that project at 
risk.
    So this issue is very, very important, too important not to 
allow that not to be successful. The decision was made by the 
Department to--with a new direction. Not a lack of commitment 
to Future Gen or a lack of commitment to furthering research 
and furthering demonstrating the technology of carbon capture 
and storage on a full commercial scale project, but doing it a 
way, I think, that the market could really act and it would be 
very market based commercial type plans that would be where the 
success would be very likely. That was the foundation for that 
decision is to make sure we have a successful outcome.
    Senator Barrasso. Mr. Chairman, as a member of both the 
Energy committee as well as the Environment and Public Works 
committee we're looking at using all the sources of energy, but 
doing it in an appropriate way for our environment. We don't 
want to put the cart before the horse too far. We want to make 
sure that we're working in unison to try to get things going on 
developmentally and educationally in a way that would help 
folks and help our environment, but also make sure that we have 
all the energy that we need. Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Tester.
    Senator Tester. Thank you, Mr. Chairman. I want to thank 
Senator Barrasso for his comments. I want to dovetail on to 
them initially. Mr. Slutz, what's the level of urgency in the 
DOE as far as carbon capture and storage?
    Mr. Slutz. It's the very critical to much of our research 
programs. A majority of clean coal is about how do we increase 
efficiency, reduce emissions or actually have carbon capture 
and storage. I think one of the urgencies that's communicating 
if you look at part of this decision on Future Gen and to 
communicate the importance that the Administration places on 
our clean coal research program.
    We released our budget numbers early this year and showed a 
very significant increase in coal research which shows how we 
want to move this faster.
    Senator Tester. Coal research based on carbon capture?
    Mr. Slutz. Based on carbon capture and storage.
    Senator Tester. How close are we to having a large scale 
carbon capture technology available?
    Mr. Slutz. The technology exists. The issue is the cost of 
the technology and the costs that it would----
    Senator Tester. How close are we to having to having 
affordable large scale carbon capture technology?
    Mr. Slutz. First let me, the technology exists. One of the 
advantages of this Future Gen approach is to actually get a 
commercial power plant in operation. We're looking at a date of 
2015 that it could be operational on this because we don't know 
all of the costs. We only now can speculate and estimate the 
costs, but having actual real data on commercial scale, 
commercial operating power plants will be hugely beneficial in 
making those advancements in the future.
    Senator Tester. Ok. I just tell you I echo Senator 
Barrasso's comments. We have to have the technology. That 
technology is critically important. Everybody blames the price 
of food on corn ethanol. There's also a worldwide drought. That 
probably has more to do than any kind of renewable energy 
policy we put out of here.
    I attribute a lot of that to worldwide global warming. I 
think that if we lead, and we lead in a way that's there's 
urgency, we can have our eggs and eat it too, as Senator 
Coleman said. That is that we can develop technology we can 
sell to other countries and we can clean it up on a worldwide 
basis. But there has to be a level of urgency. Because if 
there's not a level of urgency, we'll develop the technology 
and it will be too late.
    I've got a question for Mr. Grumbles from the EPA. You 
talked about under any proposed regulation, and I'm reading 
from your written statement, currently under development that 
geological site characterizations to ensure that wells are 
sited in suitable areas to limit potential for migration and 
injected formation fluids into underground drinking water. Now 
I know you're with the drinking water area of the EPA, but what 
about leeching into the atmosphere? Isn't that also considered 
insuitable sites?
    Mr. Grumbles. It's a very important issue that is part of 
our discussions with the Air Office. It's part of our 
discussions with all the stakeholders so far and all the 
national workshops and research forums we've had. We want to 
look at the environmental risks but from the standpoint of the 
Safe Drinking Water Act.
    Senator Tester. Ok.
    Mr. Grumbles. We will be focusing on protection of 
underground sources of drinking.
    Senator Tester. I appreciate that. But so what you're 
saying here only as it applies to drinking water, but 
somebody's got to be looking at leeching of the atmosphere 
because that's another significant problem.
    Mr. Grumbles. Monitoring of these sites it's very important 
to have post closure monitoring of sites as it is with existing 
UIC programs.
    Senator Tester. Ok.
    Mr. Grumbles. Monitoring can get into releases, surface 
releases as well.
    Senator Tester. Good. Mr. Allred, I have a question that 
kind of dovetails on the chairman's question. It deals with 
storage and with the plume that will be created with 
CO2 storage. I don't care where you put it. That 
plume may affect not only Federal lands but also private lands 
and private lands where there's Federal minerals underneath 
them.
    What do you recommend, or do you have a recommendation to 
deal with the liability as it applies to the plume and 
potential exposure there. Keeping in mind that, we put it under 
the ground, somebody may decide to drill a hole and let it out, 
that might happen on private lands. So how do you deal with 
that issue?
    Mr. Allred. Mr. Chairman, Senator Tester, I--as I look at 
the Federal land question and I look at most of my background 
as you probably know is not in government. I look at how do you 
implement projects or how do you cause things to occur. To me 
one of the most important things that we need to look at is, 
first, to keep regulation as simple as it can be because if it 
is complicated, I think that that will deter people and 
organizations and financial resources from being applied to 
this.
    Second, there's a big learning curve on this. The more that 
we can use existing legal frameworks to assure that we don't 
have unintended consequences or that we provide the ownership 
and responsibility for these the better off we'll be. I think 
that our oil and gas laws, both the Federal Government's and 
the State's, perhaps provide some of that mechanism. 
Particularly on Federal lands we think that through our leasing 
requirements and steps that we take to assure that oil and gas 
is properly handled and that the United States receives its 
proper royalty from that.
    If you use the reverse of that, we think that those same 
processes or same legal applications can work on Federal 
grounds. I think one of the things you really have to consider 
is who owns that carbon dioxide because if you decide that then 
you probably have gone a long way to decide about liability and 
responsibility. If they are on Federal lands or Federal 
resources we're either going to have an agreement with the 
lessee to store their carbon dioxide or there will be decisions 
that that will become a Federal resource where there's Federal 
ownership and before that agreement is ever entered into there 
will be some assurances as to how safe it is to have it where 
it is.
    Senator Tester. I've run out of time, but the other 
question is what happens if it starts on Federal land and moves 
into private land? I don't want you to answer that because 
there are other people that have questions but that is a 
concern.
    The Chairman. Senator Corker.
    Senator Corker. Actually I think that is a great question. 
This is an area that I guess I'm somewhat skeptical about just 
because, for a long, long time we've been pumping carbon in the 
air and we figure out here recently that's a problem. I don't 
know if we've done enough work to see what kind of problems 
will exist underground pumping tremendous amounts of carbon in.
    But I'd love for you to answer Senator Tester's question 
because it seems to me that we do get into a lot of mineral 
rights issues, and storage rights issues. Storage can end up 
taking place under somebody's land and they might want to drill 
for something else. I mean it does seem to me there are a lot 
of complications that exist. So please answer Senator Tester's 
question.
    Mr. Allred. Mr. Chairman, Senator Corker, to the best that 
I can, I will. But one of the advantages we have with depleted 
oil or even operating oil reservoirs is there's a tremendous 
amount of information about that reservoir with regard to its 
extent and characteristics. That's a source of data that we 
don't have perhaps in places that we might seek to sequester 
where we have not had that oil or gas experience.
    Not in all cases will we be 100 percent sure. That's going 
to be a, I'm mean, there's got to be a concern about that 
because we may not. But remember why the oil and gas is there. 
It was captured because there was some structure that kept it 
there. What will be a bigger question probably is what have we 
done to make it not suitable because obviously we've drilled 
holes. That is an issue that can be dealt with fairly easily 
although it might be expensive.
    The second question is when you enhance oil recovery, you 
do a thing called fracking and you fracture some of the area in 
order to have oil flow into a well more easily. That will be a 
real question as to how that fracking has affected those 
reservoirs and their integrity. That is something that we'll 
have to understand.
    Senator Corker. So is it envisioned that if a property, 
private property owner has an area underneath them where oil 
has been recovered and now there's a cavern there or someplace 
just to store carbon that that person would actually be paid 
for carbon to be stored under their land?
    Mr. Allred. Mr. Chairman, Senator, if you were to follow 
the oil and gas laws and that's a big if, I think.
    Senator Corker. Right.
    Mr. Allred. That has to be decided on non-Federal lands. I 
would assume that there would have to be a lease like an oil 
lease so you could use that. But I think that's one of the big 
questions about how do you regulate. I think the question on 
Federal land may be more clear than on private lands.
    Senator Corker. Yes, I would guess so. I actually think 
that as we get into this, while I agree with others there 
should be a tremendous sense of urgency, I think there are so 
many complications that exist around this that I can see how it 
might take several years to work out this whole process of 
rulemaking even though we'd like to see it happen more quickly.
    In the area of drinking water itself it seems to me that 
water is becoming more and more of an issue even in a State 
like Tennessee. Talk to us about some of the hazards that 
exist, that you can envision existing storing carbon adjacent 
to water supplies and those types of things.
    Mr. Grumbles. Senator we have extensive experience as was 
already mentioned with the Class two UIC program under the Safe 
Drinking Water Act injecting carbon dioxide for enhanced oil 
and gas recovery. But one of the key areas of focus for us, as 
we work to issue a regulation ensuring there are safeguards for 
the long term storage and sequestration of carbon dioxide, is 
to reduce the likelihood of migration of that CO2 
into underground sources of drinking water. That it can lead to 
different types of pollution problems.
    I would say one of the areas we're looking at as potential 
risks to aquifers, potential sources of drinking water, because 
we recognize that in some areas--data we have indicates that by 
2013 at least 36 States in this country will experience some 
form of water shortage. That's not just in drought stricken 
areas. It's a combination of growth and population and 
development or drought.
    So for us as we're going through this analysis, of 
CO2 storage, we want to make sure that it doesn't 
migrate, that it stays in place. The experience to date is that 
it is a very promising technology. That it does stay in place 
for very long periods of time if the geologic siting is done 
properly, the well construction is done properly and it's 
monitored. So it is very promising in not producing or posing a 
significant risk to underground sources of drinking water.
    Senator Corker. Mr. Chairman, thank you for the time. At 
some point I hope we'll gain an understanding as to the 
practicality of this. I think that a lot of times we move in a 
direction and it sounds utopic to move there and there's a lot 
of political momentum.
    I have to tell you that this still, to me, and I'm not an 
oil drilling State, seems like a fairly impractical thing to do 
on a mass scale. I can see in geographic locations that might 
be good, but thank you so much for this hearing.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much. In North 
Dakota we have the only coal gasification plant that was ever 
completed and it exists now as a technological marvel in terms 
of its production. It produces synthetic natural gas from 
lignite coal. It also is, I think, the world's largest 
demonstration of CO2 capture and it captures 50 
percent of the CO2 from the coal gasification plant. 
It puts it in a pipe and pipes it to Canada to the oil wells in 
Alberta and they use it for enhanced oil recovery.
    So there is a capture process with respect to coal 
gasification. I suspect if we're taking a look at what's 
happening in the oil wells up in Canada we can get a sense of 
some leeching issues and other issues about is this 
sequestration for the long term and so on. But I want to ask 
this question. This is such an important area. Fifty percent of 
our electricity comes from coal. We're not going to have a 
future without using coal. I mean our future's going to include 
the use of coal. The question is how do we use coal.
    We're going to be able to use coal if we can effectively 
unlock the mysteries of capturing carbon and sequestering 
carbon. How do we do that? I'm chairing the appropriations side 
on the subcommittee on appropriations that funds a lot of this. 
Here's the way it looks to me.
    We've got carbon sequestration R&D projects. We've put 120 
million into that. We have regional organization. So we got 120 
million dollars in our area. It's called PECORE. But 120 
million dollars was for carbon sequestration R&D. 70 million 
dollars for the clean coal power projects. 75 million dollars 
was put in this year for Future Gen, now I saw your 
announcement yesterday about that, six billion dollars for loan 
guarantees for coal projects that will demonstrate these 
technologies.
    So we have all of these things happening. You know, it 
reminds me kind of a circus with a bunch of rings. The question 
is who brings it all to the center ring? Who brings it to 
center stage to decide how all of this works together because 
we're in a big hurry? The fact is we need to get to center 
stage soon with technologies we know will work. So, Mr. Slutz, 
who down there at the Energy Department is bringing these five 
or six projects or areas of funding together to accomplish what 
we want to accomplish?
    Mr. Slutz. It is, Senator. We do manage these programs as 
an integrated approach even though it may not look like it all 
the time, but we do. In fact I will use an example in answering 
some of the questions about what's this going to do in the 
subsurface. That's why we have those--that carbon sequestration 
program with the seven partnerships and we have four large 
scale projects underway. Three more will be finalized and ready 
to announce later this spring.
    Those--the four that are announced are each there in the 
site characterization doing those detailed geologic 
assessments. They will when they, a little after that 
assessment is done and assuming the assessment all proves out, 
they are scheduled--will inject at least a million metric tons 
a year of CO2. They'll be monitored extensively. 
It's to get that information, that detailed information, that 
then working with our partners at EPA and the other agencies 
can use to develop what's the best rules.
    One side on that this CO2 is not in some big 
cavern. It's in the pore space of rock. I think that's an 
important piece and I'm sorry to end----
    Senator Dorgan. You know, last year I called down because 
what was happening inside the department is the Department of 
Science was over here and others were over here and the money 
wasn't being released to the partnerships. So I don't know that 
both hands were communicating so well. They finally got the 
money but there is an urgency about this.
    Someone just gave me this core sample. This is sandstone 
and this is where you would invest CO2. The question 
is does it stay there? What are the conditions under which it 
stays there?
    You know, the science is very sophisticated, very important 
and my great concern is we're moving very quickly on this issue 
of climate change and our understanding that we have to take 
immediately no regret steps to deal with it and perhaps more 
aggressive steps. But that doesn't mean that this country's 
going to be able to have the kind of energy supply that it 
wants and needs without using our most abundant resource and 
that is coal. So, when I mentioned five or six programs I don't 
know that you have this all laced up real tight down there. I 
hope so.
    Because just for example the last six billion dollars we 
put in which would be loan guarantees. I don't know how you 
intend to use those. I don't know the announcement you made 
yesterday. I don't know what that means in terms of the several 
larger projects rather than one in Future Gen. I don't know how 
that relates to the regional partnerships.
    So, I hope you can continue to give us as much information 
as possible about how all these things come together and lace 
up something that gets us to a conclusion. Because we can--you 
know one of the things about the government is it just studies 
things forever. That's really interesting but not very 
effective. At some point you have to have coordinated studies 
that get the results you need in order to move forward and 
achieve the goals you have.
    Mr. Slutz. Let me answer that as I think it requires a 
little more of an answer that we can provide outside in 
subsequent to the hearing. But it is coordinated even as we 
work through our budget process. In looking we've done climate 
overlays that look at things like where can we spend the money 
to get different benefits at different times from the various 
programs within DOE. Not just fossil, but energy efficiency and 
all those are layered together to see how would we address, how 
would the overall DOE research budget address climate change?
    Then as you then work within the programs, for instance the 
fossil energy, we have the core coal R&D that's going to move 
these advance technologies. The CCPI program that gets those 
technology pieces out into a demo environment. The Future Gen 
project that is a full scale powered plant with CCS and then 
you mentioned you get these proved up in demo. You still have 
to get them deployed into the marketplace and that's where loan 
guarantees come into play.
    So it is a program that works together. I would be happy to 
follow up with a little more detail on how that meshes up a 
little bit.
    [The information follows:]

    Attached is a graphic* that outlines the activities of the Office 
of Fossil Energy's Carbon Sequestration Program and the relationship of 
those activities to basic research carried out under DOE's Office of 
Science. Carbon Sequestration an Storage is one of six areas 
highlighted in the FY 2009 DOE budget request for enhanced coordination 
between basic and applied research and development. Coordination of 
activities between the DOE programs is carried out through program 
manager-level working groups.
---------------------------------------------------------------------------
    * The graph has been retained in committee file.

    Senator Dorgan. My time has expired. I want to thank all 
the witnesses today. I have to go to another hearing as well, 
but I appreciate very much your testimony.
    The Chairman. Thank you.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman. Thank you for 
the testimony here this afternoon. I want to follow on a little 
bit to Senator Dorgan's comments and those made by Senator 
Barrasso about the Future Gen project and the decision coming 
out of DOE and more specifically to the signal that is sent.
    Again you had a pretty ambitious private/public partnership 
there. A lot of time, a lot of money goes into it and then I 
understand what you were saying, Mr. Slutz about having to re-
evaluate and do the cost. But in terms of signals sent, it is 
not a very encouraging signal sent from the Department of 
Energy about one of these proposals that we're looking to 
firmly establish that the technology has worked and we're 
making it happen right here.
    Ms. Edwards, I want to ask you a question about just the 
logistics of how these CO2 pipelines would work. If 
we were to go to full CCS for all powers I would imagine we're 
going to have to expand this pipeline network, not only the 
numbers of pipelines, but the lengths of the pipelines that 
we're talking about. The question is, as you are pumping the 
CO2 further distance and in larger volumes, does 
this cause any problems? You kind of spoke to the safety aspect 
of the process, but recognizing that it's going to be more, 
higher volumes going farther distances, does that do anything 
to us?
    Ms. Edwards. Again these are the sorts of risks that we 
regularly manage in transportation. So I would think that the--
we have a regulatory framework in place that's ready for 
CO2 pipelines however they were configured. They may 
be short. They may be longer and with more capacity. So I would 
say that the----
    Senator Murkowski. But it does cause the pipe to age more 
quickly?
    Ms. Edwards. You know again it would and that would be part 
of the requirements or if it did it would be part of the 
requirements. You know the operator understands the risks and 
does the monitoring. Of course it's very consequence phased 
depending on where the segments run and what is the exposure.
    Senator Murkowski. So do we not know yet?
    Ms. Edwards. This is material that does not have the same 
types of, you know, certainly environmental risks or even risks 
of life and property as other materials that are moved by 
pipeline. So we, yes, you know those questions--the technology 
is mature for pipelines. So I would say that the core 
significant issues having to do with pipeline transportation 
are not technical but more economic in terms of siting and 
investment.
    Senator Murkowski. Let me ask you this, Commissioner 
Kelliher, about the siting you mentioned in your opinion that 
the State siting seem to be working relatively well if you have 
an increase again in this pipeline network. With the siting 
issues, does it become more complicated with an increased 
capacity there in terms of the siting? Is it something that at 
some point you might say that the Federal preemption is the way 
to go? Is this something to be evaluated later?
    Mr. Kelliher. I think looking at what Congress did on gas 
pipeline siting. It started off with state siting and at some 
point it failed. In the views of Congress they concluded that 
state siting had failed. But it was after the failure was 
demonstrated. Then Congress came in and changed the law. 
Exclusive and preemptive siting was the rule.
    The State siting has worked for CO2 pipelines up 
to this point. But the network is much smaller than the oil and 
gas pipeline networks. The CO2 pipeline network is 
about 3,900 miles. The natural gas pipeline network is about 
300,000 miles and the oil pipeline network is about 200,000 
miles. Last year actually was a very big year for gas pipeline 
additions and we added about 2,700 miles last year alone on gas 
pipelines.
    So it really relates to if this is the path the country 
goes down how big of a CO2 pipeline network are we 
going to need and how quickly are we going to need it? There 
are varying estimates on how big of a network we might need.
    Senator Murkowski. So at some point in time you may have to 
evaluate this preemption issue. I would certainly think there 
would be state consultation if that is the route you would go. 
I want to ask you a question a little bit off topic, but since 
you're here, Commissioner Kelliher I'd like to ask you about 
this MOU that I understand this is regarding ocean energy 
projects.
    You know I've been following this and trying to see some 
progress with this. There's been some competing Federal 
jurisdiction out there, FERC, saying anything within three 
miles MMS is looking at those projects located on the outer 
continental shelf. Can you give me a status very, very quickly 
as to what is happening with that MOU?
    Mr. Kelliher. The quick status is that in my view it is 
final. In my view we're prepared to sign, but the MOU cannot be 
effective with only one agency signature.
    Senator Murkowski. Can we expect the other agency 
signatures shortly? What is the status on that?
    Mr. Kelliher. I would have to defer to Secretary Allred on 
that.
    Senator Murkowski. Secretary, can you give me an update on 
where you are on your end?
    Mr. Allred. Senator Murkowski, as you are aware we had 
negotiated an agreement. I think it's one that was generally 
acceptable to both of us. We were asked by this committee not 
to proceed with that in light of and until there were certain 
decisions that I assume the committee chose to make with regard 
to the energy legislation.
    One of the things that's happened in the intervening period 
of time is that our regulations for alternative energy offshore 
are now about ready to be released. While I don't anticipate 
that that would make a significant change in how we and FERC 
deal together it's probably premature for us to do that in 
light of the fact that these regulations will go out for public 
comment. If the regulations themselves don't deal, and there 
are some that do deal with some of the issues in the memorandum 
of understanding, it would be my intent that we would modify 
that agreement so that it will be specific to the items that we 
might have yet uncovered in those rules and regulations.
    Senator Murkowski. You're not giving me any indication in 
terms of timing on this then.
    Mr. Allred. I would anticipate that the rules and 
regulations will be out for draft review within the next 2 
months.
    Senator Murkowski. We certainly--an awful lot of people 
that are hoping that this gets resolved very quickly and we're 
very optimistic when this MOU was announced. So, I'd like to 
think that we're going to see that sooner than later. My time 
is up, but perhaps I can have a little follow up after this 
with you if it's possible to do that. Thank you, Mr. Chairman.
    Mr. Kelliher. Just 30 seconds or so, Mr. Chairman, thank 
you. I just want to emphasize how important it is that we 
clarify the respective roles of the two agencies. Actually I 
don't see that there's conflict between the MMS role and the 
FERC role. I actually think they're complementary. It's just 
that the two agencies actually have never worked together on 
projects. We haven't seen ocean projects in the outer 
continental shelf before that are FERC jurisdictional.
    So from the developers point of view there's tremendous 
uncertainty. I think perpetuating that uncertainty is 
forestalling exactly what we need now on ocean energy 
demonstration projects. We need to demonstrate these 
technologies and the uncertainty means we probably won't see 
development of ocean hydro projects. So I think we do need to 
clarify the respective roles to the agencies.
    Senator Murkowski. Mr. Chairman, if there's anything that 
we on this committee can do to help encourage that along I 
think it would be very, very beneficial for all. Thank you.
    The Chairman. Thank you very much.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. I appreciate 
your leadership here on the committee on this particular issue. 
It seems to me that we need action that matches the sense of 
urgency that we are feeling on climate change.
    We've heard testimony here and elsewhere that China is 
building a coal fired plant every week. It seems to me if we 
have any hope of lowering greenhouse gas emissions and avoiding 
catastrophic climate change we need to act quickly and 
effectively. But it also seems to me if we want technologies 
like carbon capture and sequestration to flourish in the near 
future it would appear to me that we need to pass a cap and 
trade bill as soon as possible because when carbon emissions 
have a price attached to them well the coal powered industry 
will act quickly by investing their own money and not just 
relying on Federal research.
    I was listening to Senator Dorgan's numbers as he was 
putting them out there and other numbers that we've heard 
projected. We're talking about an enormous amount of money. I 
think there's a good part of who participates in this process 
because while we need to act quickly, I think we also need to 
act wisely.
    The issue I'd like to pursue with this panel to some degree 
is I think maybe one of the most important issues in the 
question of the regulatory regime and that's the question of 
who pays to oversee and regulate this new effort. I mean I look 
at Future Gen which some of us have believed is has always been 
Never Gen. I look at the statement made by the Deputy Energy 
Secretary, Clay Sell, who said among the reasons why they were 
dropping and this was just as in December the Department was 
listing this as the centerpiece of their strategy for clean 
coal technologies. One of the major reasons is that the price 
had risen to 1.8 billion dollars.
    That I think goes to the very heart of the question of who 
participates in this process in paying toward it. You know we 
have had 150 years of electric power and fossil fuel that has, 
yes, it has lit up America, but it's also caused some 
significant environmental damage along the way and a lot of 
public health concerns including acid rain, mercury poisoning, 
asthma attacks, ozone depletion, particulate matter pollution, 
just to name a few. There are no apologies, no apologies for 
any of this.
    Instead now when the industry is under threat they want the 
American taxpayers to save them. I think it has it backward. 
I'm wondering whether one of the views that we should have is 
that in fact an industry that is mature and immensely 
profitable shouldn't be significantly in the forefront of the 
concept of polluter pays for example is one.
    So my question that I wanted to throw open to the panel is 
if we're likely to have to ensure CO2 stays in the 
ground for 100 years or more who's going to ensure. Who's going 
to pay for that process of making sure that we have the 
pipelines, that we have the monitoring, that we in essence are 
going to ensure that something, that we're going to pursue that 
course on is going to be one that is not born specifically by 
the American taxpayer. Do we view this being born by the 
American taxpayer? You don't all have to jump to answer the 
question.
    Mr. Grumbles. Just from an EPA perspective we understand 
that is one of the key questions and as we're moving forward on 
the regulatory piece that relates to safeguards for underground 
sources of drinking water. As I mentioned earlier the financial 
responsibility question for not only the closure, but the post 
closure and monitoring is one that we're going to be getting 
comments from the public on in the rulemaking process. Outside 
of the rulemaking process, we have an established workgroup 
with DOE and with States.
    A key question on that is also the important role of the 
States in this effort. From the Safe Drinking Water Act 
standpoint, the UIC program, 35 States have been delegated the 
authority to run the program and many States are very 
interested in carbon sequestration, the new frontier. We're 
going to be working with States on that question of liability.
    EPA continues to embrace the polluter pays principle. When 
it comes to government oversight and management that's going to 
be one of the key issues; post closure monitoring and financial 
responsibility.
    Senator Menendez. Many of us find the EPA weakening the 
provisions of polluter pays by virtue of the fact that 
Superfund is a perfect example of how we have not met that 
standard. But my question is to the rest of you. You know we're 
talking about an enormous outlay of pipelines, of the 
sequestration caverns which we will put this in, the monitoring 
for the leaking and just the technology. Isn't there a 
participation of some significant degree by the industry or do 
we see the American taxpayer putting this all out there and 
ultimately not having a very robust, to say the least, 
participation by the industry at the end of the day.
    Mr. Slutz.
    Mr. Slutz. We really how this has developed just like the 
rest of the infrastructure of this country will be by the 
private sector and the market and in the case of DOE 
technologies the idea is to create these technologies so the 
market can pick them up. One of the issues with reference to 
the Future Gen project that was 74 percent U.S. Government 
funded and 26 percent industry. The revised approach that we 
have come out with while we're still we have a request for 
information. We're seeking feedback, but would likely the way 
this comes out would reverse that percentage and have a much 
larger private sector share in a power plant than it would be 
much more commercially oriented. So it is built into that.
    I would add one more thing as we deal with issues of 
carbon. One of the challenges which I know all of you are aware 
of is how do you develop the technology. How do you implement 
them without dramatically increasing the price of energy 
because as you say that will then impact our economy and impact 
citizens.
    Senator Menendez. Mr. Chairman I know my time is over, but, 
you know, I find it interesting just two notes here for future 
reference. Powers affect the price of energy, of course it's 
important. But by the same token if the government is funding 
overwhelmingly all of this effort and then the monitoring, that 
is the taxpayer too. They may not see it in their energy bill, 
but they're seeing it out of their money in enormous fashion, 
No. 1.
    No. 2, I find it interesting we had a hearing on a 
different matter, Mr. Chairman on the Banking committee where 
the whole issue is what are we doing to try and help people of 
this country having the American dream not become the American 
nightmare. A lot of those who say don't get engaged. You know, 
let the market work its forces.
    If we're not going to solve the problem for people who 
ultimately may be losing their homes was the centerpiece of the 
American dream, then I'm not so sure the American taxpayer can 
be called upon to solve the problems for the coal industry, be 
responsible, overwhelmingly for the problems of the coal 
industry in trying to meet the challenges of the future. I 
think there has to be some symmetry at the end of the day as to 
what's our views in terms of responsibility. But, thank you, 
Mr. Chairman. I appreciate the opportunity.
    The Chairman. Thank you very much. We have another panel 
right after this. Let me ask if Senator Corker has any final 
question to put to this panel?
    Senator Corker. Mr. Chairman, thank you and Senator 
Menendez, I agree with you. I think this is what we need to get 
away from is any subsidizing. We ought to figure out the true 
cost of energy and I hope it will be industry funded.
    We're all going to be looking at bills. Senator Bingaman 
has a very thoughtful bill. There's other bills regarding cap 
and trade. Regardless of whether the money is there from the 
private sector to put carbon in the ground or not, the first 
thing we all have to be comfortable with is it is safe to do 
that. I mean can we, are we really solving a problem? Are we 
not having other unintended problems occur?
    I'm just wondering if you all could give us a guess, if you 
will. We got a lot of departments that work on this. It's kind 
of a cluster making everything happen sequentially. Do you all 
have any idea when we're going to know for real, in a way that 
we can really pump some significant resources toward this from 
this from the private sector, when we're really going to know 
when it is safe and we have the regulations in place? It would 
be helpful to us.
    We're going to have to be dealing with credits and 
allowances and all those kinds of things. Just to have an idea 
of when you think on a mass basis we will be able to do that? I 
would just love a number.
    Mr. Grumbles. From an EPA standpoint the key part of 
answering that question is getting in place the safeguards up 
front. We believe that there's very minimal risk associated 
with carbon sequestration if you do have the proper geologic 
siting and well construction and monitoring and post closure 
monitoring. We're learning a lot by the work that is going on 
around the world in some of the demonstration sites. So we're 
optimistic about this promising, but still unproven technology.
    IPCC basically has said it's very promising from their 
perspective. They say that carbon dioxide could be trapped for 
millions of years in appropriate geologic formations are likely 
to retain over 99 percent of the injected CO2 over 
1,000 years. So it is a question of when you go from the 
smaller and experimental demonstration sites to the larger 
commercial scale sites. Will you have the basic safeguards in 
place to ensure the proper siting and monitoring and measuring? 
If so, then we're very optimistic about the safety of this long 
term storage.
    Senator Corker. That seems vague to me.
    The Chairman. Does anybody else want to respond?
    Mr. Slutz. I will respond. We can get some more information 
with some of the dates from our--we have a carbon sequestration 
research road map that lays out certain milestone dates. Rather 
than throw them out and be incorrect. But we can show some of 
those things.
    One of the challenges is we have a greatly differing and 
varying geology in this country. That's why we have these seven 
partnerships to try to get information in different regions, 
different types of geology. One of the challenges we don't 
always know, you know, it's research. You don't know exactly 
what you're going to find. But I think we can put together some 
information that will show you some of the key milestones on 
where we're trying to get with our research program and our 
portfolio to help understandthat.
    I don't know if it will, it won't give you that specific 
date, a year or something. But it'll show you the various 
milestones that we're getting over the next 5 to 8 years.
    [The information referred to follows:]

    Following is the response to information (milestones/dates) as to 
when a system will be in place that assures the safety of carbon 
sequestration and a regulatory framework to allow ongoing mass storage 
of CO2.
    DOE agrees with the testimony presented by the Environmental 
Protection Agency (EPA) on January 31, 2008, which stated as follows:
    In March 2007, EPA issued technical guidance to help State and EPA 
Regional managers in processing permit applications for geological 
sequestration (GS) demonstration projects under the general UIC 
regulations.
    Under the SDWA [Safe Drinking Water Act], EPA develops minimum 
requirements for state UIC [Underground Injection Control] programs. 
States may develop their own regulations for injection wells in their 
State. These requirements must be at least as stringent as the federal 
requirements (and may be more stringent). Annually, billions of gallons 
of fluids are injected underground through wells authorized under State 
and Federal UIC Programs. This includes approximately 35 million tons 
of carbon dioxide that are injected for the purposes of enhancing oil 
and gas recovery. EPA's proposed regulations will build on the UIC 
Program's many years of experience in safely injecting fluids, 
including carbon dioxide, into the subsurface.
    The proposed regulation, currently in development under an 
accelerated schedule, will take into account the EPA's existing UIC 
program requirements. Key components of the proposed regulation will 
include requirements related to: (1) geologic site characterization to 
ensure that wells are sited in suitable areas to limit the potential 
for migration of injected and formation fluids into an underground 
source of drinking water; (2) well integrity testing and monitoring to 
ensure that the wells perform as designed; and, (4) well closure, post-
closure care, and financial responsibility to ensure proper plugging 
and abandonment of the injection well. We will also discuss long-term 
liability and seek further comment on this issue as part of the 
proposed rulemaking.

    The Chairman. Anyone else?
    Mr. Allred.
    Mr. Allred. Mr. Chairman, Senator Corker. Just a point that 
I think that there is already a lot of information that is 
available that would show that it can be done. I think we have 
to be more deliberate about how that information is collected, 
but as Mr. Slutz indicated, they have projects where in excess 
of a million tons of CO2 have been injected. We have 
a number of places where over a million tons a year has been 
injected for enhanced oil recovery.
    So I think there are a lot of those things which either are 
now being done or could be done. The purpose of those, at least 
the oil recovery projects, has not been sequestration, although 
there may have been a significant amount of sequestration 
occur. One of the things I think that we have the potential to 
do is to add a purpose to those, not to eliminate the other 
purpose, but add a purpose to those. Answer a lot of questions 
that you were just asking. I suspect that those answers will be 
with proper knowledge and proper consideration that we will be 
safe in can be done fairly quickly.
    The Chairman. Thank you. Senator Lincoln, did you have 
questions of this panel?
    Senator Lincoln. No.
    The Chairman. Let me thank all the witnesses of this panel 
and we will stay in touch with you and try to continue moving 
ahead on this set of issues.
    Let me call the final panel forward. Lawrence Bengal who is 
with the Arkansas Oil and Gas Commission. Tracy Evans who is 
with Denbury Resources in Plano, Texas and Scott Anderson with 
Environmental Defense from Austin, Texas. Thank you all for 
coming.
    Yes. Let me call on Senator Lincoln to make whatever 
introductions she would like of our witnesses here. I know one 
of these witnesses is from her home State. Blanche, go right 
ahead with whatever you would like to say.
    Senator Lincoln. Mr. Chairman, I apologize that I've been 
absent for the earlier part of the hearing. As most of us know 
it gets over scheduled way too much, but I certainly appreciate 
your leadership in this area. There's so much to be done and so 
much for us to learn without a doubt.
    But it is my pleasure to introduce the Chairman of the 
Arkansas Oil and Gas Commission, Larry Bengal. Mr. Bengal has 
held positions as researcher with the Illinois State Geological 
Survey as a project manager for Geologic and Mining Engineering 
Consulting firm, engaged in projects throughout the United 
States and as an independent counseling or consulting petroleum 
geologists as manager of the Illinois Class II underground 
injection control program and as a supervisor of the Illinois 
Oil and Gas division. He is here today in his capacity as 
chairman of the IOGC carbon capture and geologic storage task 
force. We're certainly appreciative of all of what he has done.
    I feel, like you, Larry, we appreciate you being here and 
appreciate all the both evidence and intelligence that you 
bring to the issue that we're dealing with here and grateful 
that you've joined us. We look forward to continuing to work 
with you as well. But we're very proud of him in Arkansas and 
his work in the oil and gas issues there and equally proud of 
his fine work with the CCGS task force. So thank you, Mr. 
Chairman and thank you, Larry for being here and to all the 
panelists.
    The Chairman. Alright. Thank you very much. Mr. Bengal, why 
don't you start and then Mr. Anderson and then Mr. Evans.

STATEMENT OF LAWRENCE E. BENGAL, DIRECTOR, ARKANSAS OIL AND GAS 
                  COMMISSION, LITTLE ROCK, AR

    Mr. Bengal. Good afternoon and thank you, Senator Lincoln 
for that gracious introduction.
    Mr. Chairman, committee members, my name is Lawrence 
Bengal. I am the director of the Arkansas Oil and Gas 
Commission and I'm appearing here today in my capacity as 
chairman of the Interstate Oil and Gas Compact Commissions Task 
Force on Carbon Capture and Geologic Storage. I would like to 
share with the committee the experience and conclusions of the 
task force and offer brief comments on S. 2144 and S. 2323.
    Funded by the U.S. Department of Energy through the 
National Energy Technology Laboratory, the task force has been 
engaged since 2003 in a two phase effort relating to the 
regulation of geologic storage of carbon. In phase one the task 
force undertook a thorough review of the technology of geologic 
storage. In phase two developed model regulations. A major 
conclusion of the task force in phase one was that the geologic 
storage of carbon dioxide or CO2 was not something 
entirely new or mysterious, but the technological outgrowth of 
analogs with which the States already have regulatory 
experiences.
    In phase two the task force has produced a clear and 
comprehensive model regulatory regime for the geologic storage 
of CO2. Utilizing these model frameworks, States and 
provinces and indeed other nations can begin immediately the 
process of enacting legislation and promulgating rules and 
regulations enabling CO2 geologic storage projects. 
In fact a number of States have already begun this process.
    By 2010 I fully expect that at least 5, 10 or more States 
will have legal and regulatory systems in place. The EPA carbon 
storage regulations under the Safe Drinking Water Act and it's 
implementing underground injection control or UIC programs 
should also be in place within this timeframe. It is my 
expectation the State regulatory systems will work seamlessly 
like hand in glove with the regulations likely to emerge from 
the EPA regulatory development process. This is largely because 
of the role States play in the administration of UIC programs 
under EPA privacy authority.
    As concerns SB, Senate bill 2323 the legal and regulatory 
framework proposed by the task force does not require in order 
for our program to work effectively any broader, overarching 
Federal regulation. Framework proposed by the IOGCC task force 
is comprehensive and contains many aspects that are solely a 
function of State law. Our expectation is that the combination 
of State and EPA UIC regulatory systems will produce a 
flexible, responsive, safe and environmentally sound regulatory 
framework for CO2 geologic storage that will be more 
than adequate to get the first project planned and safely off 
the ground.
    We would suggest that before we rush to create a 
potentially unnecessary Federal and regulatory framework that 
we observe how this combined State and EPA administered storage 
framework functions. If a need for additional Federal 
regulatory authority manifests, it can be addressed at that 
time. As concerns SB 2144, I would only suggest that the 
departments and agencies designated in the bill to conduct the 
study be required to conduct it in close cooperation and 
consultation with the States which have much experience in this 
area.
    Let me now turn to the diagram which you see before you 
which illustrates the cradle to grave regulatory model that was 
developed by the task force and this is what we recommended to 
States. There are three phases you can see. Although I do not 
have enough time at this stage to go over each of the phases, 
this will give you some idea of the breadth of the regulatory 
structure proposed by the IOGCC task force.
    I would note however that only within the project areas 
indicated by the green box does it appear to the EPA has 
regulatory authority over the Safe Drinking Water Act. The 
other areas would be covered under State law.
    Let me close by noting the obvious that public support for 
carbon storage as a strategy for mitigating the impact of 
global climate change will be crucial. It is important to 
educate the public about this technology including 
CO2 long history of being transported, handled and 
used in a variety of applications. CO2 is certainly 
no more, if not less, than the hazardous waste of natural gas 
and calling it such makes it very difficult for public 
acceptance of CO2 storage.
    It will also be vitally important to include the public in 
every step of the regulatory development process at the State 
and Federal levels. State laws will ensure public notice and 
participation and the State processes of both legislation and 
regulation development stages. Thank you for the opportunity to 
appear here today. If I can provide any information, please do 
not hesitate to ask. I would ask though that a copy of the full 
IOGCC task force be included in the record today.*
---------------------------------------------------------------------------
    * Document has been retained in committee files.
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    [The prepared statement of Mr. Bengal follows:]

 Prepared Statement of Lawrence E. Bengal, Director, Arkansas Oil and 
                    Gas Commission, Little Rock, AR

    Good afternoon. My name is Lawrence Bengal. I am the Director of 
the Arkansas Oil and Gas Commission and I'm appearing here today in my 
capacity as Chairman of the Interstate Oil and Gas Compact Commission's 
Task Force on Carbon Capture and Geologic Storage (CCGS). The Task 
Force was comprised of representatives from IOGCC member state and 
provincial oil and gas agencies, U.S. Department of Energy sponsored 
Regional Carbon Sequestration Partnerships, the Association of American 
State Geologists, industry experts, as well as representatives from the 
U.S. Environmental Protection Agency (EPA), the U.S. Bureau of Land 
Management (BLM) and the environmental group, Environmental Defense, 
who attended as observers.
    The member states of the Interstate Oil and Gas Compact Commission 
(IOGCC) produce more than 99% of the oil and natural gas produced 
onshore in the United States. Formed by Governors in 1935, the IOGCC is 
a congressionally ratified interstate compact. The organization, the 
nation's leading advocate for conservation and wise development of 
domestic petroleum resources, includes 30 member states, associate 
states, and 4 international affiliate provinces. The mission of the 
IOGCC is two-fold: to conserve our nation's oil and gas resources and 
to protect human health and the environment during the production 
process. Our current chairman is Governor Sarah Palin of Alaska.
    I am here today to share with the committee the experience and 
conclusions of IOGCC's CCGS Task Force and to offer our comments on S. 
2144, the ``Carbon Dioxide Pipeline Study Act of 2007'', and S. 2323, 
the ``Carbon Capture and Storage Technology Act of 2007''.
    Funded by the U.S. Department of Energy (DOE) and its National 
Energy Technology Laboratory (NETL), the Task Force has been engaged 
since 2003 in a two-phase effort relating to the regulation of the 
geologic storage of carbon. In Phase I, the Task Force undertook a 
thorough review of the technology of geologic storage and in Phase II 
developed a model statute and model rules and regulations for the 
states and provinces to administer regulatory oversight of geologic 
storage of carbon dioxide (CO2).
    A major conclusion of the Task Force in Phase I was that the 
geologic storage of CO2, in addition to conservation, is 
among the most immediate and viable strategies available for mitigating 
the release of CO2 into the atmosphere. It was readily 
apparent to the Task Force that carbon storage was also not something 
entirely new and mysterious--but the technological outgrowth of four 
analogues. These four analogues, in the opinion of the Task Force, 
provide the technological and regulatory basis for storage of 
CO2 in geologic media: 1) naturally occurring CO2 
contained in geologic reservoirs, including natural gas reservoirs; 2) 
the large number of projects where CO2 has been injected 
into underground formations for Enhanced Oil Recovery (EOR) operations; 
3) storage of natural gas in geologic reservoirs; and 4) injection of 
acid gas (a combination of H2S and CO2), into underground 
formations, with its long history of safe operations.
    It was the opinion of the Task Force that given the jurisdiction, 
experience, and expertise of the states and provinces in the regulation 
of oil and natural gas production as well in regulating the analogues 
identified above, the states and provinces would not only be well able 
to regulate, but would be the most logical and experienced regulators 
of CO2 geologic storage. Additionally and importantly, the 
oil and natural gas producing states and provinces are strategically 
and geologically well-situated for the geologic storage of 
CO2. Regulations already exist in most oil and natural gas 
producing states and provinces covering many of the same issues that 
need to be addressed in the regulation of CO2 geologic 
storage, and consequently serve as adaptable frameworks.
    Given these Phase I conclusions, the Task Force, in Phase II, began 
work and in September of 2007 produced, for the first time, a clear and 
comprehensive model legal and regulatory regime for the geologic 
storage of CO2. Utilizing these model regulatory frameworks, 
states and provinces, and indeed other nations, can begin immediately 
the process of developing and enacting legislation and promulgating 
rules and regulations enabling CO2 geologic storage 
projects. California, New Mexico, North Dakota, Texas, and Wyoming are, 
among other states, in various stages of developing such a legal and 
regulatory framework.
    I anticipate that by 2010 there will be at least 5-15 states, 
encompassing much of the country best suited for carbon geologic 
storage, with legal and regulatory systems in place for the regulation 
of geologic storage of CO2. I would also anticipate that in 
this same general timeframe that EPA will likewise have in place 
regulations governing geologic storage of CO2 under the Safe 
Drinking Water Act and the implementing Underground Injection Control 
(UIC) Program.
    It is appropriate that I now briefly address how the IOGCC 
anticipates the EPA's CO2 geologic storage regulations will 
interface with the regulatory systems being developed by the states. 
Given the incorporation of UIC-like regulatory requirements into the 
proposed IOGCC model regulatory frameworks, there is every reason to 
anticipate that the IOGCC and EPA frameworks will fit like hand in 
glove. This is largely because of the role that states play in the 
administration of UIC programs under EPA primacy authority.
    In this regard, as you are no doubt aware, the EPA is in the 
process of developing regulations for geologic sequestration under the 
Safe Drinking Water Act with the goal of having draft regulations for 
public comment by the summer of 2008. The IOGCC at the invitation of 
EPA has two representatives, Berry ``Nick'' Tew of Alabama and myself, 
actively participating in the process as state co-regulators. States 
with primacy already play an integral role in administering the UIC 
program and under future rules governing geologic storage, are likely 
to do so again. Having representatives from states involved in the 
process helps insure compatibility between the state and federal 
components of geologic storage regulatory oversight.
    What is clear to me, especially given my involvement with the 
current EPA workgroup, is that the state regulatory system for carbon 
storage proposed by the IOGCC Task Force will in all likelihood work 
seamlessly with the regulations likely to emerge out of the EPA 
regulatory development process.
    Having made this observation let me now offer brief comment on the 
two bills which are the subject of this hearing today.
    The legal and regulatory framework proposed by the Task Force, 
which I will discuss in more detail subsequently, does not require, in 
order to work effectively, broader over-arching federal regulation such 
as that apparently contemplated by S. 2323. The Task Force strongly 
believed that what it was proposing was comprehensive and given the 
number of aspects that are solely functions of state and not federal 
law (for example ownership of storage rights and means for amalgamating 
those rights through some type of condemnation proceeding) that there 
was no need or in some respects even the possibility of a broader 
federal role. It is suggested that there will be ample time over the 
coming years to see how the state-administered CO2 storage 
frameworks function in tandem with the EPA UIC storage regulations 
thereby alleviating the need to rush to create a potentially 
unnecessary federal regulatory framework at this time. If there is need 
for additional federal regulatory authority, it can be addressed 
legislatively then. I fully anticipate that what will exist during this 
interim period will be a flexible, responsive, and environmentally 
sound combination of state and EPA UIC regulatory systems, which will 
be more than adequate to get the first projects planned and off of the 
ground. Experience with these projects will show us rather quickly if 
weaknesses or problems with the existing frameworks manifest. We have 
absolutely no expectations at this time that they will.
    As concerns S. 2144 and the requirement of a study of feasibility 
relating to construction and operation of pipelines and CO2 
sequestration facilities, I would note first that the Task Force's 
proposed legal and regulatory infrastructure encompasses construction 
and operation of CO2 sequestration facilities. Second, I 
would suggest that given this, that the federal government departments 
and agencies designated in the bill to conduct the study at a minimum 
be required to conduct the study in close cooperation and consultation 
with states, including representatives of the IOGCC Task Force.
    It is now appropriate to supply a little more detail about the 
legal and regulatory system which the IOGCC Task Force has proposed for 
the geologic storage of CO2 and how, precisely, the proposed 
EPA regulatory system for CO2 storage would likely fit into 
this system. This *diagram will be helpful:
---------------------------------------------------------------------------
    * Document has been retained in committee files.
---------------------------------------------------------------------------
    The diagram represents the ``cradle to grave'' regulatory model 
which the Task Force has recommended to states. There are three phases.
1. Licensing including amalgamation of Storage Rights
    The first phase is the licensing phase which includes the critical 
requirement that the project operator control the storage rights.
    The Task Force concluded that as a part of the initial licensing of 
a storage project that the operator of the project must control the 
reservoir and associated pore space to be used for CO2 
storage. The operator would need to acquire these rights from the 
owners or assume those rights by means of eminent domain, unitization 
or some other vehicle that either exists in a state or would be created 
by the state uniquely for this purpose. This step is necessary because 
in the U.S., the right to use reservoirs and associated pore space is 
considered a private property right and must be acquired from the 
owner. It was the conclusion of a Task Force legal subgroup that in 
most U.S. states, for non EOR-related storage, the owner of these 
rights would likely be the owner of the surface estate. It may be 
prudent, however, depending upon the specific property right ownership 
framework in a given state, for an operator to also control the 
relevant subsurface mineral rights.
    Additionally, as part of the initial licensing of a project the 
operator would be required to submit for State Regulatory Authority 
(SRA) approval, detailed engineering and geological data along with a 
CO2 injection plan that includes a description of mechanisms 
of geologic confinement that would prevent horizontal or vertical 
migration of CO2 beyond the proposed storage reservoir. The 
operator would also be required to submit for approval by the SRA a 
public health and safety and emergency response plan, worker safety 
plan, corrosion monitoring and prevention plan and a facility and 
storage reservoir leak detection and monitoring plan.
    The rules also include requirements for an operational bond that 
would be sufficient to cover all operational aspects of the storage 
facility excluding wells which would be separately bonded.
    Site licensing and amalgamation of storage rights is generally 
believed to be outside the scope of the current UIC Program, and given 
that regulatory involvement with property rights is a state issue, this 
phase is best addressed at the state level. In addition, given the 
likely competition for acceptable storage sites, it is in a state's 
interest to manage these sites to maximize storage capacity and resolve 
any operator conflicts over the right to use storage resources, thereby 
maximizing the state's best economic interest in providing storage 
sites for that state's generators.
2. The Storage and Closure Phase
    In this second phase we are talking about the phase, following 
initial licensing, when the storage project is developed, operated, and 
closed. This includes a short time period following plugging of the 
wells during which time the project is monitored to ensure stability of 
the injected CO2.
    During the storage component of this phase the model rules specify 
the procedures for permitting and operating the project injection wells 
to safeguard life, health, property and the environment. The operator 
would be required to post individual well bonds sufficient to cover 
well plugging and abandonment, CO2 injection and/or 
subsurface observation well remediation. The rules also specify design 
standards to ensure that injection wells are constructed to prevent the 
migration of CO2 into other than the intended injection 
zone. Provisions in the rules also ensure that all project operational 
standards and plans submitted during the licensing phase would be 
adhered to and that the project and wells are operated in accordance 
with all required operating parameters and procedures. Quarterly and 
annual reports would be required throughout the operational life of the 
project. The rules also ensure that the wells are properly plugged and 
the site restored. The individual well bonds, maintained during the 
operational phase of the project would be released as the wells are 
plugged.
    The closure component of this phase is defined as that period of 
time when the plugging of the injection wells has been completed and 
continuing for a defined period of time (10 years unless otherwise 
designated by the State Regulatory Authority) after injection 
activities cease and the injections wells are plugged. During this 
closure period, the operator of the storage site would be responsible 
for providing the required data to ensure the injected CO2 
has not migrated beyond the project boundaries and the injected 
CO2 plume has been stabilized. During this time the operator 
is required to maintain an overall project operational bond.
    This phase is primarily where EPA is developing proposed rules to 
ensure the operation and plugging of the wells are protective of the 
groundwater resources under the UIC Program.
3. Long-Term ``Care Taker'' Phase (long-term monitoring and liability)
    The last phase is the Long Term or Post-Closure Period and is 
referred to as that period of time when the operator of the project is 
no longer the responsible party and the long-term ``care taker'' role 
is assumed by a government entity or government-administered entity. 
The major issue faced by the Task Force was how to deal with long-term 
monitoring and liability issues. The formula settled upon by the Task 
Force is the following:
    At the conclusion of the Closure Period, the operational bond would 
be released and the regulatory liability for ensuring that the site 
remains a secure storage site would transfer to a trust fund 
administered by the state. During the Post-Closure Period, the 
financial resources necessary for the state or a state-contracted 
entity to engage in future monitoring, verification, and remediation 
activities would be provided by this state-administered trust fund.
    The Task Force concluded that such a state-administered trust fund 
would be the most effective and responsive ``care-taker'' to provide 
the necessary oversight during the Post-Closure Period. The trust fund 
would be funded by an injection fee assessed to the site operator and 
calculated on a per-ton basis.
    In summary, the EPA Regulations under the SDWA and the UIC Program 
primarily deal with the Storage and Closure Phase as illustrated by the 
green box in the diagram, for it is only in the project areas within 
that box that EPA has authority under the SDWA. In addition to EPA's 
mandate to protect drinking water under the SDWA, the IOGCC regulations 
cover other public health and safety issues that need to be a part of a 
comprehensive regulatory framework. As previously stated, almost all of 
the well operational standards proposed in the IOGCC model regulations 
are already UIC requirements of one form or another.
    What I anticipate is that the proposed EPA regulations, whatever 
they end up being, will yield a set of uniform national standards, 
which superimposed on whatever state regulations may be in place will 
result in national consistency of application so as to ensure that 
drinking water resources are protected. Again as previously stated, 
given most states (those with primacy) already administer the existing 
UIC program, they will continue to do so, conforming their state 
regulations as they pertain to the geologic storage of carbon to the 
minimum standard set by the new EPA regulations.
    Unless the EPA regulations end up being unnecessarily proscriptive 
and onerous, the systems should work together perfectly and as I've 
already stated, ``seamlessly''. Certainly this is the hope and current 
full expectation of the IOGCC.
    I will note that with regard to federal lands (surface and/or 
mineral interests), that federal regulations emanating out of the BLM 
will undoubtedly be necessary. However, what emanates out of BLM would 
in all likelihood be more akin to what the states have done with regard 
to state and private lands rather than an overarching and broader 
national regulatory scheme.
    Additionally, our model regulatory system does not address the 
regulatory issues involving CO2 emissions trading and 
accreditation for the purpose of securing carbon credits. The Task 
Force concluded that the issue of CO2 emissions trading and 
accreditation would likely best be addressed in the marketplace and/or 
at the federal government level and was beyond the scope of the Task 
Force's mandate. In any event, the Task Force strongly believes that 
development of any future CO2 emissions trading and 
accreditation regulatory frameworks should utilize the experiences of 
the states.
    As concerns long term ``care taker'' liability, what the Task Force 
has proposed will have to be addressed by each state and province as 
they develop their own framework. It remains to be seen if states will 
agree with the Task Force or propose something new. There may indeed be 
a need for a federal role here at some point in the future but it is 
suggested that federal action in this area await a clear need 
manifesting itself in the years ahead.
    Additionally and very importantly, states and provinces are likely 
to continue to regard CO2 geologic storage reservoirs as a 
valuable resource that should be managed using resource management 
frameworks, therefore avoiding the treatment of CO2 storage 
as waste disposal. The Task Force strongly believes that treatment of 
CO2 as a waste under waste management regulatory frameworks 
will diminish significantly the potential of carbon storage technology 
to meaningfully mitigate the impact of CO2 emissions on the 
global climate. The energy consuming public and the industry which 
produces that energy share a common goal in coming up with a workable 
solution.
    Let me close by noting the obvious--that public support for carbon 
storage as a strategy for mitigating the impact of global climate 
change will be crucial. It will be important to educate the public 
about this technology including CO2's long history of being 
transported, handled, and used in a variety of applications. It will 
also be vitally important to include the public in every step of the 
regulatory development process, state and federal. State open meeting 
laws will ensure public notice and participation in the state process 
at both legislation and regulation development stages.
    Thank you for the opportunity to appear here today. If I can 
provide any additional information, please do not hesitate to ask.

    The Chairman. We'll be glad to include that in the record. 
Thank you very much for your testimony.
    Mr. Anderson.

 STATEMENT OF SCOTT ANDERSON, ENVIRONMENTAL DEFENSE, AUSTIN, TX

    Mr. Anderson. Thank you, Mr. Chairman. We're pleased to be 
here today as the committee considers how to create a 
regulatory framework regarding carbon capture and storage so 
that CCS can play a role in the fight against climate change. 
Climate change is the most significant environmental issue of 
our generation. The Senate is doing important work in this 
area. Cap and trade legislation if adopted would do a lot to 
commercialize CCS by creating a market value for voiding 
CO2 emissions and considering the measures you have 
before you today it is vital work as well.
    Without a sound regulatory framework uncertainty will 
prevail and the marketplace will not be able to move CCS 
forward in a significant way. Public acceptance will happen 
only if the public is confident that rigorous and credible 
regulatory oversight is in place. The fact that Environmental 
Defense supports deployment of CCS does not mean that we are 
champions of coal.
    We believe that business as usual for coal is over. Public 
opinion is shifting and conventional coal plants are being 
delayed or canceled at a rate unimaginable a year ago. People 
are increasingly recognizing that energy efficiency and 
renewables should play a leading role in energy and climate 
policy.
    We're not champions of coal at Environmental Defense but we 
are realists. Coal will continue to be used for the foreseeable 
future and we believe that CCS can play a significant role in 
helping coal to reduce its greenhouse emissions. Even today in 
the absence of a full fledged private market it's possible 
where the economics arrive to begin deployment.
    The Texas legislature passed a bill in 2007 that provided a 
severance tax incentive for oil producers who use 
CO2 to produce oil and then sequester the carbon 
afterwards, defining permits as meaning 99 percent retention 
for 1,000 years or more. So at least in Texas the legislature 
has made a determination that CCS is ready for deployment now.
    I'll turn now to Senate bill 2144 and section 5 of Senate 
bill 2323. Senator Coleman's Senate bill 2144 would require a 
feasibility study that we believe is sound. We endorse this 
measure.
    Section 5 of Senator Kerry's bill would establish an 
interagency task force to develop regulations and we believe 
that with some modification this is worthy of passage as well. 
Section 5 has several notable strengths. It assures that the 
development of a regulatory framework will move forward 
expeditiously that includes the Departments of Energy and 
Interior in the process. It appropriately names the 
administrator of the EPA who has key responsibilities of the 
Safe Drinking Water Act to be chairman or chairperson of the 
task force.
    Finally the legislation builds on existing regulatory 
authority on an incremental as needed bases. Subsection (a)(5) 
requires regulations to take into account the existing UIC 
program and then continues to provide additional requirements 
that regulations must satisfy. We believe such a step by step 
approach is prudent for first generation CCS rules. As the need 
for additional grants of jurisdiction or congressional guidance 
become apparent additional provisions can be enacted through 
supplemental legislation.
    There are also several areas of Section 5 that we feel 
could be improved. I'll only touch verbally on one of those. We 
are confident that the bill is intended to accelerate adoption 
of carbon sequestration regulations, but EPA is already engaged 
in rulemaking and there's a risk that the bill can actually 
slow down adoption of the first set of regulations. We 
recommend adding a provision indicating that Congress does not 
intend to discourage rulemaking in the near term, but rather 
intends that regulations should reflect the interagency process 
spelled out in the bill. If EPA adopts rules based on existing 
procedures in the meantime in a rules developed pursuant to 
this bill would become the second generation of rules.
    The final portion of my prepared testimony discusses the 
appropriate design of geologic sequestration regulations. We 
suggest that rules generally should be flexible and performance 
based and that they should adapt to evolving knowledge and best 
practices. At the same time we say that it's not enough to be 
flexible, adaptive and performance based. It's essential that 
rules be grounded in a thorough scientific understanding of the 
risks involved and the rules assure that the risk will be 
managed properly. Some aspects of the rules such as site 
characterization and selection requirements will need to be 
relatively more prescriptive than others. With that I'll close. 
Thank you.
    [The prepared statement of Mr. Anderson follows:]

Prepared Statement of Scott Anderson, Environmental Defense, Austin, TX

    We appreciate the opportunity to speak to you today as the 
committee considers how to create a regulatory framework that will 
enable carbon capture and storage (CCS) to play a role in the fight 
against climate change. Climate change is the most important 
environmental issue of our generation and successful development and 
deployment of CCS is a critical path for taking coal, the world's most 
abundant but carbon-intensive fossil fuel, and accommodating it to a 
carbon-constrained future.
    Environmental Defense is a national non-profit organization 
representing more than 500,000 members. Since 1967, we have linked 
science, economics and law to create innovative, equitable and cost-
effective solutions to urgent environmental problems. My personal 
background includes more than 20 years representing independent oil and 
gas producers in Texas, and so I have some appreciation for many of the 
issues and concerns related to the underground storage of carbon 
dioxide.
    The Senate is doing important work to address the threat of climate 
change. The single most important thing the Senate can do to 
commercialize CCS is to take quick action on cap and trade legislation, 
since such legislation would create a market value for avoiding carbon 
dioxide emissions. Given the right incentives, we believe that the 
market will be far more effective and efficient in discovering 
necessary technologies of all types, including CCS, than any suite of 
government mandates or subsidies, however well intentioned.
    Consideration of regulatory measures such as those before you today 
is vital work as well. Without a sound regulatory framework to govern 
carbon capture, transportation and storage, uncertainty will prevail 
and the marketplace will not be able to achieve the kind of deep and 
sustained reductions necessary to avoid the worst consequences of 
greenhouse gas build-up. Similarly, public acceptance of CCS will 
happen only if the public is confident that rigorous and credible 
regulatory oversight is in place.
    The fact that Environmental Defense supports the deployment of CCS 
does not mean that we are champions of coal. We believe that business 
as usual for coal is over. Public opinion is shifting and conventional 
coal plants are being delayed or canceled at a rate unimaginable even a 
year ago. In states like Texas, Florida, Oklahoma and Kansas, people 
are beginning to realize that it is environmentally irresponsible and 
fiscally imprudent to proceed with building new coal plants, absent a 
concrete plan to reduce and avoid CO2 emissions. We are also 
pleased that people are increasingly recognizing that energy efficiency 
and renewables should play a leading role in energy and climate policy.
    Although we are not champions of coal at Environmental Defense, we 
are realists. Coal will continue to be used for electricity production 
for the foreseeable future. Therefore the nation and the world need 
technologies that enable coal to be used in a manner that avoids 
significant greenhouse gas emissions. According to an IEA study 
released in 2006, CCS could rank, by 2050, second only to energy 
efficiency as a greenhouse gas control measure. The Intergovernmental 
Panel on Climate Change projects that CCS could, by 2100, contribute 15 
to 55% of the greenhouse gas reductions needed to avert catastrophic 
climate change. Just last week in a proposed directive on CCS, the 
Commission of the European Communities noted that efficiency and 
renewables are the most sustainable supply options in the long run but 
that ``we cannot reduce EU or world CO2 emissions by 50% in 
2050 if we do not also capture CO2 from industrial 
installations and store it in geological formations.''
    While different analysts come up with somewhat different scenarios, 
it is clear that coal is not going to disappear anytime soon and 
therefore effectively capturing and sequestering carbon dioxide 
emissions from coal can make a real difference in whether mankind will 
be able to solve climate change problems. We are fortunate that early 
sequestration projects, together with over 30 years of experience with 
injecting CO2 into oilfields, have provided confidence that 
long-term sequestration in properly selected geologic formations is 
feasible.
    In fact, even today, when large-scale commercialization of CCS is 
hampered by the absence of price signals that could be provided by a 
market in trading allowances, it is possible to begin deployment and 
start making real reductions in CO2 emissions. McKinsey & 
Company's recent study, ``Reducing U.S. Greenhouse Gas Emissions: How 
Much at What Cost?,'' provides a sense of the costs involved. My fellow 
panelist Tracy Evans of Denbury Resources can speak from direct 
experience about the feasibility of deploying CCS in the oilfield 
context.

               summary of comments on s. 2144 and s. 2323

    I would like to cover several things this morning. I will touch 
briefly on S. 2144, which would require a study of the feasibility of 
constructing and operating carbon dioxide pipeline and sequestration 
facilities. I want to focus most of our remarks, however, on Section 5 
of S. 2323, which would establish an interagency task force to develop 
regulations for CO2 capture and storage. Our remarks on 
Section 5 will focus on regulations for geologic sequestration, rather 
than capture. Finally, we will offer comments on the appropriate design 
of sequestration regulations. We will mention why it is important for 
CO2 storage regulations, especially in the early years, to 
be relatively performance-based rather than prescriptive and why it is 
important for the regulatory framework to adapt as knowledge improves.
    We believe that it would be useful to adopt S. 2144, and Section 5 
of S. 2323 if modified in several respects, as stand-alone measures. 
These measures would be most useful, however, if enacted as part of or 
in concert with comprehensive cap and trade legislation that would 
create a market value for avoiding CO2 emissions and thereby 
encourage market participants to engage in the activities that these 
measures are intended to address.

                                s. 2144

    Senator Coleman's S. 2144 would require the Secretary of Energy, in 
coordination with certain other agencies, to study the feasibility of 
constructing and operating carbon dioxide pipelines and sequestration 
facilities. We believe that the scope of the contemplated study is 
sound and that the study is likely to yield important information. 
Without prejudice to the possibility that others may have valuable 
suggestions on improving the scope of the study, we generally endorse 
this bill as proposed.

                          section 5 of s. 2323

    Section 5 of Senator Kerry's S. 2323 would establish an Interagency 
Task Force ``to develop regulations providing guidelines and practices 
for the capture and storage of carbon dioxide.''
    Section 5 has several notable strengths:

          1. The most fundamental benefit of Section 5 lies in assuring 
        that the development of a regulatory framework for CCS will 
        move forward expeditiously. The intent is clearly that issuance 
        of regulations should be accelerated, not delayed.
          2. Including the Departments of Energy and Interior in the 
        regulatory development process is worthwhile. DOE has 
        significant expertise in carbon capture and sequestration that 
        can benefit the rulemaking process. The Department of 
        Interior's Geologic Survey also has significant expertise and 
        is in a position to offer useful input.
          3. The bill appropriately names the Administrator of the 
        Environmental Protection Agency as the chair-person of the task 
        force. This is appropriate given that EPA, in addition to 
        having its own significant expertise in CCS, has responsibility 
        under the Safe Drinking Water Act's Underground Injection 
        Control Program to protect underground sources of drinking 
        water from contaminants that might cause a violation of a 
        national primary drinking water regulation or otherwise 
        adversely affect the health of persons.
          4. The legislation builds on existing regulatory authority on 
        an incremental, as-needed basis, i.e. subsection (a)(5)(A) 
        requires that the regulations ``take into account existing 
        underground injection control program requirements'' and then 
        provides additional requirements that regulations must satisfy 
        in subsections (a)(5)(B)-(F). We believe it is prudent to take 
        such a step-by-step approach to authorizing and overseeing the 
        development of ``first generation'' rules for CCS. Both 
        industry and regulators will ``learn while doing'' in the early 
        years of this technology. For now, most observers (ourselves 
        included) appear to find the Safe Drinking Water Act's 
        Underground Injection Control Program to be generally adequate 
        as a basis for initial federal regulations. As the need for 
        additional grants of jurisdiction and/or Congressional guidance 
        becomes apparent, additional provisions can be enacted through 
        supplemental legislation.

    There are also several aspects of Section 5 where the committee has 
an opportunity to make improvements:

          1. As noted above, subsection (a)(5)(B)-(F) builds on the 
        Safe Drinking Water Act by requiring that carbon dioxide 
        capture and storage regulations satisfy several objectives that 
        are not part of the existing underground injection control 
        program. However, in our judgment, two more requirements ought 
        to be added. These are (to borrow language from the proposed 
        Lieberman-Warner Climate Security Act): (a) a requirement to 
        regulate the ``long-term storage of carbon dioxide and 
        avoiding, to the maximum extent practicable, any release of 
        carbon dioxide into the atmosphere;'' and (b) a requirement 
        that the carbon dioxide storage regulations protect not just 
        underground sources of drinking water and human health, but 
        ``the environment'' as well. In order to fill these two gaps, 
        we recommend borrowing the language just quoted from section 
        8001 of S. 2191.
          2. We are confident that S. 2323 is intended to accelerate 
        the adoption of carbon sequestration regulations (while at the 
        same time broadening the regulatory development process beyond 
        EPA). There is a risk, however, that the bill could actually 
        slow down adoption of EPA's first set of regulations, which the 
        agency currently plans to propose in the Federal Register by 
        this fall. Publication and adoption of rules in the near term 
        would be likely to have a positive effect on the development of 
        early CCS projects. It would be extremely unfortunate if 
        passage of S. 2323 served to convince EPA to wait for the 
        conclusion of the S. 2323 process before adopting the first set 
        of regulations. Accordingly, we recommend that a provision be 
        added to the bill indicating that Congress does not intend to 
        discourage earlier CCS rulemaking but rather desires to make 
        sure that regulations growing out of an interagency process are 
        adopted in the near-term. If EPA adopts rules based on existing 
        procedures in the meantime, the regulations developed pursuant 
        to S. 2323 would become the second generation rules.
          3. Subsection (a)(5)(C) requires carbon dioxide storage 
        regulations to ``address the potential appropriate transfer of 
        liability to governmental entities.'' We would prefer that any 
        regulations transferring liability to governmental entities be 
        postponed until after the task force report called for in 
        Section 8004 of S. 2191. If such regulations are authorized 
        sooner, however, we think additional guidance is desirable in 
        order to assure that those who develop the regulations 
        recognize that shifting liability to the taxpayers affects the 
        taxpayers differently depending on whether or not monitoring 
        has demonstrated that the storage project in question is 
        performing as expected. The current proposal in Europe 
        regarding the transfer of liability, released January 23 by the 
        Commission of the European Communities, would transfer 
        liability to the government only ``if and when all available 
        evidence indicates that the stored CO2 will be 
        completely contained for the indefinite future.'' (Proposed 
        Article 18, Proposal for a Directive of the European Parliament 
        and of the Council on the Geological Storage of Carbon 
        Dioxide). Perhaps that would be a good policy for the United 
        States as well. It would protect the taxpayer and assure that 
        project developers maintain an incentive to operate projects 
        safely and effectively. At a minimum, however, we recommend 
        that subsection (a)(5)(C) of Section 5 be amended so that those 
        who draft regulations addressing liability will do so ``taking 
        into account whether or not particular projects have 
        demonstrated a reasonable likelihood that virtually all the 
        CO2 stored will remain sequestered permanently.''
          4. Subsection (a)(4) of Section 5 calls on the Interagency 
        Task Force to consult with industry, legal and technical 
        experts. We suggest that consultation be expanded to include 
        experts from non-governmental public interest organizations.
        appropriate design of geologic sequestration regulations
    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 projects. The Intergovernmental 
Panel on Climate Change (IPCC) Special Report on Carbon Capture and 
Storage concluded in 2005 that the fraction of CO2 retained 
in ``appropriately selected and managed geological reservoirs'' is 
likely to exceed 99% over 1000 years. The IPCC also concluded that the 
local health, safety and environmental risks of CCS are comparable to 
the risk of current activities such as natural gas storage, enhanced 
oil recovery and deep underground storage of 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.''
    While there is little doubt that geologic sequestration is 
feasible, and little doubt that successful projects are technically 
achievable today, knowledge and understanding are expected to increase 
dramatically as the technology begins to be deployed on a large scale. 
Current projects are highly customized. There are gaps in our knowledge 
and neither government nor industry have yet developed standard 
protocols for fundamental aspects of the process such as site 
characterization and monitoring. The IPCC Special Report projects that 
increasing knowledge and experience will ``reduce uncertainties'' and 
``facilitate decision-making.''
    In other words, we know enough to get started but we can expect to 
experience a lot of ``learning by doing.''
    What are the implications of this for the regulatory system? We 
believe at least four recommendations are in order to account for the 
fact that increasing knowledge and experience will facilitate rational 
decision-making in different ways over time:

          1. Lean toward a performance-based system. ``Performance-
        based'' regulations and ``command-and-control'' regulations do 
        co-exist--they are two poles on a continuum;
          2. Be reasonably flexible. Different projects will present 
        different risks and uncertainties, and the uncertainty 
        presented by a single project will tend to decline over time;
          3. Require projects to employ an iterative process, informed 
        by monitoring results and perhaps even by experience gained 
        from other projects, in order to reduce uncertainty and drive 
        improvements in site characterization, site suitability 
        assessment, models, model inputs, field operations, the 
        monitoring plan itself, and the remediation plan;
          4. Write ``adaptive'' rules. Look for language that 
        automatically accommodates evolving best practices. Also 
        structure rules to make use of evolving knowledge at each 
        particular site. Be willing to amend rules when needed to 
        protect the environment, giving due regard to the fact that it 
        generally is in the public interest for the regulatory 
        framework to give the regulated community the certainty needed 
        to make investment decisions.

    At the same time, it is not enough for rules to be flexible, 
adaptive and performance-based. It is essential that rules be grounded 
in a thorough, scientific understanding of the risks involved and that 
rules assure that the risks will be managed properly. In order to 
accomplish this, some aspects of the rules (e.g. site characterization 
and site selection requirements) will need to be more prescriptive than 
others.

                               conclusion

    In a carbon-constrained world where market forces are harnessed to 
make sure that society's carbon footprint is reduced in an economically 
rational fashion, Environmental Defense foresees a dramatically 
increased role for renewable energy and for energy efficiency. At the 
same time, since any complete transition away from fossil fuels is 
likely to take a very long time, we foresee a long-term need to deal 
with CO2 emissions from coal-based facilities. The sooner we 
begin to deploy CCS technology on a large scale the better. We applaud 
you for working on measures to make this a reality.

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

STATEMENT OF RONALD T. EVANS, SENIOR VICE PRESIDENT, RESERVOIR 
        ENGINEERING, DENBURY RESOURCES, INC., PLANO, TX

    Mr. Evans. Thank you Chairman Bingaman and members of the 
committee for the opportunity to share our views on the policy 
aspects of carbon capture and storage for CCS. As Denbury 
Senior Vice President I oversee all reservoir engineering, 
land, acquisitions and purchases of anthropogenic 
CO2. Denbury's primary focus is enhanced oil 
recovery utilizing CO2.
    We are currently the largest oil producer in the State of 
Mississippi and one of the largest injectors, if not the 
largest injector of CO2 in terms of volume in the 
United States. Since 1999 we have produced over 15 million 
barrels of oil from CO2 flooding from ten active EOR 
projects in Mississippi and Louisiana. We are currently 
participating in several demonstration projects and DOE's 
regional carbon sequestration partnership program. I will 
briefly address what we at Denbury believe are the most 
important policy aspects of carbon capture and storage: cost, 
taxation and the question of pipeline access and the 
legislation before the committee today.
    Cost. Perhaps the single largest obstacle to developing CCS 
beyond a limited number of projects currently in operation is 
the significant cost involved with carbon capture and storage. 
The cost of capture stem from variations in the quantity and 
the quality of the CO2 produced by hydrocarbon 
combustion, gasification or other industrial processes. The 
cost to purchase the compressors and the power to generate the 
compression necessary to pressure the gas significantly to 
enter the pipeline or sequestration, the lower the percentage 
of CO2 in the stream of gases and the greater amount 
of impurities in the streams the greater the cost of capture.
    In addition most technologies capture CO2 at a 
lower pressure than the pressure required to enter a typical 
CO2 pipeline or to inject into a deep saline 
reservoir or EOR project. The cost of the compressors and the 
power necessary to drive them are significant. One example 
approximately seven dollars and fifty cents per ton or just 
over one third of the estimated total cost of 20 dollars per 
ton for carbon capture and storage from the least expensive 
sources when transported only moderate distances.
    The costs of transportation are also significant. 
Installation costs for CO2 pipelines have increased 
dramatically in recent years. From about 30,000 dollars per 
inch mile for Denbury's free State pipeline to an estimated 
100,000 dollars per inch mile for Denbury's proposed green 
pipeline due to rising steel prices, rising energy prices and 
construction costs doubling our effective CO2 
pipeline transportation rate. Without some means of reducing 
the cost of carbon capture and storage infrastructure, 
significantly development, will likely remain stagnant.
    Senate bill 2144 directs the Secretary of Energy to study 
technical and financing issues related to the construction and 
operation of CO2 pipelines. While further studies 
should prove useful, Congress can act now to address carbon 
capture and storage costs. Congress should amend section 7704, 
the tax code to clarify that section (d)(1)(E) covers man made 
as opposed to just naturally occurring CO2.
    A substantial portion of all the CO2, natural 
gas, oil and product pipelines in the United States are owned 
and operated by publicly traded partnerships under section 7704 
whose lower cost of capital lowers the cost of development and 
transportation of natural resources. Because of the current 
uncertainty in section 7704 much of the existing CO2 
pipeline capacity cannot be used and new capacity may not get 
built to transport anthropogenic CO2. The Senate 
Finance committee approved a clarification last June, but 
Congress failed to include it in the Energy Independence and 
Security Act. We strongly urge members of this committee to 
work with their colleagues to pass this clarifying amendment.
    Pipeline access. The natural gas, oil and product pipeline 
systems today consist of hundreds of thousands of miles of 
pipelines with significant interconnects between individual 
pipeline systems. There also exists a huge retail market or oil 
and natural gas with a large number of users. This situation 
stands at market contrast to CO2 pipelines. In 
addition to CO2 not being explosive, flammable or 
poisonous there currently exists no large interconnected system 
nor are there reasonable prospects for development of a retail 
market for CO2 with a large number of users.
    Only a limited number of regional CO2 shippers 
and users exist. CO2 pipeline systems are only a 
tiny fraction of the size of the oil and gas network. 
CO2 pipelines should be given room to grow before 
FERC like regulation, including regulating access, is 
contemplated.
    To conclude the U.S. economy will continue to require 
massive amounts of energy well into the future and thus this 
country needs to use all of its resources to produce the energy 
it requires given economic and environmental realities. EOR is 
already playing an important role in this regard and can do so 
by far greater scale with the right policies. EOR is the only 
currently active, actual on the ground method for 
CO2 injection and sequestration.
    While we agree that the additional research and studies 
proposed in Senate bills 2144 and Senate bill 2323 are 
worthwhile. We do not believe there's a need for comprehensive 
Federal regulation as section five of Senate bill 2323 
proposes. Congress should provide necessary incentives in 
mechanisms to foster the development of CCS allowing states to 
continue to oversee various aspects with which they already 
have significant experience. Thank you.
    [The prepared statement of Mr. Evans follows:]

Prepared Statement of Ronald T. Evans, Senior Vice President, Reservoir 
               Engineering, Denbury Resources, Plano, TX

    Denbury Resources, Inc., (``Denbury'') appreciates this opportunity 
to share with Members of the Senate committee on Energy and Natural 
Resources its views on policy aspects of carbon capture, 
transportation, and sequestration (hereinafter collectively referred to 
as ``CCS''). As Senior Vice President, Reservoir Engineering for 
Denbury, I oversee all reservoir engineering, land functions and 
acquisition activities; am responsible for securing and contracting 
sources of anthropogenic CO2; and coordinating our 
government relations. Denbury is currently the largest oil producer in 
the State of Mississippi and the one of the largest injectors of carbon 
dioxide (``CO2'') in terms of volume in the United States. 
Denbury's primary focus is enhanced oil recovery (``EOR'') utilizing 
CO2. At the present time we operate ten (10) active 
CO2 enhanced oil projects, nine in the State of Mississippi 
and one in the State of Louisiana.
    Denbury also owns the largest natural deposit of CO2 
east of the Mississippi River, called Jackson Dome in central 
Mississippi, which we extract and transport through approximately 350 
miles of dedicated CO2 pipelines for use in EOR. Denbury is 
also in the process of designing or constructing an additional 375 
miles of CO2 pipelines in order to expand our operations 
into additional fields throughout the Gulf Coast of the United States. 
Finally, the committee may be interested to know that Denbury is 
working with the federal Department of Energy and various research 
universities on several Phase II and Phase III demonstration projects 
in the Regional Carbon Sequestration Partnership Program. While our 
business model focuses primarily on the transportation and 
sequestration components of CCS, we also are very familiar with the 
capture component both in terms of (1) the compression demands of 
transportation and sequestration and (2) our enhanced oil operations, 
which recycle large volumes of CO2 in order to recover 
additional volumes of oil. Given this background, Denbury is pleased to 
share its perspective on various policy aspects of CCS and the proposed 
legislation before the committee today.
    A thorough understanding of both (1) the physical processes by 
which CO2 is obtained, transported and injected for purposes 
of EOR and/or permanent storage, and (2) the economics that underlie 
existing and future EOR-related use of CO2 is essential to 
any consideration of potential policy issues. The significant and 
varying costs associated with CCS--whether in conjunction with EOR or 
not--are perhaps the single largest obstacle to developing CCS 
infrastructure beyond the limited, discrete projects currently in 
operation. From Denbury's perspective, it is critical that any 
contemplated state or federal regulation not increase these costs and 
impede private sector development of the CCS infrastructure necessary 
to meet the demands of our energy hungry and potentially carbon-
constrained world. As explained in greater detail below, the current 
regulatory structure surrounding CO2 consists of state and 
federal provisions that cover discrete aspects of CCS. For instance, 
the over 3,500 miles of dedicated CO2 pipelines currently in 
use were constructed and are operating under rules and guidelines for 
safety issued by the Department of Transportation's Office of Pipeline 
Safety; with pipeline siting issues significantly impacted by state 
eminent domain laws; and with CO2 injection wells permitted 
and approved by individual state government divisions or departments of 
Underground Injection Control, utilizing the standards and policies 
issued by the Environmental Protection Agency. While this system may 
appear patch-work and noncomprehensive, the current structure is 
entirely appropriate, as CCS is very much still in its infancy. This 
predominantly state-law-based system should suffice for many years to 
come. Thus, Denbury supports the recommendations of the Interstate Oil 
and Gas Compact Commission's 2005 Regulatory Framework for States. With 
few exceptions, such as funding research and further study of the 
issues involved as both bills propose, and given the current system of 
regulations and natural physical and economic constraints likely to 
exist for years to come, federal policymakers might best further 
national energy and carbon capture goals by deferring broad legislation 
or regulation while CCS is in this nascent phase.

                        i. capture / compression

    In thinking about the policy aspects of CCS, it is useful to 
separate the various components of CCS and to identify what issues 
within each merit particular attention, distinguishing between EOR-
related CCS and CCS in saline or other formations where appropriate. 
The starting point for any type of CCS is to capture the 
CO2. Denbury currently obtains all of its CO2 
from its natural deposit at Jackson Dome. Certain existing and some 
evolving technologies allow CO2 emitted from various 
manufacturing processes to be captured. The combustion or gasification 
of hydrocarbon-based fuels such as coal, petcoke or other hydrocarbons 
produces particularly large volumes of CO2 at varying levels 
of quality and purity. As new capture-inclusive projects are 
constructed, Denbury plans to acquire thousands of metric tons of 
CO2 each day for use in EOR.
    Aside from the threshold questions of how to properly classify 
CO2 and whether and to what extent to restrict emissions, 
from Denbury's perspective, the capture of CO2 presents no 
policy issue. Rather, the capture component presents a significant 
economic issue: First, capture technology is expensive. The byproduct 
of hydrocarbon combustion or gasification is a stream of gases and 
other impurities that contains various quantities of CO2. In 
order for CO2 to be usable in EOR it must be injected in a 
relatively pure form. Similarly, CO2 injected into deep 
saline reservoirs must be in a relatively pure form to maximize the 
storage space available to be filled with CO2. Thus, a 
significant component of the capture cost is the cost to separate and 
purify the CO2 to be injected. The lower the percentage of 
CO2 in the stream of gases and the greater the amount of 
impurities in the stream the greater the cost of capture. Second, most 
technologies capture the CO2 at a lower pressure than is 
required to either enter a typical CO2 pipeline or to inject 
into a deep saline reservoir or EOR project. The costs of the 
compressors and the power necessary to drive them are significant--
approximately $7.50/ton of the estimated $20/ton total cost\1\ for 
CO2 that is transported moderate distances. Therefore, the 
compression costs associated with CO2 capture are slightly 
more than one-third (33%) of the total CCS cost for the least expensive 
sources of anthropogenic (man-made) CO2. Additional 
compression costs are incurred to maintain pressure in pipelines and 
again when CO2 is pressured up to sufficient level for EOR 
reservoir injection. In sum, without some means of reducing the cost of 
captured anthropogenic CO2 significantly, infrastructure 
development will likely remain stagnant.
---------------------------------------------------------------------------
    \1\ Total costs of CCS varies substantially by source of 
CO2--to upwards of $70/ton--and even across proposed 
gasification projects because of variances in each process. This figure 
represents an estimate of the lowest-cost industrial-sourced 
CO2.
---------------------------------------------------------------------------
    To address this issue, last year the Finance committee approved a 
tax credit for the capture and sequestration of CO2 of 
$10.00/ton in connection with EOR and $20/ton for non-EOR projects for 
up to 75,000,000 tons sequestered. From Denbury's perspective, this 
would be sufficient to incentivize construction of additional pipelines 
from emission sites to geologic sequestration sites in connection with 
EOR activities. Unfortunately, this provision was not included in the 
energy legislation ultimately signed into law in December. We hope that 
Congress will address the issue of CCS costs in 2008, especially those 
associated with capture and compression, and note that proposed 
projects from gasification through to sequestration have the potential 
to create hundreds and perhaps thousands of jobs across the country. On 
this point, S. 2144 directs the Secretary of Energy to study technical 
and financing issues related to the construction and operation of 
CO2 pipelines and sequestration facilities. While this will 
be helpful to policymakers, the legislation should also direct the 
Secretary to consider these same issues in relation to CO2 
capture, separation, purification and compression.

                           ii. transportation

    The most economical way to transport CO2 is through 
pipelines at pressures in excess of 1100 psi so that the CO2 
is transported as a supercritical fluid (dense phase). At pressures in 
excess of 1100 psi and temperatures common for CO2 
pipelines, CO2 is a supercritical fluid which means that the 
CO2 has properties of both a liquid and a gas. Larger 
volumes of CO2 can be transported through CO2 
pipelines in this dense phase than can be transported as a gas. Given 
the pressure requirements to maintain CO2 in the dense 
phase, CO2 pipelines are generally operated at pressures 
greater than 2,000 psi. This pressure is well in excess of the average 
operating pressure of a natural gas pipeline, though the material used 
to manufacture both types is the same.
A. Safety
    CO2 is not as dangerous to transport as some other 
gases, such as hydrogen and natural gas because it is not explosive, 
flammable or poisonous. The primary safety issue with transporting 
CO2 is asphyxiation caused by a leak in a pipeline. Although 
there have been a few accidents, releases and leaks reported, none of 
the dozen leaks that occurred from 1986 to 2006 resulted in significant 
injury. The characteristics of anthropogenic CO2 and natural 
CO2 are essentially the same. Thus, whether natural 
CO2 or anthropogenic CO2 is being transported in 
a CO2 pipeline for the purposes of being delivered to an 
enhanced oil recovery project or being delivered to a deep saline 
reservoir sequestration project is irrelevant to the safe construction 
and operation of a CO2 pipeline. At the present time there 
exist over 3,500 miles of dedicated CO2 pipelines, most of 
which have been transporting CO2 for over 20 years--and some 
for over 30 years--with an excellent safety record. We do not see any 
evidence to suggest that the current regulatory framework that oversees 
construction and operation of CO2 pipelines should be 
modified. To the extent that consideration of safe handling, 
transportation, and sequestration issues by the Department of Energy, 
as S. 2144 directs, will address any lingering misconceptions about the 
relative safety of dense phase CO2, it will facilitate 
public understanding and acceptance of CO2 pipelines and 
sequestration projects.
B. Siting
    At the present time federal eminent domain authority does not 
extend to CO2 pipelines. Several states have provided 
eminent domain authority to CO2 pipeline owners to assist in 
getting CO2 pipelines constructed. While this is helpful in 
constructing intrastate pipelines, individual state eminent domain 
powers may not extend to interstate pipelines that are just traversing 
through a state with no origin or terminus there. For this reason and 
due to the long distances across state lines that separate potential 
CO2 emission capture sites from potential EOR locations, 
federal eminent domain authority may ultimately be required to develop 
a nationwide CO2 pipeline infrastructure. In addition, some 
mechanism may be necessary to address the siting of pipelines and CCS 
generally on federal lands. S. 2144 directs the Secretary of Energy to 
study CO2 pipeline siting issues, which should facilitate a 
thoughtful approach by policymakers.
C. Rates
    Any contemplation of federal regulation of CO2 
transportation rates and pipelines similar to the regulations that 
currently exist for natural gas, oil or products pipelines is 
premature, as there is no interconnected system of CO2 
pipelines to which to apply any such regulation, nor prospects for 
development of one for many years, nor reasonable prospects for 
development of a ``retail'' market for CO2 with large 
numbers of ``users'' of the CO2. At the present time there 
are very limited areas with existing CO2 pipelines and 
limited industrial CO2 emissions being captured (North 
Dakota Gasification). The vast majority of the existing CO2 
pipelines are transporting natural CO2 from natural 
underground CO2 production sources that are owned and 
operated by the CO2 pipeline owner--generally for use in 
enhanced recovery projects also owned and operated by the 
CO2 pipeline owner. In cases where the owner of the 
CO2 pipeline has CO2 production volumes in excess 
of its own EOR requirements, the excess CO2 volumes are sold 
to EOR operators in other projects or to industrial gas suppliers. This 
limited number of regional CO2 shippers and consumers stands 
in marked contrast to the numerous and geographically widespread 
producers and consumers of oil and natural gas products.
    It would be a substantial mischaracterization to suggest that the 
U.S. has an integrated CO2 pipeline system similar to the 
fully integrated natural gas, oil or hydrocarbon products pipeline 
systems which have their transportation rates regulated by the Federal 
Energy Regulatory Commission (``FERC''). The natural gas, oil and 
product pipeline systems today consist of hundreds of thousands of 
miles of pipelines with significant interconnects between individual 
pipeline systems to accommodate the transfer of natural gas, oil or 
products from one pipeline system to the other. In contrast, existing 
CO2 pipeline systems are a tiny fraction of that size (3500 
miles) and are not interconnected. (see Attachment No. 1) Several 
pipelines delivering CO2 for enhanced oil recovery in the 
Permian basin of west Texas are interconnected at Denver City, where 
CO2 can be transferred from one pipeline to another. The 
other CO2 pipeline systems in Wyoming, North Dakota, 
Oklahoma, and Mississippi are not connected to the Permian basin 
pipeline system or to each other. Thus, today no national 
CO2 pipeline system exists and no federal regulation to 
ensure access is necessary.
    Natural gas, oil and hydrocarbon products pipelines were 
constructed in a similar manner to today's CO2 pipeline 
systems. Individual pipeline systems were developed to transport 
natural gas, oil or products from production sites to consumption sites 
in their infancy. Only after a significant period of time, were these 
individual systems eventually interconnected to allow the transfer from 
one pipeline system to the other. Although the Federal Power Commission 
and eventually the FERC was granted jurisdiction over the 
transportation rates for natural gas, oil and hydrocarbon products, the 
combination of regulating rates and requiring open access has only 
existed since 1985. Several decades passed between the time that 
individual pipelines were constructed and eventually interconnected to 
create an integrated intrastate pipeline system. CO2 
pipelines should also be given room to grow before FERC-like regulation 
is contemplated.
D. Costs
    The construction and installation of CO2 pipelines is a 
capital intensive effort, the costs of which have increased in recent 
years for a variety of reasons, including rising steel prices, 
construction costs and energy prices. By way of example, Denbury's 93 
mile, 20 inch Freestate pipeline (see Attachment No. 2) completed in 
2006 cost approximately $30,000 per inch-mile, resulting in an 
effective transportation rate of approximately $3.50/ton at full 
capacity. The initial 37 mile segment of Denbury's 24 inch Delta 
pipeline was completed in 2007 at a cost of approximately $55,000 per 
inch-mile. We estimate that our planned 314 mile, 24 inch Green 
Pipeline that will run from Donaldsonville, Louisiana to Hastings field 
in southeast Texas will cost approximately, $100,000 per inch-mile 
resulting in an effective transportation rate of approximately $7/ton 
at full capacity. While the length (pumping stations to maintain 
adequate pressure add an additional $1 to $2 per ton to transportation 
costs), route obstacles and type of terrain all added to the estimated 
cost of the Green pipeline, the fact remains that such endeavors, even 
under the best of circumstances are extremely costly and take years of 
careful planning. As stated above, S. 2144 directs the Secretary of 
Energy to study technical and financing issues related to the 
construction and operation of CO2 pipelines. Such 
information should prove useful to policymakers seeking to understand 
the significant costs involved in developing the infrastructure of CCS. 
Also, any study of CO2 pipeline financing issues will 
undoubtedly encounter the tax code impediment discussed in the next 
section.
E. Taxation
    Today, a substantial portion of all CO2, natural gas, 
oil and products pipelines in the U.S. are owned and operated by 
companies that are organized as Publicly Traded Partnerships commonly 
referred to as Master Limited Partnerships (``MLPs''), which through 
their lower cost of capital have been an important financing source for 
building these assets. Section 7704 of the tax code permits MLPs to be 
taxed so that income and tax liabilities are passed through to the 
partners, even though the MLPs are large public entities, provided 90 
percent or more of the MLP's gross income is derived from certain 
qualifying activities. These activities include exploration, 
development, processing and transportation of natural resources, 
including pipelines transporting gas, oil, or products thereof (see 
Sec. 7704(d)(1)(E)). While this provision covers the processing and 
pipelining of ``natural'' CO2, it is unclear whether it 
covers anthropogenic CO2. Because of this uncertainty, much 
of the existing CO2 pipeline capacity (that owned by MLPs) 
cannot currently be used to transport anthropogenic CO2 from 
emissions sites--at least not without significantly higher tax costs 
than other pipeline assets in the industry.
    Last year, as part of its energy tax package, the Senate Finance 
committee adopted a modification to include industrial source 
CO2 in the definition of qualifying income (see Sec. 817 of 
the Energy Enhancement and Investment Act of 2007, June 19, 2007). 
However, Congress ultimately failed to include that package of 
provisions in the Energy Independence and Security Act of 2007 (P.L. 
110-140). Without this modification of the tax code, a substantial 6 
portion of the pipeline industry will most likely not contribute 
capital to the construction of the CO2 pipeline 
infrastructure necessary to facilitate CCS through transportation of 
anthropogenic CO2. We strongly urge Members of the Energy 
and Natural Resources committee to work with their colleagues on the 
Finance committee and the House Ways and Means committee to accomplish 
this important clarification.

                     iii. injection / sequestration

    Enhanced oil recovery utilizing CO2 requires multiple 
injection wells throughout a unitized field or reservoir. 
CO2 injection wells are permitted and approved by each 
State's division or department of Underground Injection Control 
utilizing the standards and policies issued by the EPA. CO2 
injection wells utilized in tertiary oil recovery (a.k.a. EOR) are 
permitted and approved as Class II Injection wells. Such wells have 
been in existence for over 30 years. The CO2 sequestration 
commercial demonstration projects proposed in S. 2323 and enacted in 
the Energy Independence and Security Act of 2007 should yield 
additional helpful data on the ability of EOR and saline reservoirs to 
sequester CO2.
    In 2005, the Interstate Oil and Gas Compact Commission (``IOGCC'') 
issued its recommendations concerning CO2 injection wells in 
EOR and non-EOR applications. The IOGCC has recommended that future 
CO2 regulation should build upon the primarily state-based 
regulatory framework already in place, due to states' decades of 
experience with CO2 EOR, natural gas storage, and acid gas 
injection. We concur with their recommendation that for future 
CO2 injections in EOR projects, the existing regulatory 
framework should not be modified. The IOGCC recommended that for non-
EOR CO2 injections, additional regulatory requirements may 
need to be considered since these types of applications may not have a 
defined period of injection as does EOR. We also concur with the IOGCC 
recommendation that CO2 injection wells for non-EOR 
applications should be permitted and approved as a sub-class of Class 
II injection wells or a new classification but not permitted as Class I 
or V injection wells.
    Generally, every CO2 well drilled is required by state 
regulations to set and cement a surface casing string below the 
Underground Source of Drinking Water (USDW) depth to protect the fresh 
water and ground water intervals. Cement is required to be circulated 
back to the surface to insure that all potential zones above the USDW 
depth that contain freshwater are protected. Only after setting the 
surface casing are wells drilled to the depth required to produce oil 
and gas or to inject CO2. Once the well reaches total depth 
an additional casing string is cemented in the well to provide 
additional protection to the freshwater intervals and to produce or 
inject through. We believe existing laws and regulations provide 
sufficient protection of the fresh water and ground water reservoirs 
from the injection of CO2 in EOR operations or, for that 
matter, in deep saline reservoirs.
    The potential for significant migration or leakage from an EOR 
operation is extremely remote due to the geological nature of oil and 
gas reservoirs and the existing mechanism that has trapped the oil or 
gas. At the present time oil and gas operators are required under their 
mineral leases and state regulations to properly plug and abandon 
wellbores within a reasonable period after oil and gas operations 
cease. Responsibility for re-plugging an improperly plugged well 
remains with the oil and gas operator for an extremely long period of 
time and, in practice, remains as long as the oil and gas operator is 
in existence. Such responsibility should be essentially the same for 
deep saline reservoir injection. However, the detailed geologic and 
engineering information required by states for EOR projects does not 
exist for saline reservoirs. Thus, information about deep saline 
reservoirs will have to be developed, taking into account that 
CO2, being less dense than saline water, will segregate due 
to gravitational forces and migrate to the highest subsurface position 
in the reservoir. As noted above, S. 2323 proposes, and the Energy 
Independence and Security Act of 2007 provided for, commercial 
demonstration projects, as well as a national CO2 storage 
capacity assessment. These undertakings should yield important data 
currently lacking on saline reservoirs.

                             iv. conclusion

    The U.S. economy will continue to require massive amounts of energy 
well into the future and thus the country needs to use all of its 
resources to produce the energy it requires given economic and 
environmental realities. EOR is already playing an important role in 
this regard--taking a waste product and using it to increase domestic 
energy production--and can do so on a far greater scale, with little 
action required by federal policymakers. The most important step 
Congress can take at present is to amend Section 7704(d)(1)(E) of the 
tax code to make clear that anthropogenic CO2 is included.
    The two bills being considered by the committee today, S. 2144 and 
S. 2323, are clearly intended to provide meaningful vehicles to better 
understand the issues central to CCS and we commend the committee for 
focusing on them. While we agree that additional research and further 
study are worthwhile--as both bills propose--we do not believe there is 
a need for comprehensive federal regulation, as Section 5 of S. 2323 
proposes. Of course, there are areas where federal oversight will 
likely be necessary, such as management of CO2 on and under 
federal lands. For the most part, however, Congress should simply 
provide necessary incentives and mechanisms to foster the development 
of CCS, allowing states to continue to oversee various aspects with 
which they already have significant experience.

    The Chairman. Thank you very much. Thank you all for your 
excellent testimony.
    Let me start with you, Mr. Bengal. I think you make a point 
in your testimony which is fairly key to our consideration of 
this whole subject and that is that you say States and 
provinces are likely to continue to regard CO2 
geologic storage reservoirs as a valuable resource that should 
be managed using resource management frameworks therefore 
voiding the treatment of CO2 storage as a waste 
disposal. I gather that what you have put together, your task 
force as you see it, deals with this not as a pollutant but 
rather as a resource that should be managed in that way. Could 
you clarify that for me?
    Mr. Bengal. The CO2 in and of itself may be not 
the resource as much as the pore space you would be putting it 
into. Primarily there's only so many places that would be good 
for CO2 storage. Not every State has good geologic 
sites and there's some States that you should not store 
CO2 in because of the nature of the geology. It's 
just not safe and sound.
    So there will be a competition for that pore space for 
those places where it is good that would be an economic benefit 
to a State who has that pore space to effectively manage that 
pore space. Ensure that No. 1, the maximum amount of 
CO2 is put into that storage area so it's not 
wasted, the space is not wasted, to keep other entities from 
encroaching upon that area so it can be set aside just for a 
particular project. There's a question about drilling through 
that site. If you had an entire site permitted and set aside 
for any particular project the State would then ensure that 
there's no other penetration to the well bores to that site.
    So what we're really talking about is we're looking at the 
management of the pore space where you put the CO2 
as basically the resource. The CO2 placed in that 
resource management frameworks deal with that because we deal 
with natural gas storage maximizing pore space to store the 
natural gas. With oil and gas you maximize recovery by managing 
the pore space much the same way here.
    In a waste framework you're just looking at a place to 
inject something to get rid of it. You're not managing 
effectively what you're using and where it's going. So that's 
the way we want to look at it. It's more regulatory framework 
issue as opposed to the CO2 itself.
    The Chairman. Let me ask, with my very limited knowledge of 
this subject at this point, it seems to me that a big problem 
is that much of the production of CO2 from power 
plants is not going to be particularly near the storage 
locations that we're going to try to store or sequester this 
CO2 in. So we're going to be talking about quite a 
few pipelines that are transferring this CO2 across 
several states. So there's going to be a Federal responsibility 
once you get an interstate pipeline.
    What do you see? I know you have a thing here saying that 
broader, overarching Federal regulation that's like that 
contemplated in 2323 is not appropriate in your view. How do 
you see the Federal Government regulating that transportation 
if I'm right that the significant amount of interstate 
transportation is going to be required?
    Mr. Bengal. What we're referring to basically is the 
storage site itself and not the transportation system. That 
would be a Federal role. The pipelines and the infrastructure 
for that would remain a DOT role as it is or a FERC role.
    We're basically talking about the regulation of the site, 
the licensing of the site, the long term storage and things 
like that is what we're referring to and the Federal 
regulations that would deal with that. With respect to the 
location and the cost of CO2 from existing power 
plants, you're absolutely correct. The cost of right now to 
retrofit an existing power plant to concentrate the 
CO2 from that emission stack and then transport it 
somewhere, a distance for storage which is many years off in 
the future for sure.
    What we're looking at is initially, I think the first 
projects would be basically a plant built for that purpose at a 
storage site where you have minimal transportation. Those are 
the kinds of projects we need to get going on first and right 
away as opposed to planning for this massive retrofitting of 
all existing power plants and a massive pipeline system which 
we don't need to do first. We need to get some major projects 
going right now. The technology exists. The regulatory 
frameworks are in place right now to do that.
    The Chairman. Senator Corker.
    Senator Corker. Yes, sir, Mr. Chairman. Thank you for your 
testimony, all of you. Mr. Anderson, you talked about how coal 
is going to be moving into a new era. I can't help but think, 
based on all the complications that center around either the 
cost of transport that Mr. Evans talked about and just the 
geographic differences that exist between where carbon is 
produced and where it's going to be stored, that really, unless 
there's huge allowances that are laid out for coal on the front 
end, that basically coal is going to go through a really, 
really tough period of time beginning in 2012 if a bill does 
pass regarding carbon cap and trade which I'm not saying is a 
plus or minus. I'm just making an observation. Do you have any 
comment on that? It just seems to me that the price of coal, 
the cost of coal produced electricity is going to skyrocket in 
the beginning as some of these other more complicated things 
are worked out. I wonder if you have any comment in that 
regard.
    Mr. Anderson. The studies that I'm familiar with project a 
very large role for coal based CCS in the future under regimes 
like this. The International Energy Agency for example has 
estimated that by 2050 that CCS could rank second only to 
energy efficiency as a contributor to solving global warming. 
There are other estimates that project a 15 percent to 55 
percent contribution.
    So while I think that business as usual is over for coal, I 
think coal has a very bright future.
    Senator Corker. That it has a bright future just at a 
different cost structure?
    Mr. Anderson. Yes, sir.
    Senator Corker. Mr. Evans do you have any comments in that 
regard?
    Mr. Evans. The comments I have, Senator, would be that the 
actual cost of transportation when you look at it although it's 
one third of the cheapest sources, it becomes a much, much 
lower component of say from an existing coal fired power plant. 
It may be as low at 10 percent of that cost. So really the cost 
on conventional coal today is primarily in the capture side not 
the transportation.
    As we develop sequestration in general with EOR the oil and 
gas companies can build pipelines to capture the CO2 
and transport to their oil fields. We can cover that cost of 
the transportation and the sequestration side. It's how much of 
the capture cost in addition to that are we able to cover.
    Senator Corker. What kind of commercial market for carbon 
other than for use in enhanced oil recovery do we see 15, 20 
years out? What part of the carbon that will be produced can 
actually be used for other commercial uses other than enhanced 
oil recovery?
    Mr. Evans. If I do a comparison in Mississippi we produce 
almost 550 million cubic feet a day of CO2. About 80 
million cubic feet of that goes into industrial uses to make 
dry ice, freeze chickens, industrial uses of CO2 so 
there you're looking at around 20 percent. That market has only 
been growing about two to 3 percent a year. So I don't know 
that there's going to be without significant discoveries of 
other uses for CO2 much use of it other than EOR or 
permanent sequestration.
    Senator Corker. Mr. Chairman, thank you.
    The Chairman. Thank you.
    Senator Lincoln.
    Senator Lincoln. Thank you, Mr. Chairman. Again welcome 
gentlemen. We appreciate your expertise in working with us.
    Mr. Bengal you mentioned some states have begun the process 
of beginning a legal and regulatory structure for carbon 
storage. What are some of those or who are some of those 
States?
    Mr. Bengal. California, New Mexico, Wyoming, North Dakota, 
Texas and several other States.
    Senator Lincoln. So there are a few.
    Mr. Bengal. Yes, they're working on legislation as well as 
rules to move CO2 storage along in their States.
    Senator Lincoln. What was the other or whoever was on your 
task force? Was there other expertise there?
    Mr. Bengal. Yes. The task force consisted of actually of 
two task forces through phase one and phase two. But it was 
State oil and gas regulators from various oil and gas States, 
representatives from the various DOE partnerships, the 
Association of Professional or state geologists, State geologic 
surveys, representatives from DOE, EPA, BLM and Environmental 
Defense was an observer during the process of our rules 
development.
    Senator Lincoln. So you had quite a wide----
    Mr. Bengal. Yes. There were industry experts as well.
    Senator Lincoln. I don't know that you've gotten into this 
yet today and maybe I'm being redundant. I hope not. But you 
might explain to me the issue regarding storage rights.
    Mr. Bengal. Much like natural gas if you're going to store 
something underground like you do natural gas the pore space is 
owned by someone. It's mineral right. It's a property right and 
you can't just use that without the property rights authority 
to do so.
    That has to be acquired and that's generally, probably akin 
to the natural gas storage industry where it belongs to the 
surface owner. So in order to store these amounts of 
CO2 we're talking about even though you may have a 
very large area an operator will have to acquire the right to 
store it in that area. There was a question before where's the 
plume going to go? How are you going to manage the plume for 
future liability?
    You're going to know that before you start because that 
operator is going to have to own and control the entire area 
where that plume will go. That's a very large undertaking to do 
to acquire those rights. So that will be worked out prior to 
injection what the ultimate static disposition of that plume 
will be because it will be owned and controlled by owning those 
property rights.
    Senator Lincoln. That seems like that would be quite the 
lengthy process. I know just with the Fayetteville shale 
drilling that is going on in Arkansas the mineral rights and 
property rights and how they've gone in there has taken quite a 
bit of time.
    Mr. Bengal. It will be in a natural gas storage setting. 
States do that through eminent domain condemnation proceedings. 
You get a certain percentage of the site locked up and then you 
would go to the State and condemn the rest to move that project 
forward.
    Senator Lincoln. In terms of the--maybe you can help 
explain a little better too, more detail, how you see the state 
framework working with the EPA framework? Is that kind of like 
a MOA or how do they do that?
    Mr. Bengal. Right now the UIC program, the Underground 
Injection Program, most states have the authority through 
privacy from the U.S. EPA to administer that program at the 
State level for the U.S. EPA in each state.
    Senator Lincoln. So they've already got that?
    Mr. Bengal. They've already got that. In a few States, a 
direct implementation State, the EPA does on its own. But for 
those States that do have privacy whatever EPA changes the 
regulations to be they're automatically incorporated into the 
State functions that exist and are ongoing now.
    Senator Lincoln. Is there something special about Federal 
land. Is there something that--does there need to be 
regulations of CO2 storage specifically on Federal 
lands?
    Mr. Bengal. They probably will have to develop a similar 
type of framework for regulation that we would have on private 
lands within the States. The State would probably be involved 
in that. I don't see why it would have to be much different 
than what the States would do on private lands. The one benefit 
of Federal lands is you have one mineral owner or one surface 
owner for the entire project. You could actually site projects 
very succinctly and not have to deal with the property issue at 
all.
    Senator Lincoln. Last just about emissions trading or 
accreditation of storage projects for the purposes of securing 
the carbon credits. Does your proposed infrastructure cover 
that as well?
    Mr. Bengal. No. We do not do that. We dealt with just the 
technology and the legal framework for the storage itself. 
That's probably going to be worked out at the marketplace or be 
federally--under the cap and trade system and you'll have to 
figure that out. We will fit in whatever it is.
    Senator Lincoln. We're always grateful for any suggestions 
or models you might have already come up with.
    Mr. Bengal. Just don't do more than you have to.
    Senator Lincoln. Ok. Thank you, Mr. Chairman.
    The Chairman. All right. I think that's the end of our 
questions, and thank this panel very much. This was very useful 
testimony and we think it is a useful hearing. Thank you.
    [Whereupon, at 4:25 p.m. the hearing was adjourned.]
                               APPENDIXES

                              ----------                              

                               Appendix I

                   Responses to Additional Questions

                              ----------                              

     Responses of Scott Anderson to Questions From Senator Bingaman

    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Answer. We suggest using retention of at least 99% for at least 
1000 years as the standard for ``permanence.'' The Intergovernmental 
Panel on Climate Change has indicated that it is feasible to meet such 
a standard in well-selected, well-managed sites.
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Answer. We are hopeful that a 1,000 year standard as suggested 
above will assure that any material leakage that takes place will occur 
well beyond the era of fossil fuels and therefore at a time when 
climate change due to emissions of greenhouse gases such as 
CO2 is no longer an issue. We do not expect such a standard 
to be burdensome and in fact we expect that well-executed projects will 
have minimal leakage for even longer times. Studies at the Weyburn 
project, for example, indicate a 95% probability that 98.7 to 99.5% of 
the sequestered CO2 will remain in the geosphere after 5,000 
years and that there will be even less leakage as time goes on. The 
longer CO2 is contained underground the more likely it is to 
stay contained due to mineralization, dissolution in formation water, 
and residual trapping in pore spaces. See Whittaker, S., White, D., 
Law, D, and Chlaturnyk, R., IEA GHG Weyburn CO2 Monitoring & 
Storage Project Summary Report, Petroleum Technology Research Center, 
Regina, 273 (2004); Damen, K., Faaij, A., and Turkenburg, W., Health, 
Safety and Environmental Risks of Underground CO2 Storage--
Overview of Mechanisms and Current Knowledge (Springer 2006).
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1% leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Answer. Some have calculated that leakage rates as low as .01% per 
year, implying 90% retention over 1000 years, might be acceptable from 
the perspective of climate change policy. Hepple, R. and Benson, S., 
Implications of Surface Seepage on the Effectiveness of Geologic 
Storage of Carbon Dioxide as a Climate Change Mitigation Strategy, in 
Gale, J. and Kaya, Y. (eds), Sixth International Conference on 
Greenhouse Gas Control Technologies, vol. I, 261-266 (2003). We believe 
that the 99% for 1000 years standard is feasible and provides a better 
margin of safety.
    In order to enforce such a requirement, it will be necessary to: 
(1) require that sequestration projects take place only at well-
characterized, properly selected sites; (2) require project developers 
to define the containment system and explain why it is reasonable to 
expect the system to contain the appropriate amount of CO2 
for the appropriate time frame; (3) require the developer to model and 
project the fate of the CO2 in the containment system; (4) 
require monitoring to confirm or modify the definition of the 
containment system and to confirm or modify the projections regarding 
the fate of CO2 in the system; (5) require that operations 
be modified if monitoring indicates that a risk of unacceptable leakage 
is developing; and (6) require remediation where problems develop that 
cannot be adequately resolved through modification of operations.
    Question 4. In your written testimony, you support the coordinated 
efforts of the EPA, DOE, and DOI that are specified in Senator Kerry's 
bill (S.2323). Would there be any additional agencies, organizations, 
or individuals who you feel should be involved in the interagency task 
force? (e.g. in the case of ultimate liability of storage sites the 
Department of Justice may need to be consulted, DOT & FERC for 
pipelines issues, etc.)
    Answer. Yes, the Department of Justice, DOT and FERC could all have 
valuable roles to play.
    Question 5. You also state in your testimony a need to specify 
``permanent'' geologic storage. In your opinion and that of 
Environmental Defense, how would you define permanent storage?
    Answer. Please see answer to question 1 above.
      Responses of Scott Anderson to Questions From Senator Dorgan
    Question 1. I also think it's important that the general public 
have an understanding of how vastly important an issue this will be to 
our energy future. In your judgment, what will it take for the general 
population to better understand and support the approaches associated 
with carbon capture and storage?
    Answer. Education is important in order to achieve public 
understanding and support. A sound, rigorous regulatory framework is 
also essential. In addition, the public is more likely to support CCS 
if it views the technology as only one tool among many for combating 
climate change, as opposed to viewing CCS as being in competition with 
renewables and energy efficiency.
    Question 2. Coal and oil & gas are two different sectors that 
traditionally have little history of working together. Today, through 
enhanced oil recovery opportunities, we are seeing these partnerships 
beginning to take shape. What kind of new relationships and 
partnerships will have to be established in order to achieve larger 
scale carbon capture and storage projects? How can we build on these 
and other public and private sector relationships to expand this into 
an industry (regional or national)?
    Answer. Putting a market value on carbon sequestration by passing 
cap and trade legislation is the single most important thing Congress 
can do in order to encourage these relationships. Once this is done, 
the market will be able to become the primary driver for answering 
questions about the types of relationships and partnerships that ought 
to arise.
      Response of Scott Anderson to Question From Senator Menendez
    Question 1. Mr. Anderson, I agree with your testimony that carbon 
capture and sequestration technology needs to be advanced and I agree 
with you that a cap and trade bill would be the best way to make sure 
this technology is developed quickly. But I also do not want us to lose 
focus on the fact that we need to eventually transform our economy from 
one based on fossil fuels to one based on renewables. I am curious 
about your views on what the balance between funding for CCS and 
renewable should be. For instance, the Administration is asking for 
more funding for research on the technology than they are asking for in 
solar research. Is this the correct balance in your opinion?
    Answer. We support the proposed level of CCS funding because it 
seems proportionate to current RD&D needs. This funding level should 
not be permanent, however. Once these investments have been made, the 
investment incentive in the future will need to come from the price 
signal induced by cap and trade legislation. Publicly-funded research 
needs for renewable energy are likely to remain large for a longer 
period of time, and accordingly we hope that the balance between CCS 
investments and investments in solar and other renewable energy will 
improve as time goes on.
                                 ______
                                 
  Responses of Benjamin H. Grumbles to Questions From Senator Bingaman
    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Answer. There is currently not a precise definition of ``permanent 
CO2 storage.'' Effectiveness of geologic storage is 
contingent on CO2 remaining stored underground for a long 
period of time. A desirable timeframe for geologic storage of 
CO2 is on the order of thousands of years or longer. 
However, effectively sequestering CO2 for even a few hundred 
years could provide valuable flexibility in reducing CO2 
emissions and contribute to reducing the costs of mitigating climate 
change.
    Accumulation of CO2 in natural geologic formations has 
been underway as a natural process in the earth's upper crust for 
hundreds of millions of years. In most proposed carbon capture and 
storage (CCS) projects, the goal is to remove CO2 from the 
atmosphere, and store it in the subsurface for significant periods. 
Thus, ``permanent'' means some long period of time that provides a 
reasonable assurance that the majority of the CO2 will stay 
in place over a number of years (100's to 1,000's). Eventually, an 
increasing portion of CO2 stored in the subsurface will be 
trapped through processes such as formation of minerals, and 
hydrodynamics with the result that this portion of the CO2 
would be sequestered at a geologic time scale of millions of years. As 
we gain knowledge from geologic storage projects, a more precise 
understanding of ``permanent CO2 storage'' should emerge.
    For the purposes of EPA's proposed rulemaking under the Underground 
Injection Control (UIC) program, we have not defined this term. 
However, CO2 will be stored for long periods of time (e.g., 
centuries) and EPA's regulations will ensure that CO2 
storage is conducted in a manner that does not endanger underground 
sources of drinking water.
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Answer. DOE and others are conducting pilot scale geologic 
sequestration projects to help better understand these questions and 
others. CO2 storage in geologic formations can mirror the 
timescale of oil and gas deposits in formations containing naturally 
occurring carbon dioxide gas. These formations have held these fluids 
for millions of years. A desirable timeframe for geologic storage of 
CO2 is on the order of thousands of years or longer.
    Demonstrating storage over these timeframes should not be overly 
burdensome. For well-selected, designed, constructed and managed 
geologic storage sites, the vast majority of CO2 will 
gradually be immobilized by various trapping mechanisms and, in that 
case, could be retained for up to millions of years. Because of these 
mechanisms, storage could become more secure over longer timeframes 
(IPCC 2005).
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1 % leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Answer. EPA is currently deliberating on several of these issues as 
the Agency works to develop a regulatory proposal under the UIC 
program. EPA anticipates that some CCS projects will exhibit a certain 
amount of leakage within the subsurface, however, safeguards such as 
leak detection and monitoring will protect against leakage that 
endangers underground sources of drinking water. The Agency is 
considering requiring monitoring for leakage to the atmosphere as it is 
an indicator of potential leakage to or endangerment of underground 
sources of drinking water.
    Question 4. In the context of the national regulations that you are 
developing for carbon storage, have/will you make a clear definition of 
the appropriate storage time for CO2 in the subsurface? Will 
you be proposing acceptable leakage rates and be mandating a minimum 
storage time? If so, how will you enforce this regulation?
    Answer. EPA is currently deliberating on these issues as it works 
to develop a proposed regulation.
    Question 5. In the case of other ``pollutant'' storage, the EPA has 
mandated 10,000 years residence time for the pollutant (or waste 
product) in the geologic subsurface. Do you anticipate proposing this 
sort of mandatory time restriction? In the case of Yucca Mountain this 
has proved to be very burdensome in the permitting/regulatory process.
    Answer. EPA is in the middle of a deliberative process as it 
develops its proposed regulations and is considering this, among many 
other issues.
    Question 6. According to a study conducted by Argonne labs, there 
is a perception from state EPA employees that they are currently 
inadequately trained, underfunded, and understaffed for handling the 
existing UIC program. After you complete the new regulations that you 
have described in your written testimony, do you anticipate that the 
state and regional EPA offices will have enough manpower, fiscal 
resources, training, and expertise to effectively implement these new 
rules? Should new staffing be required? How will this be funded?
    Answer. While CO2 storage raises new technical 
considerations, EPA is committed to continuing to support regional and 
state regulators for the purposes of implementing the UIC program. 
Currently, EPA provides nearly $11 million annually to assist primacy 
states and EPA regions where states do not have primacy with UIC 
program implementation. EPA directly implements programs in 10 states 
and shares responsibility in 7. The FY 2009 President's Budget requests 
$10.9 million for this work.
    We would note that the Clean Air Act Advisory committee's (CAAAC) 
Advanced Coal Technology Work Group, which recently issued its final 
report, developed a recommendation regarding this topic. Specifically, 
the Work Group recommended that EPA, working with other agencies, 
``sponsor education and training programs for regulators and other 
officials involved in the permitting and monitoring of carbon capture 
and sequestration projects'' (more information is available at http://
www.epa.gov/air/caaac/coaltech.html). EPA is currently preparing a more 
indepth evaluation of this issue in order to respond to CAAAC. The 
President's Budget requests a total of $3.9 million for UIC regulatory 
work in FY 2009, which the Agency could partially target to help 
address the CAAAC recommendation.
   Responses of Benjamin H. Grumbles to Question From Senator Dorgan
    Question 1. It seems to me that we need to much more quickly begin 
establishing and defining the ``rules of the road'' when it comes to 
carbon management. As we begin to unlock the opportunities for 
capturing, moving and storing larger amounts of CO2, it is 
fair to say that the federal government will likely play a greater 
role. It will be better if we begin to better define appropriate roles 
for local, state and federal government. What are the most critical 
near-term issues that your agency can address so that developers can 
begin demonstrating CCS projects?
    Answer. EPA understands the importance of clearly defining roles 
and responsibilities. Under the Safe Drinking Water Act, EPA develops 
minimum requirements for state and tribal Underground Injection Control 
(UIC) programs. Primacy states may develop their own regulations for 
injection wells in their state. These requirements must be at least as 
stringent as the federal requirements (and may be more stringent).
    EPA has been working closely with DOE over the past several years 
as they implemented their CCS research and development program. The 
Agency recognized the critical near-term issue associated with 
facilitating UIC permits for demonstration projects to ensure that 
projects are carried out in a manner that does not endanger underground 
sources of drinking water. To address this, in March 2007, EPA issued 
guidance on permitting experimental projects as Class V injection 
wells. EPA plans to propose regulations in the summer of 2008 to ensure 
consistency in permitting fullscale CO2 geologic 
sequestration projects. Final regulations would be issued by 2011. As 
with our other regulations, when EPA publishes new federal regulations 
with specific criteria and standards for constructing, operating, and 
closing CO2 wells, a primacy state would need to adopt these 
standards and classes of wells and seek approval from EPA. In the 
interim, states will be able to permit CO2 wells under 
existing EPA regulations and guidance.
    Question 2. Creating an infrastructure to capture, transport, 
store, and monitor CO2 will take greater federal resources 
including staff, technology and other elements. Do you think your 
agency is well-equipped to begin to undertake this enormous challenge?
    Answer. There are several federal agencies that will play a role in 
establishing a national program to carry out carbon dioxide capture and 
storage (CCS) on the scale that will be needed to address climate 
change. While EPA itself will not undertake infrastructure projects, 
the Agency is responsible for implementing environmental statutes and 
other programs that may affect deployment of CCS. EPA has been and 
continues to thoroughly examine its CCS-related statutory and 
programmatic responsibilities in order to prioritize Agency efforts.
    Along those lines, establishing a regulatory framework for geologic 
sequestration (GS) under the UIC program is an integral step towards 
creating an enabling framework for CCS. EPA is committed to continuing 
to provide funding and resources for regional and state regulators for 
the purposes of implementing the UIC program. Currently, UIC programs 
receive nearly $11 million annually to assist in implementing their 
programs.
    The UIC Program has regulated over 800,000 injection wells for over 
35 years. While the GS of CO2 is a new technology that poses 
a unique set of risks to underground sources of drinking water and 
human health, EPA believes that GS can be a safe and effective tool 
when wells are properly sited, operated, monitored, and closed. We 
believe the UIC program provides an appropriate regulatory framework 
within which to manage the injection of CO2 to ensure 
protection of underground sources of drinking water.
    Question 3. Many of the introduced climate change bills have called 
for ``permanent'' storage, but do not go so far as to define 
``permanence.'' Since the EPA may have a role in monitoring 
CO2, does the agency have a clear definition of ``permanent 
CO2 storage'' as it relates to geologic storage? Would there 
be any amount of leakage that is acceptable? What is reasonable? How 
can we enforce such a requirements?
    Answer. Effectiveness of geologic storage is contingent on 
CO2 remaining stored underground for a long period of time. 
A desirable timeframe for geologic storage of CO2 is on the 
order of thousands of years or longer. However, effectively 
sequestering CO2 for even a few hundred years could provide 
valuable flexibility in reducing CO2 emissions and 
contribute to reducing the costs of mitigating climate change.
    For the purposes of EPA's proposed rulemaking under the UIC 
program, we have not yet defined this term. Generally, the 
CO2 will need to be stored for long periods of time (e.g., 
centuries or millennia) in a manner that does not endanger underground 
sources of drinking water.
    EPA is currently deliberating on several of these issues as the 
Agency works to develop a regulatory proposal under the UIC program. 
EPA anticipates that some CCS projects will exhibit a certain amount of 
leakage within the subsurface, however, safeguards such as leak 
detection and monitoring will protect against leakage that endangers 
underground sources of drinking water. The Agency is considering 
requiring monitoring for leakage to the atmosphere as it is an 
indicator of potential leakage to or endangerment of underground 
sources of drinking water.
    Question 4. Could you elaborate more about how the EPA could work 
with state regulations to monitor CO2? Would there be 
similarities to how you monitor the UIC program?
    Answer. The Safe Drinking Water Act, 42 U.S.C. 300h-1, allows 
States to apply to EPA for primary enforcement responsibility to 
administer the UIC program; those States receiving such authority are 
referred to as ``Primacy States.'' For UIC Class I,111, IV and V wells, 
states must meet EPA's federal minimum requirements for UIC programs, 
including minimum construction, operating, monitoring and testing, 
reporting, and closure requirements for well owners or operators. Where 
states do not seek this responsibility or fail to demonstrate that they 
meet EPA's federal minimum requirements, EPA is required, by statute, 
to implement a UIC program for such States (42 U.S.C . 300h-1(c)). We 
expect that states who wish to implement a CCS program would be subject 
to similar requirements for primacy and would need to demonstrate that 
they meet EPA's federal minimum requirements for CCS.
   Response of Benjamin H. Grumbles to Question From Senator Menendez
    Question 1. Mr. Grumbles, CCS technology does not necessarily 
address other environmental problems with coal fired power plants. Coal 
is a major source of air pollution, with coal-fired power plants 
spewing 59% of total U.S. sulfur dioxide pollution and 18% of total 
nitrogen oxides every year. Coal-fired power plants are also the 
largest polluter of toxic mercury pollution, the largest contributor of 
hazardous air toxics, and release about 50% of the nation's particle 
pollution. In addition, mining coal itself can pollute groundwater and 
devastate landscapes. Do you agree that even with an effective carbon 
capture and sequestration program that other environmental harms from 
coal need to be addressed before CCS technology can truly usher in an 
era of ``clean coal?''
    Answer. EPA is committed to addressing environmental challenges 
associated with the use of coal, which is an abundant domestic energy 
source that is important to U.S. energy security. Under the Clean Air 
Act, EPA has made and will continue to make significant achievements in 
reducing major pollutants from coal fired power plants, including 
sulfur dioxide, nitrogen oxides, and mercury. Reductions in air 
pollution, since the 1990 Clean Air Act Amendments, have moved 
significantly further through policies such as the Clean Air Interstate 
Rule. The proposed rulemaking under the Underground Injection Control 
(UIC) Program is an important step towards ensuring protection of U.S. 
drinking water. EPA is also working under the Clean Water Act (CWA) 
with other Federal agencies, the States, and the coal mining industry 
to significantly reduce adverse impacts to the Nation's waters from 
surface coal mining activities. We are using our CWA regulatory tools 
to ensure mining impacts to streams and wetlands are avoided wherever 
possible, and where impacts can not be avoided, we are requiring more 
effective mitigation and reclamation to offset these impacts.
                                 ______
                                 
    Responses of Ronald T. Evans to Questions From Senator Bingaman
    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Answer. The only definition or measure of permanent storage of 
which I am aware is that set forth by the Intergovernmental Panel on 
Climate Change (IPCC) which states that storage should be on the order 
of 1,000 years in a geologic formation, with less than 1% leakage of 
the volume of CO2 that is injected.
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Answer. I am not an expert on climate change and thus not in a 
position to recommend the appropriate length of time CO2 
should be stored underground to mitigate emissions.
    Whether or not storage times will be burdensome on CCS projects--
specifically on projects undertaken in conjunction with enhanced oil 
recovery, Denbury's area of operations--will depend on the nature and 
scope of any post-injection monitoring requirements. Denbury currently 
monitors and verifies CO2 volumes we inject in enhanced oil 
recovery projects in order to properly manage the project. When it is 
determined that all of the economically producible oil or gas has been 
recovered, the projects are generally abandoned by properly plugging 
the wells. However, to date, we have not sequestered any volumes of 
CO2 for permanent storage and thus have no experience 
managing long-term monitoring requirements. Further, we are not aware 
of any companies, or governments for that matter, that have been in 
existence for 1,000 years. Thus, the 1,000 year period being suggested 
by the IPCC seems difficult to envision, much less manage, particularly 
without knowledge of what will be required to satisfy regulatory 
agencies overseeing CCS projects.
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1% leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Answer. I am not an expert on climate change and thus not in a 
position to recommend the amount of CO2 leakage that is 
``acceptable.''
    It is difficult to say whether 1% leakage of the volume of 
CO2 that is injected over the life of the storage project is 
a reasonable expectation. Based on our experience, we believe that 
CO2 injected into a geological reservoir during and 
following the successful completion of enhanced oil recovery will 
remain in the ground permanently without leakage, assuming the project 
is abandoned properly following the recovery of the oil or gas. 
Subsequent events such as improper cementing, the drilling of wells 
through the geologic reservoir seeking additional minerals, or 
subsurface seismic activities, could cause the trapping mechanism to be 
breached, leading to some leakage. These risks can be properly managed 
to reduce the potential for leakage, but it is impossible to assert a 
particular percentage amount of leakage that is reasonable to expect 
from CCS projects generally.
    In the short run, to enforce any leakage limitation, credits for 
sequestration could be withdrawn or withheld proportionate to the 
amount of leakage from a particular site. The best way for the 
government to enforce such a limit over the long run would seem to be 
for the government to assume control over and/or responsibility for the 
stored CO2.
    Question 4. Is Denbury or other EOR companies concerned that the 
EPA regulatory effort may be too onerous or prescriptive? Do you think 
they should be the lead agency in developing regulations for CCS (at 
the State or Federal level)?
    Answer. It is difficult for Denbury to assess the EPA's regulatory 
effort until the EPA proposes rules for comment. Nonetheless, we are 
concerned about how the EPA will eventually classify CO2 
emissions, and subsequently, what requirements the EPA will propose 
concerning how to capture and store CO2. CO2 is 
not poisonous, explosive or flammable and has been vented for many 
years without incident. In addition, CO2 is currently 
consumed by individuals, consumed by plants, and utilized in the 
refrigeration of food. Thus, classifying CO2 as any sort of 
hazardous substance would be inconsistent with its safety and its 
current uses.
    I am not certain whether EPA is the appropriate lead agency in 
developing regulations for CCS. As stated in my written hearing 
testimony, Denbury agrees with the recommendation of the Interstate Oil 
and Gas Compact Commission (IOGCC) that future CO2 policies 
should build upon the state-based framework already in place, as this 
framework has provided an entirely safe development of infrastructure 
for EOR involving CO2. Based on Assistant Administrator 
Grumbles' testimony at the hearing, the EPA plans to address the 
injection of CO2 emissions for CCS in its proposed rules 
this coming summer. His testimony indicated EPA would be working with a 
variety of government agencies within the existing framework of the 
underground injection control regulations. We believe that in 
developing proposed regulations on Underground Injection Control 
specific to CCS, EPA should work closely with the Department of the 
Interior's Minerals Management Service, which has significant 
experience managing the nation's natural gas, oil and other mineral 
resources.
    Question 5. Many industry professionals have indicated that for 
large scale CCS to take hold, government must help provide certainty by 
developing a legal and regulatory framework for the storage of 
CO2. Besides resolving technological hurdles, what are the 
first steps that the government can take specific to legal, regulatory 
or social elements that will allow more CCS projects to go forward?
    Answer. First, Congress should amend tax code Section 7704 to 
clarify that subsection (d)(1)(E) covers man-made, as opposed to just 
naturally occurring, CO2. With the current legal uncertainty 
in Sec. 7704, much of the existing CO2 pipeline capacity 
cannot be used--and new capacity may not get built--to transport 
anthropogenic CO2. This action would not be providing a new 
incentive for CCS; it would simply remove existing legal ambiguity.
    Second, as discussed in my written testimony, federal eminent 
domain authority may ultimately be required to develop a nationwide 
CO2 pipeline infrastructure.
    Third, we believe that the current regulatory structure is 
sufficient with respect to (a) CO2 pipeline safety, overseen 
by the Office of Pipeline Safety in the U.S. Department of 
Transportation's Pipeline and Hazardous Materials Safety 
Administration, (b) CO2 pipeline access, which is not 
currently federally regulated and need not be, due to the small, 
regional, non-integrated nature of existing and planned CO2 
pipelines, and (c) protection of the fresh water and ground water 
reservoirs from the injection of CO2, as provided in the 
Safe Drinking Water Act and by the EPA's Underground Injection Control 
Program.
    Finally, we concur with the IOGCC's recommendation that future 
CO2 regulation should build upon the primarily state-based 
regulatory framework already in place, due to the states' decades of 
experience with CO2 EOR, natural gas storage, and acid gas 
injection.
     Responses of Ronald T. Evans to Questions From Senator Dorgan
    Question 1. I also think it's important that the general public 
have an understanding of how vastly important an issue this will be to 
our energy future. In your judgment, what will it take for the general 
population to better understand and support the approaches associated 
with carbon capture and storage?
    Answer. For the general population to better understand and support 
CCS, it is important to educate and disseminate information about 
various approaches to CCS, such as EOR, through various forums and 
Congressional hearings similar to the one held by this committee. The 
general public and legislators need to be educated about the various 
costs, merits and limitations of various energy sources, including the 
costs of CCS, available to the country along with reasonable forecasts 
of the energy needs of this country.
    Capturing and storing CO2 from various sources is 
technically feasible today, can provide additional sources of energy 
through enhanced oil recovery, and assist in the reduction of 
greenhouse gases. The transportation and sequestration of 
CO2 related to enhanced oil recovery has been safely 
demonstrated for over 30 years with no loss of life due to 
CO2 leakage. Particularly important is the necessity to 
distinguish between the relative safety of CO2 in comparison 
to the other materials transported via pipeline such as oil, natural 
gas, petroleum products and hydrogen. CO2 is not poisonous, 
explosive or flammable and thus poses far less risk when transported.
    Question 2. I have seen reports that indicate that over 200 billion 
barrels of oil may remain as residual oil in geologically complicated, 
partially-produced or in mature oil fields in the U. S. What can you 
tell me about the potential for oil recovery using CO2 EOR 
(enhanced oil recovery) that is practiced today versus the potential 
for so called ``next generation'' EOR technologies?
    Answer. The various technologies associated with EOR (e.g. water 
flooding, steam flooding, CO2 flooding, polymer flooding, 
advanced well designs, etc.) have been used and developed over the past 
thirty years. The CO2 flooding used by Denbury today is 
state of the art and the most efficient at recovering oil in the proper 
applications. Nonetheless, we continue to refine and improve EOR 
processes in an attempt to yield additional barrels of oil. Future 
technological advances will likely allow recovery of incremental 
volumes of oil, rather than result in a quantum leap or step change in 
amounts recoverable.
    In general, less than 50% of the oil discovered in this country was 
or will ever be produced, and thus a significant volume of oil is still 
in the ground and unable to be recovered without some sort of 
additional investment. The U.S. Department of Energy commissioned a 
study of the potential amount of oil that could be recovered from 
CO2 enhanced oil recovery. The results of this study, 
completed by Advanced Resources International in 2006, indicated that 
approximately 390 billion barrels of the 580 billion barrels of oil 
originally discovered will remain in the ground after primary and 
secondary methods are applied. Using current technologies it is 
technically possible to recover approximately 89 billion barrels via 
CO2 enhanced oil recovery. These technically recoverable 
barrels are based on several assumptions within the report concerning 
CO2 prices, oil prices and other variables. The report can 
be found at: http://www.fossil.energy.gov/programs/oilgas/eor/
Ten_Basin-Oriented_CO2-EOR_Assessments.html
    Question 3. Many industry professionals have indicated that for 
large scale CCS to take hold, federal and state governments must help 
provide certainty by developing a legal and regulatory framework for 
the storage of CO2. Besides resolving technological hurdles, 
what are the first steps that the government can take specific to 
legal, regulatory or societal elements that will allow more CCS 
projects to go forward?
    Answer. Please see my response to Senator Bingaman's question #5. 
In addition, the Coal Fuels and Industrial Gasification Demonstration 
and Development Act, S. 2149, which you introduced on October 4, 2007, 
includes the necessary clarification of Section 7704(d)(1)(E) to cover 
man-made CO2 and Denbury commends your leadership on this 
issue.
    Question 4. I believe that in the near term we need to find ways to 
create certainty for investors to deploy CCS projects. I introduced a 
bill called the Clean Energy Production Incentives Act (S. 1508) 
earlier this year that among other things includes a 10-year production 
tax credit for the storage of CO2. Developers receive a 
higher credit for permanent storage and slightly lower credit for using 
enhanced oil recovery techniques. The bill also included accelerated 
depreciation and tax credit bonds for CO2 capture and 
storage property. Can you talk more about the scale of incentives and 
how these incentives can accelerate development of large scale carbon 
capture and storage? Are the incentives adequate to incentivize near-
term and long-term storage options?
    Answer. I agree that we need to find ways to create certainty for 
investors to deploy CCS. The production tax credits and accelerated 
depreciation of pipelines proposed in the Clean Energy Production 
Incentives Act introduced by you are meaningful incentives to encourage 
the development of large scale CCS. The proposed level of incentives 
should be sufficient to encourage the capture of the lowest cost 
emissions currently and a significant number of proposed gasification 
projects. Our analysis of the costs to capture, transport and store the 
lowest cost emissions indicates total costs of approximately $20/ton. 
Thus a $20/ton tax credit should be meaningful to projects that will be 
required to sequester their emissions in deep saline reservoirs. The 
corresponding lower amount, $10/ton for CO2 sequestered in 
EOR projects, is sufficient to encourage the development of additional 
enhanced oil recovery projects using volumes of captured anthropogenic 
CO2. These tax credits would encourage the development of 
CCS projects in the near term.
    Technological solutions will have to be developed in coming years 
to decrease the costs of CCS for many additional existing sources of 
CO2 emissions. The cost of CCS for many of these sources is 
up to $70/ton and potentially higher. The current proposed production 
tax credits are not sufficient to encourage or incentivize the capture 
and storage of these emissions. Necessary technology will only be 
developed, and the costs of CCS driven down for these sources, by 
getting the lowest cost CCS projects up and operating. As the lowest 
cost emissions get captured and research and development progresses, we 
are convinced that technological and cost breakthroughs will occur. 
However, delay in incentivizing the lowest cost CCS projects will delay 
the overall timeframe of the technology development necessary to 
ultimately address the higher cost emissions.
     Response of Ronald T. Evans to Question From Senator Menendez
    Question 1. You claim that government incentives are necessary to 
promote the use of man-made carbon dioxide in enhanced oil recovery 
[EOR] projects. I find this claim troubling on a number of levels. EOR 
was economically viable even back when we had cheap oil. Why isn't $90 
a barrel oil all the incentive needed? In fact, there are several 
existing projects which do in fact capture man-made carbon dioxide for 
use in EOR. The process is economically viable right now, without any 
government incentives. More importantly, using CO2 to 
recover more oil won't stop global warming because we may be putting 
some CO2 in the ground, but the extra oil we extract will 
lead to more emissions of CO2 when that oil is used. Why 
should EOR operations get credit for reducing greenhouse gas emissions, 
when the process is probably a wash at best in terms of the reduction 
of net CO2 reductions?
    Answer. In my written testimony, I stated that ``without some means 
of reducing the cost of capturing anthropogenic CO2 
significantly, infrastructure development will likely remain 
stagnant.'' As explained therein, the cost of capturing and compressing 
anthropogenic CO2 is significant. EOR can indeed absorb a 
portion of the capture and compression costs, but the percentage of the 
capture and compression costs that EOR can cover is dependent upon the 
level of oil prices. The total cost of CCS from different industrial 
sources varies widely from $20/ton to over $70/ton. EOR can cover the 
costs of transportation and sequestration, which have seen significant 
increases over the last few years, and cover a portion of the capture 
and compression cost. Unfortunately, even with oil at $90 per barrel, 
EOR cannot cover 100% of the CCS costs for a significant number of 
current emitters.
    Naturally occurring CO2 is generally priced as a 
percentage of oil prices. Thus, when oil prices were low, 
CO2 prices were reduced in order to keep projects economic, 
but at very low oil prices almost all of the projects were uneconomic. 
As prices have increased, the cost of naturally occurring 
CO2 has also increased. In addition to increasing 
CO2 costs, the capital costs associated with CO2 
facilities and well work have increased substantially and in some cases 
the costs have more than doubled.
    The only significant use of man-made CO2 in EOR at 
present is EnCana Corporation's use of CO2 from the North 
Dakota Gasification Project, which was made possible with significant 
support from the Canadian government. The other anthropogenic sources 
of CO2 currently captured and used in EOR in the United 
States, primarily in the Permian Basin of West Texas, are produced 
along with natural gas from underground reservoirs. The reason this 
CO2 is available at a relatively low cost is because the 
CO2 must be separated from the natural gas in order to sell 
the natural gas. This separation results in a relatively pure stream of 
CO2 that then only has to be compressed and transported 
short distances to the oil field.
    The reason EOR should qualify for whatever credit may eventually 
exist for reducing green house gas emissions is straightforward: First, 
America will continue to rely on fossil fuels to meet a substantial 
portion of its energy needs for the foreseeable future and a molecule 
of CO2 stored, whether in EOR or non-EOR sequestration, is a 
molecule that will not get vented to the atmosphere. Second, use of EOR 
to produce oil domestically avoids the significant emissions and 
potential spills associated with shipping oil from overseas. Third, 
according to a recent study of CO2 storage in connection 
with EOR commissioned by the U.S. Department of Energy's National 
Energy Technology Laboratory, advances in technology could enable 
storage of 1.6 times as much CO2 in oil reservoirs as the 
CO2 content in the recovered oil. (See: http://
www.netl.doe.gov/energy-analyses/ pubs/
Storing%20CO2%20w%20EOR_FINAL.pdf) At present, EOR is the 
only viable process that can accept and use productively large volumes 
of anthropogenic CO2 that would otherwise be emitted.
    In addition, EOR benefits U.S. energy security by producing 
additional volumes of oil in the United States and displacing the 
necessity for imports from foreign countries. The barrel of oil 
produced by U.S. workers in the U.S. is worth significantly more in 
terms of domestic investment, jobs and energy security than the value 
of an imported barrel of oil.
    Keeping up with America's ever-growing demands for energy while 
reducing emissions of greenhouse gases will take an enormous effort 
across all fields of energy development, all manner of industry, and 
all levels of society. If the twin goals of energy independence and a 
cleaner environment are to have any hope of being achieved without 
significant reductions in our standard of living, the country cannot 
afford to ignore particular resources or technologies; the U.S. must 
utilize every means available to it. EOR is not the answer to all of 
America's energy and emissions challenges, but it is one of the only 
readily available alternatives that is working now and that can be 
broadly utilized in the near term if policymakers decide action is 
imperative.
                                 ______
                                 
   Responses of Krista L. Edwards to Questions From Senator Bingaman
    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Answer. I would respectfully defer to the U.S. Department of Energy 
and other agencies represented at the hearing. The U.S. Department of 
Transportation's Pipeline and Hazardous Materials Safety Administration 
(PHMSA), through its two safety programs, prescribes and enforces 
standards for the design, testing, and maintenance of tanks, cylinders, 
and other containers used in the transportation and incidental storage 
of CO2. But we do not regulate any aspect of the long-term, 
permanent, or geologic storage of CO2 and, accordingly, have 
had no occasion to consider the requirements for permanent geologic 
CO2 storage.
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Answer. I would respectfully defer to other agencies represented at 
the hearing. As I mentioned in response to an earlier question, PHMSA's 
oversight extends to hazardous materials transportation, including 
incidental storage, and we have had no occasion to consider the 
requirements for long-term geologic storage of hazardous materials.
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1% leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Answer. I would respectfully defer to the other agencies 
represented at the hearing. As mentioned in response to an earlier 
question, PHMSA has had no occasion to consider standards for permanent 
or long-term geologic storage.
    Question 4. In your testimony you stated that CO2 
pipelines have a strong safety record. Does your agency do any sort of 
public outreach to convey this message to the general public?
    Answer. Yes. PHMSA regularly posts safety-related data, including 
incident statistics, on our public website (http://
primis.phmsa.dot.gov/comm/reports/safety/PSI.html). In addition, PHMSA 
has several program initiatives focused on safety-related public 
education and outreach. The agency's Community Assistance and Technical 
Services (CATS) program is devoted to enhancing public understanding 
about pipeline operations and risk controls through direct interaction 
with local officials and concerned citizens and the development and 
dissemination of training programs. CATS representatives working out of 
the agency's five regional offices participate directly in community 
meetings and public hearings related to existing or proposed pipelines. 
As experienced pipeline engineers, our CATS representatives are 
uniquely qualified to answer public questions and concerns about 
pipeline operations and oversight.
    As part of a comprehensive approach to pipeline safety, PHMSA also 
requires pipeline operators to develop and implement system-specific 
public awareness programs targeting nearby communities. These programs 
are designed to enhance public understanding about pipeline risks and 
safety performance and to educate communities about the prevention, 
detection, and reporting of pipeline events. Together with our state 
partners, PHMSA reviews operators' public awareness programs and 
enforces requirements under which operators must periodically evaluate 
their programs' effectiveness in reaching targeted populations and 
satisfying information needs.
    Building on these efforts, PHMSA's Pipelines and Informed Planning 
Alliance (PIPA) is bringing together a broad group of stakeholders 
(including industry, safety advocates, and state and local officials) 
to promote the development of risk-informed standards to guide land use 
and community planning. We launched PIPA in January of 2008 and have 
arranged working group meetings throughout the year, targeting a final 
report by January 2009.
    Question 5. Do you envision PHMSA taking on an expanded regulatory 
role should the existing CO2 pipeline network be expanded 
beyond its current geographic distribution? Are there any areas where 
CO2 pipelines may be more challenging to site and regulate?
    Answer. PHMSA's existing pipeline safety program has provided 
effective oversight of CO2 pipelines since 1991 and will 
accommodate new CO2 pipelines, however and wherever they are 
located. From the perspective of public safety and environmental 
protection, the CO2 pipeline network can be expanded beyond 
its current geographic distribution using existing technologies and 
under existing safety standards and oversight arrangements.
    Under PHMSA's current program, a limited number of states are 
certified to oversee hazardous liquid pipelines, including 
CO2 pipelines. To the extent that new CO2 
pipelines are planned in other states, we will be prepared to work with 
state and local officials to address information requirements and, as 
appropriate, help states expand their program certifications to 
encompass CO2 pipelines.
    I would defer to other witnesses concerning the economic and 
regulatory challenges associated with siting of CO2 
pipelines.
    Responses of Krista L. Edwards to Questions From Senator Dorgan
    Question 1. It seems to me that we need to much more quickly begin 
establishing and defining the ``rules of the road'' when it comes to 
carbon management. As we begin to unlock the opportunities for 
capturing, moving and storing larger amounts of CO2, it is 
fair to say that the federal government will likely play a greater 
role. It will be better if we begin to better define appropriate roles 
for local, state and federal governments.What are the most critical 
near-term issues that your agency can address so that developers can 
begin demonstrating CCS projects?
    Answer. PHMSA and our state partners currently oversee nearly 4,000 
miles of CO2 pipelines under established and effective 
standards for public safety and environmental protection. The same 
oversight arrangements and standards will govern new CO2 
pipelines, however and wherever they are configured and located. 
Accordingly, PHMSA foresees no significant challenges meeting its 
statutory responsibilities with respect to CCS projects involving 
pipeline transportation. We will be prepared to work with communities, 
prospective operators, and state pipeline safety programs to plan for 
the construction, operation, and oversight of new CO2 
pipelines.
    Under our current program, a limited number of states are certified 
to oversee hazardous liquid pipelines, including CO2 
pipelines. To the extent that new CO2 pipelines are planned 
in other states, we will be prepared to work with state and local 
officials to address information requirements and, as appropriate, help 
states expand their program certifications to encompass CO2 
pipelines.
    Question 2. Creating an infrastructure to capture, transport, store 
and monitor CO2 will take greater federal resources 
including staff, technology and other elements. Do you think your 
agency is well-equipped to begin undertaking this enormous challenge?
    Answer. Yes. Having successfully overseen the operation of 
CO2 pipelines since 1991, DOT is well-positioned to carry 
out its statutory responsibilities with respect to future 
CO2 transportation. PHMSA's existing pipeline safety 
programs and standards are established and effective, as reflected in 
accident trends generally and the strong safety record of the roughly 
4,000 miles of CO2 pipelines currently in operation. Since 
we introduced our Integrity Management program in 2000, the annual 
number of serious incidents involving hazardous liquid pipelines has 
reached historic lows, even as the size of the pipeline network has 
grown. Within these data, the safety record of CO2 pipelines 
is especially strong, with no incidents involving death or serious 
injury since the inception of DOT oversight in 1991.
    Together with our state partners, PHMSA currently oversees more 
than two million miles of natural gas and hazardous liquid pipelines, 
including pipelines carrying crude oil, refined products, highly 
volatile liquids, anhydrous ammonia and hydrogen, in addition to carbon 
dioxide. Because it is neither combustible, reactive, nor toxic, 
CO2 is the least hazardous of the materials regulated under 
our pipeline safety program.
    The Nation's pipeline network is expanding, with numerous 
privately-financed pipeline construction projects currently underway 
and in the planning and permitting stages. Although I would defer to 
other members of the panel for more precise data and projections, we 
expect this growth to continue, without regard to any pipeline 
expansion associated with CCS projects.
    In accordance with the Pipeline Inspection, Protection, 
Enforcement, and Safety Act of 2006 and our FY 2008 appropriations, 
PHMSA is in the process of increasing the numbers of federal inspection 
and enforcement personnel and increasing financial support for state 
pipeline safety programs. The President's FY 2009 budget proposes 
further increases in staffing and state grants, addressing a variety of 
new oversight demands, including the construction of new and expanded 
energy pipelines and the use of existing pipelines for the 
transportation of new fuel products and blends.
    PHMSA's existing program can accommodate the expansion of 
CO2 pipelines, without significant new challenges or 
resource requirements. The current CO2 pipeline network 
accounts for roughly two percent of the hazardous liquid pipeline 
mileage under our jurisdiction (and less than 0.2 percent of the total 
pipeline mileage we oversee). Accordingly, even a significant expansion 
of the CO2 pipeline network will only marginally increase 
the mileage under our jurisdiction and is unlikely to necessitate any 
changes in our standards and oversight arrangements. PHMSA is prepared 
to work with communities and prospective operators to plan for new 
CO2 pipelines, and we will be prepared to oversee their 
construction and operation, just as PHMSA is doing today in connection 
with the expanding network of natural gas, crude oil, and refined 
products pipelines.
    As I mentioned in response to an earlier question, PHMSA 
anticipates that state pipeline safety programs may play a larger role 
in oversight of new CO2 pipelines, depending on the location 
and configuration of the new lines. We will be prepared to provide 
financial and technical support to states interested in participating 
in oversight of CO2 pipelines.
                                 ______
                                 
   Responses of Lawrence E. Bengal to Questions From Senator Bingaman
    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Answer. Using the term ``permanent'' when referring to storage of 
carbon dioxide (CO2) unnecessarily identifies CO2 
with the disposal of manmade ``wastes'', which essentially remain the 
same in the subsurface, unlike CO2. CO2 is a 
``natural'' gas that, in addition to being part of the air we breathe, 
can be found naturally in the subsurface throughout the world. 
Naturally stored CO2 is part of the earth's geologic 
processes. Injected CO2 will likewise become part of the 
natural earth processes, mineralizing, going into solution and 
eventually reaching a stability as do natural CO2, natural 
gas and crude oil reservoirs, in which CO2, natural gas and 
oil are ``stored'' naturally for millennia.
    It is important also to realize that it is primarily during the 
active injection phase that there is a risk of leakage into the 
atmosphere. These risks can be significantly reduced if not eliminated 
by injecting the CO2 only into select geologically sound 
storage reservoirs and making certain through subsurface monitoring 
that the CO2 during the active injection phase is being 
contained within the storage interval. Once the injection ceases and 
the injection facility is closed, the risks of migration from the 
reservoir decrease exponentially as the CO2 incorporates 
with the reservoir environment. Should a leak be detected during the 
injection phase, remedial actions can be initiated to address the leak 
until the situation is mitigated. Although monitoring will continue 
during the post closure phase, it unlikely to reveal leakage that 
hadn't been detected during and immediately after the active injection 
phase.
    In summary, at the time a site is closed, the regulator would be 
expected to have a good understanding of how the CO2 is 
behaving in the storage interval and a good deal of confidence that the 
injected CO2 is likely to remain in that interval over the 
very long term. As I have discussed, however, the term ``permanence'' 
seems to be more applicable to the situation where a non-natural man-
made substance is being emplaced into the earth. In this case, in a 
very real sense, CO2 becomes part of the geologic 
environment into which it is emplaced. It is thus not so much 
``permanently'' contained, as it is incorporated, albeit permanently, 
into the geologic system as are natural accumulations of oil and 
natural gas.
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Answer. The answer to the prior question basically answers this 
question as well. If all goes as anticipated in the storage of 
CO2 in an appropriate geologic reservoir, where during the 
injection, closure and post-closure phases no leakage from the storage 
interval has been detected by monitoring, it can generally be assumed 
that the CO2 has become integrated into the geology of the 
interval into which it has been emplaced. As previously discussed, 
there is no reason to anticipate post closure leakage (see also the 
answer to question #3), although monitoring will continue indefinitely. 
The IOGCC-proposed state administered trust fund, to which operation of 
the site would be transferred post closure, would be designed to be 
more than adequate to indefinitely monitor the site and take, should 
such be deemed necessary, any and all remedial actions. The 
specification of a ``storage time'' would not be a burden, but an 
expected part of the post closure regime. Of more importance would be 
the definition of ``leakage'' and the regulatory burden a strict ``un-
measurable'' standard would impose on a CO2 project (see 
next question).
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1% leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Answer. In answering this question it is important to be clear what 
we are trying to accomplish in regulation of the storage of 
CO2. We begin with the assumption that first and foremost 
the reason we are geologically storing CO2 in the first 
place is in lieu of ``storing'' (releasing) this greenhouse gas in the 
atmosphere where it will contribute to global climate change.
    There are three regulatory standards which will determine an 
acceptable amount of ``leakage''; 1) carbon credits--the leakage 
threshold in this respect will likely be established by the 
governmental and or commercial entity which is ultimately established 
to award carbon credits for the underground storage of CO2; 
2) public health and safety--while there is a threshold of even minimal 
release into the atmosphere which could endanger public health and 
safety, catastrophic release from underground storage is almost 
inconceivable, and; 3) drinking water protection--this is the purpose 
of the regulations being developed by the U.S. Environmental Protection 
Agency (EPA), likely to be administered by states under delegated 
authority from EPA under its Underground Injection Control program. 
Presumably these regulations will establish this threshold, which is 
likely to be ``no contamination''.
    Having said this, it is very clear that the most important factor 
in assuring that stored CO2 remains in the subsurface is to 
make certain that the geologic sites selected for the storage of 
CO2 are optimal for that purpose and mirror the ``storage'' 
capabilities of naturally occurring oil and natural gas reservoirs. I 
therefore begin with the assumption and expectation that CO2 
will be stored in formations for which the geology indicates a very 
strong likelihood of long term containment which meet the thresholds of 
all three regulatory interests identified above. I further assume and 
fully expect that the regulatory framework which permits any such 
storage facility will contain layers of safeguards designed to prevent 
leakage. However, the purpose of subsurface monitoring is, first and 
foremost, to detect leakage in the subsurface (above the storage 
interval) well before the CO2 reaches the surface and hence 
the atmosphere. However, even in the very unlikely event that 
monitoring reveals leakage and that leak is mitigated (mitigation 
options range from complete cessation of injection--including 
ultimately depressurizing of the storage interval until leakage is no 
longer occurring--to capture and re-injection of the leaking 
CO2 all while still contained in the subsurface) I am 
assuming and expecting that any escaping CO2 will be 
unlikely to reach the surface and hence the atmosphere.
    Question 4. In your testimony you outline the operational bond 
requirements for the post-closure phase of the CCS project. Following 
site closure, the operational bond is released the regulatory liability 
is turned over to a trust fund administered by the state. Did the IOGCC 
consider a period of time whereby private insurance companies could 
manage these sites (post-closure)?
    Answer. No. Based on the states' long experience with financial 
assurances in the plugging of oil and gas wells and the administration 
of state administered abandoned oil and gas well programs, the IOGCC 
Task Force believed that the state-administered trust fund would offer 
the greatest flexibility post closure to monitor and ``caretake'' the 
facility in perpetuity. Private insurance would lack the flexibility 
and responsiveness to be able to immediately respond to potential 
contingencies. It would also require that a regulator adopt inflexible 
rules setting the parameters under which insurers would operate.
    Responses of Lawrence E. Bengal to Questions From Senator Dorgan
    Question 1. I also think it's important that the general public 
have an understanding of how vastly important an issue this will be to 
our energy future. In your judgment, what will it take for the general 
population to better understand and support the approaches associated 
with carbon capture and storage?
    Answer. I couldn't agree more. I indicated in my testimony the 
importance of public support for this technology, but before the public 
can support this technology, they must understand and feel 
``comfortable'' with the process. The U.S. Department of Energy has 
understood this and has required each of the Regional Carbon 
Sequestration Partnerships to have a strong public outreach component. 
It has also funded the Interstate Oil and Gas Compact Commission to 
widely distribute the findings of the Task Force's work regarding 
geologic storage of CO2. The most recent publication of the 
IOGCC entitled Road to a Greener Energy Future--CO2 Storage: 
A Legal and Regulatory Guide for States is being circulated broadly and 
can be downloaded at the IOGCC website at (http://
www.iogcc.state.ok.us/PDFS/Road-to-a-Greener-Energy-Future.pdf).
    We also firmly believe that a key component of building public 
support is making absolutely certain that states in their process of 
creating the laws and regulations to govern this technology do so in a 
completely open and transparent manner. It is essential that all 
stakeholders be included in the process if the public is to have 
confidence in the technology. The public must understand that site 
selection will be a very important part of the regulatory process. Not 
every site will be suitable for storage. Only the sites most 
geologically suitable will be considered.
    Also important will be how this issue is presented to the public. 
As I indicated in my testimony, the public needs to be informed about 
the long history of CO2 transportation, handling and use in 
a great variety of applications. They need to understand that 
CO2 is a substance that is part of the air we breathe and 
that storing it underground is not something entirely new and 
mysterious, but the technological outgrowths of things with which 
states already have regulatory experience, like oil and natural gas 
development, natural gas storage, and CO2 injection for 
enhanced oil recovery. I believe it will be important that the public 
understand that the production of CO2 is a consequence of 
the public's demand for and use of fossil energy and that it is 
arguably in the public's interest to actively participate along with 
industry in efforts to reduce CO2 emissions through geologic 
storage.
    Given the regulatory complexities of CO2 storage 
including environmental protection, ownership and management of the 
pore space, maximization of storage capacity and long term liability, 
geologically stored CO2 should be treated under resource 
management frameworks as opposed to waste disposal frameworks.
    Regulating the storage of CO2 under a waste management 
framework sidesteps the public's role in both the creation of 
CO2 and its interest in the mitigation of its release into 
the atmosphere and places the burden solely on industry to rid itself 
of ``waste'' from which the public must be ``protected''. Such an 
approach lacking citizen buy-in with respect to responsibility for the 
problem as well as the solution could well doom geological storage to 
failure and diminish significantly the potential of geologic carbon 
storage to meaningfully mitigate the impact of CO2 emissions 
on the global climate.
    A resource management framework, as proposed by the Task Force, 
allows for the integration of these issues into a unified regulatory 
framework and proposes a ``public sector-private sector partnership'' 
to address the long-term liability, given that the release of 
CO2 into the atmosphere is at least partially a societal 
problem and that the mitigation of that release is likewise at least 
partially a societal responsibility and clearly a societal benefit.
    Question 2. Many industry professionals have indicated that for 
large scale CCS to take hold, federal and state governments must help 
provide certainty by developing a legal and regulatory framework for 
the storage of CO2. Besides resolving technological hurdles, 
what are the first steps that the government can take specific to 
legal, regulatory or societal elements that will allow more CCS 
projects to go forward?
    Answer. Echoing a point made above and in my testimony, the 
technology which will be used to store CO2 underground is 
not something new, but a technological outgrowth of things with which 
states already have regulatory experience, like oil and natural gas 
development, natural gas storage, and CO2 injection for 
enhanced oil recovery. What could kill this technology is regulatory 
uncertainty in such areas as long term liability. If the federal 
government imposes a Superfund model on storage, the technology is 
probably dead on arrival as a viable means of mitigating the impacts of 
climate change on the environment. If on the other hand investors and 
companies interested in undertaking the storage of CO2 are 
reasonably assured that a long term regulatory system along the lines 
of that proposed by the IOGCC Task Force is adopted, then such an 
atmosphere will likely be much more conducive to rapid development of 
the technology.

                       other issues of importance

    The IOGCC team clearly understands that there are large numbers of 
underground sites with effectively no risk of leakage and other sites 
where CO2 injection should not be permitted. States, working 
with Federal officials, need to develop a set of criteria by which the 
optimal sites are chosen first. Such things as properties of primary 
seals, the presence of secondary and tertiary seals clearly need to be 
considered in such a ranking.
    Aggregation of sufficient mineral and/or storage rights will be a 
large obstacle for this activity in a large number of places within 
otherwise suitable areas for sequestration. Both Federal and State 
rules may need clarification and action to facilitate such aggregation 
activities.
    Many areas with CO2 emissions will be effectively 
unsuitable for sequestration. Pipelines moving CO2 from such 
areas to suitable ones will therefore be necessary. State and Federal 
legislation could simplify this task. Adoption of an open-access status 
to those pipelines may be appropriate as well. Additionally, it appears 
that some sort of public assistance might prove a useful incentive to a 
private organization seeking to build a private pipeline. Incentives 
could come in the form of special tax treatment, access to eminent 
domain provisions, bonding assistance (similar to the Wyoming or North 
Dakota Pipeline Authorities), or some private-public arrangement (with 
the public part designated as open access).
    Avoidance of unnecessary and ominous ``permanence'' requirements is 
also essential.
    The post closure transfer of responsibility to a governmental 
entity is considered a necessity. Qualifying a site as low risk and 
allowing a rapid transfer in a short post-closure period would be both 
appropriate and stimulating for early action.
    Question 3. I believe that in the near term we need to find ways to 
create certainty for investors to deploy CCS projects. I introduced a 
bill called the Clean Energy Production Incentives Act (S. 1508) 
earlier this year that among other things includes a 10-year production 
tax credit for the storage of CO2. Developers receive a 
higher credit for permanent storage and slightly lower credit for using 
enhanced oil recovery techniques. The bill also included accelerated 
depreciation and tax credit bonds for CO2 capture and 
storage property. Can you talk more about the scale of incentives and 
how these incentives can accelerate development of large scale carbon 
capture and storage? Are the incentives adequate to incentivise near-
term and long-term storage options?
    Answer. Until government imposes a limitation on the amount of 
carbon that can be released into the atmosphere, presumably through 
adoption of a carbon tax or a cap and trade system, no additional 
incentives are likely to prove particularly efficacious. After that 
happens, all of the incentives noted in the question would be most 
beneficial indeed. I would caveat that I would question the rationale 
for disadvantaging enhanced oil recovery (EOR). Perhaps the solution is 
to frame any production tax credit so as to advantage the 
CO2 capturing entity or the pipeline entity or both rather 
than the injector. That effectively makes the CO2 less 
expensive thus encouraging the sequestration with expanded EOR 
projects.
    Additionally, the biggest issue today is the cost of separating and 
compressing the CO2 at the source so whatever can be done on 
that front will be money well invested.
                                 ______
                                 
   Responses of Joseph T. Kelliher to Questions From Senator Bingaman
    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Answer. I note, as an initial matter, that the Commission has 
extensive expertise in the storage of natural gas in underground 
reservoirs. However, the storage of natural gas differs significantly 
from the ``permanent'' sequestration of CO2. Natural gas 
storage is a dynamic process whereby gas is injected, stored and 
withdrawn with some regularity while the point of CO2 
sequestration is to ``permanently'' inject and sequester the 
CO2 in the reservoir.
    Permanent sequestration would appear to contemplate CO2 
remaining in place for the long term. ``Permanent'' sequestration may 
pose problems similar to those experienced by natural gas storage 
reservoirs which are not cycled (the process of injecting and 
withdrawing gas) on a regular basis. In the case of a natural gas 
storage field that does not experience sufficient cycling, and does not 
have well defined geologic boundaries, gas could migrate through the 
storage formation into other formations or, in the case of aquifer 
storage facilities, the gas eventually could dissolve into the water 
and the water eventually could fill the reservoir. If a natural gas 
storage reservoir is cycled, and the physical infrastructure (piping, 
casing, surface facilities) is maintained, there is no reason to 
believe that the storage field could not operate indefinitely.
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Answer. The Commission has no information regarding the amount of 
time that CO2 needs to be sequestered to ameliorate the 
effects of climate change. However, a study by the Massachusetts 
Institute of Technology (MIT) titled, ``The Future of Coal'' states, at 
p. 44, `` . . . it is very likely that the fraction of stored 
CO2 will be greater than 99% over 100 years, and likely that 
the fraction of stored CO2 will exceed 99% for 1000 years.'' 
(footnote omitted).
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1% leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Answer. References to leaks in natural storage fields generally 
apply to leaks in the equipment at the storage field including well 
casings, piping, compressors, and other miscellaneous surface 
facilities, not the storage formation, per se. This lost and 
unaccounted-for gas varies by facility. Gas can also migrate through 
rock formations and this may be what the referenced IPCC report refers 
to. Natural gas storage operators drill and maintain observation wells 
to monitor the migration of natural gas out of the designated 
boundaries of their storage field. Migration out of designated storage 
boundaries could occur if the operator does not have a complete 
understanding of the geology of the storage location. This is not to 
suggest that the operator is at fault--despite advances in technology, 
it is still impossible to know exactly what lies beneath the earth's 
surface. However, migration can also occur as a result of improper 
operations or as a result of third party operations outside the 
boundaries of the storage field.
    The MIT study referenced in the previous response addresses 
CO2 storage leakage as follows:

   Importantly, CO2 leakage risk is not uniform and 
        it is believed that most CO2 storage sites will work 
        as planned. However, a small percentage of sites might have 
        significant leakage rates, which may require substantial 
        mitigation efforts or even abandonment. It is important to note 
        that the occurrence of such sites does not negate the value of 
        the effective sites. However, a premium must be paid in the 
        form of due diligence in assessment to quantify and 
        circumscribe these risks well. [p. 50] (footnote omitted).
   Even though most potential leaks will have no impact on 
        health, safety, or the local environment, any leak will negate 
        some of the benefits of sequestration. However, absolute 
        containment is not necessary for effective mitigation. If the 
        rate and volume of leakage are sufficiently low, the site will 
        still meet its primary goal of sequestering CO2. The 
        leak would need to be counted as an emissions source as 
        discussed further under liability. Small leakage risks should 
        not present a barrier to deployment or reason to postpone an 
        accelerated field-based RD&D program. This is particularly true 
        of early projects, which will also provide substantial benefits 
        of learning by doing and will provide insight into management 
        and remediation of minor leaks. [p. 51] (footnotes omitted).

    Question 4. In your testimony you mention three models for 
governing interstate pipelines. Are you prepared, as an agency, to 
implement any of these three models for pipeline management?
    Answer. In my testimony, I referenced the oil pipeline model, where 
the states have siting authority, the Commission sets rates, and the 
Department of Transportation handles safety matters; the natural gas 
pipeline model, in which the Commission authorizes siting and sets 
rates, while the Department of Transportation handles post-construction 
safety; and the current carbon dioxide pipeline model, under which 
pipelines are sited under state law, and rates are set by the 
pipelines, subject to review by the Department of Transportation's 
Surface Transportation Board in the event a complaint is filed. Should 
Congress so require, the Commission could implement either of the first 
two models, while the third model would have no role for the 
Commission. However, as I said in my testimony, I would not recommend 
that Congress preempt the states or alter the Department 
Transportation's ratemaking and safety roles by providing for exclusive 
and preemptive FERC siting of carbon dioxide pipelines, because the 
precondition that led Congress to such a course for siting natural gas 
pipelines--the failure of state siting--does not exist.
    Question 5. While you state in your testimony that you feel the 
siting of CO2 pipelines should stay in the jurisdiction of 
the state agencies--do you think that they are the appropriate entity 
to regulate transportation rates? This seems like it is well within the 
jurisdiction of FERC to regulate fair and equitable transportation 
costs.
    Answer. As I mentioned in my written testimony, rates for carbon 
dioxide pipelines are currently set by the pipelines themselves, 
subject to the authority of the Department of Transportation's Surface 
Transportation Board to hold proceedings regarding the reasonableness 
of the rates, if a complaint is filed. While the Commission does 
possess ratemaking expertise, I have seen nothing to indicate that the 
current model is not functioning well. I do not recommend granting 
ratemaking authority over carbon dioxide pipelines to the individual 
states, because of the prospect of a patchwork of inconsistent rate 
regulation for an interstate pipeline network.
    Responses of Joseph T. Kelliher to Questions From Senator Dorgan
    Question 6. It seems to me that we need to much more quickly begin 
establishing and defining the ``rules of the road'' when it comes to 
carbon management. As we begin to unlock the opportunities for 
capturing, moving and storing larger amounts of CO2, it is 
fair to say that the federal government will likely play a greater 
role. It will be better if we begin to better define appropriate roles 
for local, state and federal government. What are the most critical 
near-term issues that your agency can address so that developers can 
begin demonstrating CCS projects?
    Answer. Given that the Commission has no jurisdiction over carbon 
dioxide pipelines or sequestration facilities, I do not believe that 
there are issues that the Commission can address directly to speed the 
development of these projects. However, should Congress pass 
legislation such as S.2144, my staff and I would be pleased to work 
with other agencies to study the feasibility of carbon dioxide capture, 
transportation, and sequestration projects. As I said in my testimony, 
FERC can play a helpful role examining regulatory barriers and 
regulatory options relating to the construction and operation of carbon 
dioxide pipelines.
    Question 7. Creating an infrastructure to capture, transport, 
store, and monitor CO2 will take greater federal resources 
including staff, technology and other elements. Do you think your 
agency is well-equipped to begin undertake this enormous challenge?
    Answer. Should Congress establish a role for the Commission in this 
area, I am confident that the Commission could carry it out. Depending 
on the nature of the responsibilities given to the Commission, and the 
extent of the CO2 capture, pipeline and storage network, the 
Commission might need additional personnel resources were it assigned 
to regulate these activities.
    Question 8. Your agency has experience siting and regulating 
interstate pipelines for natural gas and oil. I said earlier in my 
statement that building a new system for CCS transportation could be 
compared to building the Interstate Highway System. This means creating 
right-of-ways, landowner rights and liability issues and others. In 
terms of siting CO2 pipelines and potentially moving 
CO2 across state lines, which priorities should we as policy 
makers address in order to help CCS projects move forward?
    Answer. Your question poses some of the key issues Congress would 
need to address if it chose to create a comprehensive federal 
regulatory regime for carbon dioxide pipelines. Among other things, 
Congress might want to consider what type of ratemaking regime (cost-
based or market-based) would be appropriate; whether carbon dioxide 
pipelines should be common carriers; whether to grant the holders of 
authorization for carbon dioxide facilities the power of eminent 
domain; and whether there are specific environmental, economic, or 
other findings that the siting agency would be required to make in 
connection with authorizing such facilities.
                                 ______
                                 
      Responses of James Slutz to Questions From Senator Bingaman
    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Answer. There is currently not a precise definition of ``permanent 
CO2 storage.'' Effectiveness of geologic storage is 
contingent on CO2 remaining stored underground for a long 
period of time. A desirable timeframe for geologic storage of 
CO2 is on the order of thousands of years or longer. 
However, effectively sequestering CO2 for even a few hundred 
years could provide valuable flexibility in reducing CO2 
emissions and contribute to reducing the costs of mitigating climate 
change.
    Geologic storage of CO2 has been underway as a natural 
process in the earth's upper crust for hundreds of millions of years. 
At geologic time scales, CO2 forms a natural part of the 
Carbon Cycle and is necessary for life. In most proposed carbon capture 
and storage (CCS) storage projects, the goal is to remove 
CO2 from the atmospheric portion of the Carbon Cycle, and 
store it mainly in the subsurface for significant periods. Thus, 
``permanent'' must mean no unacceptable change over some long period of 
time and should provide a reasonable assurance of indefinite storage of 
the majority of the carbon over a defined number of years (100's to 
1,000's). Any leakage from the subsurface to the atmosphere could be 
mitigated, or the CO2 could be recovered and stored 
elsewhere, if deemed necessary. Eventually, an increasing portion of 
CO2 stored in the subsurface will be trapped through 
processes such as formation of minerals, and hydrodynamics with the 
result that this portion of the CO2 would be sequestered at 
a geologic time scale of millions of years. As we gain knowledge from 
geologic storage projects, a more precise understanding of ``permanent 
CO2 storage'' should emerge.
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Answer. DOE and others are conducting pilot scale geologic 
sequestration projects to help better understand these questions and 
others. CO2 storage in geologic formations should mirror the 
timescale of oil and gas deposits in formations containing naturally 
occurring carbon dioxide gas. These formations have held these fluids 
for millions of years. A desirable timeframe for geologic storage of 
CO2 is on the order of thousands of years or longer.
    Demonstrating storage over these timeframes should not be overly 
burdensome. For well-selected, designed, constructed and managed 
geologic storage sites, the vast majority of CO2 will 
gradually be immobilized by various trapping mechanisms and, in that 
case, could be retained for up to millions of years. Because of these 
mechanisms, storage could become more secure over longer timeframes 
(IPCC 2005).
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1% leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Answer. Yes, this is reasonable to expect. Ideally, of course, no 
leakage will occur and any leakage that does occur must be taken in the 
context of how much CO2 must be sequestered to reach and 
maintain preferred atmospheric levels. Extensive monitoring and 
modeling will be implemented at each of DOE's large-scale field tests. 
This monitoring and modeling will occur before, during, and after the 
CO2 is injected, for a period of approximately 10 years. 
This extensive monitoring will result in the opportunity to mitigate 
any potential leakage.
    A natural analog is the million barrels of oil and gas deposits, as 
well as naturally occurring carbon dioxide gas, that has been trapped 
in underground geologic formations for millions of years. Furthermore, 
with proper construction and monitoring, there is a very high 
probability that the same geologic formations which trap oil and gas 
deposits and naturally occurring carbon dioxide gas will also help to 
prevent the significant leakage of carbon dioxide. Sites will need to 
be chosen carefully, and only the ones with the best geology and proper 
characterization should be selected for storage. I might add that the 
United States has a great deal of experience injecting and storing 
natural gas (in which gas is injected underground during the summer and 
then recovered to heat homes in the winter) and, though short-term, 
this experience will also prove useful in developing successful carbon 
sequestration technologies.
    In all cases, best engineering practices will be developed and used 
when carbon dioxide is injected into geologic formations. The carbon 
dioxide in the formation is trapped in porous rock, like sandstone. 
Using a variety of tests and mapping activities should help to identify 
any fractures in the cap rock and other faults which then can be 
avoided.
    In addition to extensive modeling to determine the potential fate 
of CO2, proper site monitoring, measurement and verification 
(MMV) also can determine if the CO2 is remaining in the 
formation. The oil and gas industry has extensive knowledge of 
monitoring for leaks of various gases from their wells and also for 
characterizing potential drilling sites for hydrocarbon recovery. This 
technology along with others being developed through research can be 
utilized for MMV to ensure that CO2 leakage is not an issue. 
Enforcement via continuous monitoring technology may be implemented 
through a variety of potential regulatory or other legal frameworks 
that are currently under development.
    Question 4. Is the DOE comfortable with the EPA leading the 
interagency task force described in S. 2323 or would you suggest 
another organization as the lead agency?
    Answer. DOE is comfortable with the EPA leading the interagency 
task force described in S. 2323. Over the past several years, EPA has 
been coordinating with DOE. As DOE has developed a Carbon Sequestration 
Technology Roadmap for the development and deployment of this 
technology, EPA has been working to design an appropriate management 
framework for geologic sequestration. By engaging in DOE's R&D program 
early and working with stakeholders on all sides of this issue, EPA is 
well-positioned to help in the permitting of future carbon dioxide 
underground injection wells.
    Question 5. As I understand it, one of the chief benefits of the 
FutureGen approach was that it would demonstrate an integrated design, 
optimized to maximize CO2 capture and overall plant 
efficiency. How are you going to insure we receive this same benefit 
from a substantially smaller federal investment in a commercial 
facility?
    Answer. The FutureGen program remains a vital component of the 
Administration's plan to make coal a part of a cleaner, more secure 
energy future for America. The Administration is restructuring the 
FutureGen program to accelerate commercial use of carbon capture and 
storage technology and expand the program from one project to multiple 
demonstration projects. The 2009 budget request more than doubles 
funding for FutureGen, from $74 million in 2008 to $156 million in 
2009.
    Rather than investing in the total cost of an experimental facility 
integrated with carbon capture and storage, the revised FutureGen 
approach will invest in the carbon capture and storage portion of 
commercial power projects, capturing and sequestering at least double 
the amount annually compared to the FutureGen concept announced in 
2003. This will limit taxpayer's financial exposure to only a portion 
of the incremental cost of the carbon capture and storage portion of 
the plant. Furthermore, this new approach will allow us to accelerate 
nearer-term technology deployment in the marketplace faster than the 
timetable for the previous approach. In order to be successful in 
competitive power markets (not to mention in the Department's 
competitive proposal evaluation process), the underlying power plant 
projects will still need to be efficient, competitive and 
environmentally sound. The original FutureGen approach was targeting a 
CO2 capture and sequestration level of approximately 90 
percent, and that level is also specified in the Request for 
Information for the re-structured FutureGen program.
    Question 6. I have heard estimates that including large-scale 
carbon capture and sequestration on a typical power plant will increase 
costs by roughly a third. What assurance do you have that the amounts 
you propose to distribute under this program will be sufficient 
incentives to lead to commercial-scale demonstration of the technology? 
Will other federal incentives be available to the applicants, and are 
more necessary?
    Answer. Approximately thirty commercial Integrated Gasification 
Combined Cycle (IGCC) projects are in various stages of planning, 
permitting and design across the Nation, which is evidence that a 
commercially viable basis for IGCC technology already exists. Some are 
stalled because of uncertainty regarding CO2. Federal 
incentives, such as loan guarantees and tax credits, are awarded on a 
competitive basis and may also be available to some of these projects. 
Federal funding for FutureGen demonstration projects will help pay for 
the CCS part of some of these projects this provides additional 
incentives for such projects. Responses to FutureGen's Request for 
Information are due by March 3, 2008, and should provide further 
information on how to structure the FutureGen solicitation to provide 
sufficient incentives for demonstration projects. Nothing precludes 
FutureGen applicants from applying for other Federal incentives, such 
as loan guarantees or tax credits. We have considered the need for 
further incentives, but believe that none are necessary at this time.
    Question 7. In recent months we have seen proposed commercial IGCC 
plants significantly delayed or cancelled. What assurance do you have 
that there will be sufficient commercial interest in building these 
plants to give us the demonstrations we need?
    Answer. At the present time over 30 Integrated Gasification 
Combined Cycle (IGCC) power plants are in various proposal stages and 
major barriers to their deployment include the uncertainties regarding 
future CO2 emissions regulations and the actual costs of 
constructing and operating IGCC-Carbon Capture and Storage (CCS) power 
plants. The restructured FutureGen is designed to help understand, 
address, and solve technical, siting, permitting, regulatory, and 
fiscal aspects of CCS deployment in various commercial settings. 
Through its Request for Information, DOE expects to identify the power 
producers who would consider participating in the revised FutureGen 
initiative.
    Question 8. The 4 phase-3 large-scale CO2 sequestration 
tests that have been awarded thus far are all expected to inject less 
than 1 million tons (approx 500,000) of CO2 per year--will 
there be an effort to increase those amounts so that we can have 
information more in line with that FutureGen would have produced?
    Answer. In addition to the four large-scale tests awarded to three 
of the Regional Carbon Sequestration Partnerships (RCSP) in October 
2007, a fifth test was awarded in December 2007 to a fourth RCSP. Three 
of the tests (in the Alberta Basin, Lower Tuscaloosa Formation, and 
Entrada Formation) individually are expected to inject at least 1 
million tons of CO2 per year for at least one year. Two 
other tests (in the Williston Basin and Mount Simon Sandstone 
Formation) will inject greater than 1 million tons in total, though at 
a rate of less than 1 million tons of CO2 per year. The 
injection rates will be at a scale that demonstrates the ability to 
inject and sequester several million metric tons for a large number of 
years. This operation at commercial-scale is as significant as that of 
higher injections of 1 MM tons per year. It is our intention to confirm 
the design of these injections, including the applicability of the 
injection scale proposed for the demonstrations to operations at 
commercial scale, in a March 2008 technical peer review.
    Question 9. The competition for FutureGen between Texas and 
Illinois led both states to examine the policy framework that would be 
necessary for CO2 sequestration. How will the new program 
create similar incentives for states in which the projects will be 
located? What can we do here to accelerate this deployment?
    Answer. There are major technical and regulatory hurdles to 
overcome before coal with CCS can be commercially deployed, however it 
is in the best interest of states to adopt a posture that would help 
enable ultra-low emission integrated gasification combined cycle (IGCC) 
plants with CCS, like FutureGen, to provide stable power supplies at 
affordable prices.
    FutureGen will provide early CCS demonstration experience in a 
commercial setting, which is aimed at accelerating deployment and 
advancing carbon capture policy. The revised approach would sequester 
at least double the amount of CO2 than the previous 
approach, generate enough electricity per plant to power 400,000 
households, and have the potential of demonstrating CCS in multiple 
states. FutureGen will help establish commercial feasibility and 
formulate a model that industry could use to deploy commercial-scale 
plants that each sequester at least one million metric tons of carbon 
dioxide annually.
       Responses of James Slutz to Questions From Senator Dorgan
    Question 1. It seems to me that we need to much more quickly begin 
establishing and defining the ``rules of the road'' when it comes to 
carbon management. As we begin to unlock the opportunities for 
capturing, moving and storing larger amounts of CO2, it is 
fair to say that the federal government will likely play a greater 
role. It will be better if we begin to better define appropriate roles 
for local, state and federal government. What are the most critical 
near-term issues that your agency can address so that developers can 
begin demonstrating CCS projects?
    Answer. The most critical near-term issues DOE can and is 
addressing through its research, development, and demonstration carbon 
capture and storage (CCS) program are the development of technology for 
CCS, which in turn will advance public acceptance of CCS as a 
technology for mitigating greenhouse gas emissions. Testing the storage 
of CO2 in deep saline formations and depleted oil fields 
will enable representatives from industry, states, the U.S. 
Environmental Protection Agency, and others to learn from the field 
demonstration of site characterization, operations, and closure which 
will lead to the development of best management practices for all 
aspects of CCS projects. These field activities, which DOE is 
supporting on a cost-shared basis, are critical in the deployment of 
these technologies and will provide key information in the development 
of regulations and policies to support CCS. The near-term successes of 
the field activities will help to support demonstrations planned under 
the restructured FutureGen Program [at 1M tons CO2/yr, 
FutureGen is about the same scale as the field tests].
    Question 2. Creating an infrastructure to capture, transport, 
store, and monitor CO2 will take greater federal resources 
including staff, technology and other elements. Do you think your 
agency is well-equipped to begin undertake this enormous challenge?
    Answer. The DOE has a dedicated interdisciplinary team, working to 
develop and demonstrate technologies for carbon capture and storage 
(CCS) and provide support to other agencies in the development of 
regulatory structures for injection. Additionally, DOE works with other 
countries through the Regional Carbon Sequestration Partnerships (with 
over 350 entities involved) and the Carbon Sequestration Leadership 
Forum. DOE also has the ability to add resources from the nineteen 
national laboratories and enter into cooperative agreements with 
industry and other research institutions when necessary.
    Question 3. DOE has been implementing the Carbon Sequestration 
Regional Partnership program to study carbon management in different 
regions of the country. Also, your agency has been working to identify 
storage sites for CO2. I think this work is important and 
should continue to help us evaluate where the opportunities for CCS 
demonstrations could take place.
    I do believe that we can find cleaner and more efficient ways to 
utilize our coal resources. However, we must do so in a way that does 
not jeopardize are ability to generate base load power. Your agency has 
several different areas working on different elements of carbon capture 
and storage.
    Could you provide me with an explanation of how the Department of 
Energy is coordinating the different research, development, 
demonstration and deployment program areas working on CCS in order to 
deploy the technology more rapidly?
    Answer. There are several elements of DOE's Sequestration Program 
for carbon capture and storage (CCS). They include the R&D which fund 
basic and applied basic research for carbon storage and capture 
technologies. The projects funded through these R&D programs represent 
innovative approaches that can significantly reduce the cost and 
demonstrate the safety and effectiveness of CCS. The second part of the 
program consists of large-scale CO2 injection projects, 
which are designed to take the technologies developed in the R&D 
programs and deploy them in the field through programs like the 
Regional Carbon Sequestration Partnerships. This part of the program is 
also responsible for developing the infrastructure technologies and 
information, such as CCS best practices that could help form a basis 
for regulations, for CCS deployment through the involvement of 
representatives from industry, non-governmental organizations (NGOs), 
universities, and Federal and state partners. The final piece of the 
DOE CCS program will be implemented through the clean coal 
demonstration program (such as the Clean Coal Power Initiative and 
FutureGen demos), which will take the technologies developed from the 
R&D and large-scale injection projects and implement these in full-
scale power plant demonstrations that include CCS. Early commercial 
deployment of plants with CCS can benefit from FutureGen demos and 
other deployment incentives. The Sequestration Program, which is 
managed by the Office of Fossil Energy, also coordinates with DOE's 
Office of Science to enhance the scientific learning and understanding 
in the field demonstration projects.
    All of the projects awarded through these DOE programs are based on 
cooperative agreements with industry and/or research institutions. 
Therefore, the success of these programs depends upon the success of 
our partners and DOE's continued efforts to promote technology 
transfer.
    DOE is also supporting working groups through other Federal 
agencies, nongovernmental organizations (NGO), and industry that are 
working to develop regulations and liability frameworks, and to educate 
stakeholders about the benefits of CCS.
      Responses of James Slutz to Questions From Senator Landrieu
    Question 1. I learned that the Department of Energy has decided to 
alter course on its ``FutureGen'' project. In the Request for 
Information that you released yesterday, you describe that your new 
approach will target IGCC plants to demonstrate carbon capture and 
storage technology. In Louisiana, we have saline storage formations, 
and we have a 300 megawatt power plant coming online. At present, it 
will be fueled by Petroleum Coke, but it is not currently slated to be 
an IGCC plant. Will the Department keep an open mind about selecting 
plants that may not be IGCC equipped, but that are nonetheless capable 
of capturing and storing their carbon?
    Answer. Yes, alternatives to Integrated Gasification Combined Cycle 
(IGCC) will be considered. The Request for Information does seek 
comments on whether the revised FutureGen approach should allow for 
advanced coal-based technology systems, other than IGCC, that would 
meet the stated performance requirements for FutureGen (e.g., 
approximately 90 percent CO2 capture and storage, 0.04 lbs/
million Btu SO2 emissions, less than 0.05 lb/million Btu NOX 
emissions, less than 0.005 lb/million Btu particulate matter emissions, 
and greater than 90 percent mercury removal).
    Question 2. Additionally, your Request for Information states that 
the Department will contribute the incremental cost associated with 
adding CCS technology to the facilities power train. Would the DOE 
cover the costs associated with compressing and transporting the 
CO2? Are these grants only intended to cover capital costs, 
or will they cover certain qualified operating costs as well?
    Answer. DOE will contribute a portion of the incremental cost 
associated with adding CCS technology. Based in part on input obtained 
through the Request for Information, DOE will determine which 
incremental costs are eligible for cost-sharing, such as compressing 
and transporting the CO2 and certain operating costs. The 
determination of which costs will be eligible for cost sharing, 
particularly for any equipment that might be shared between the power 
plant and CCS technology, will be articulated in the formal 
solicitation.
      Responses of James Slutz to Questions From Senator Cantwell
    Question 1. The Energy Bill (Title VII, Section 702) passed in 
December directs the Department of Energy to conduct not less than 7 
initial large-scale sequestration tests to study and validate 
commercial deployment of technologies for CO2 capture and 
sequestration. Seven regional partnerships have been identified and are 
currently entering Phase III of their projects. I understand the 
Department has currently awarded 4 of the 7 partnerships with Phase III 
funding. What is your path forward to provide funding for the final 
three in 2008?
    Answer. DOE has made awards for five large-scale tests to four of 
the Regional Carbon Sequestration Partnerships (RCSP) for Phase III 
Large Volume Sequestration Testing. Depending on the results of a 
scientific needs assessment being conducted in FY 2008 and the ability 
of additional project proposals to meet those needs, additional 
projects may be awarded in FY 2008 or FY 2009. The remaining three 
Phase III projects are in the process of being evaluated. The 
evaluation process requires finalizing the technical scope of the 
project along with undertaking a scientific evaluation and cost 
analysis of the proposed projects to verify their appropriateness 
within the overall objectives of the Sequestration Program. Independent 
cost verification is being undertaken by DOE to ensure the project 
costs are adequate prior to award. Independent cost reviews of the 
projects that have received awards have been completed. An independent 
technical review will be conducted at the end of March 2008. This 
technical review, conducted by an internationally renowned group of 
experts, will compare the proposed test plans against the program needs 
and that required for proper scientific evaluation in order to develop 
an integrated portfolio of robust tests. DOE is conducting reviews and 
plans to evaluate award of the remaining RCSP Phase III Projects based 
on the results on the scientific evaluation. The estimated time-frame 
for evaluating the remaining awards is the summer of FY 2008. The 
Sequestration Program budget is available to fund these awards.
    Question 2. Which partnership takes into consideration the geologic 
formations in the Pacific Northwest and what is the status of this 
project?
    Answer. The Pacific Northwest is shared by two Regional 
Partnerships, the Big Sky Regional Partnership (Big Sky) and the West 
Coast Regional Carbon Sequestration Partnership (WESTCARB). The Big Sky 
Regional Partnership is currently evaluating basalt formations in the 
region. The West Coast Regional Carbon Sequestration Partnership in 
addition to the West Coast is responsible for working with the states 
in the Pacific Northwest to characterize the geology and terrestrial 
sinks in that region. The WESTCARB project has completed the initial 
characterization of saline reservoirs and coal seams which could be 
possible storage formations. The results of this characterization is 
available through the National Carbon Sequestration Database and 
Geographic Information System online Atlas at the following site: 
http://www.natcarb.org These Regional Partnerships are currently in 
Phase II, undertaking Field Validation Testing in the region, and are 
two of the awards that are in the process of evaluation for potential 
award under Phase III.
       Response of James Slutz to Question From Senator Menendez
    Question 1. In April, in testimony before this committee, Thomas 
Shope, Acting Assistant Secretary for Fossil Energy at the Department 
of Energy, estimated that Carbon Capture and Sequestration technologies 
would become deployable and available in 2020 to 2025, but that wide 
deployment for most projects would not happen until 2045. Do you agree 
with this estimate? If so, won't this be too late if we are going to 
reduce our greenhouse gas emissions by 80% below 1990 levels by 2050?
    Answer. Widespread deployment of Carbon Capture and Storage (CCS) 
depends on a variety of factors, including success of R&D to drive down 
the cost of safe CCS, particularly the cost of separating 
CO2 from other gases and compressing it (to a supercritical 
fluid) for injection into geologic formations, and success of 
demonstration of CCS technologies so that the lowest cost technologies 
can be identified and commercialized in a timely manner.
    The Administration believes that significant reductions in 
CO2 can be made through investment in technology that will 
lead to a fundamental change in the way we produce electricity and 
power our vehicles. The President's 2009 budget request for research, 
development and demonstration of advanced clean coal technology, when 
combined with required private-sector contribution, will approach a 
total investment of nearly $1 billion. With continued support, it could 
be possible to significantly advance the timing for full deployment of 
CCS technologies.
                                 ______
                                 
    [Responses to the following questions were not received at 
the time the hearing went to press:]

           Questions for Stephen Allred From Senator Bingaman
    Question 1. Many people have called for ``permanent'' storage in 
introduced legislation (e.g. all the introduced climate bills), but do 
not go so far as to define permanence. Can any one of you elaborate on 
a clear definition of ``permanent CO2 storage'' as it 
relates to geologic storage?
    Question 2. What is the appropriate amount of time that 
CO2 should be stored in the subsurface, as means of 
mitigating CO2 emissions? Will storage times of that 
magnitude be burdensome on CCS projects?
    Question 3. Is there any amount of leakage that is acceptable? The 
IPCC suggests that storage should be on the order of 1000 years in a 
geologic formation, with less than 1% leakage of the volume of 
CO2 that is injected over the life of the storage project. 
Is this a reasonable expectation? How can we enforce such a 
requirement?
    Question 4. In your testimony you mention that the Dept of Interior 
will have a critical role in determining how CO2 is managed 
on public lands. One area your testimony did not discuss was the site 
selection criteria that will be necessary in choosing geologic 
formations suitable for storing CO2. The USGS employs some 
of the world's leading geologic experts. In your opinion, would the 
USGS be a good organization to recommend a set of ``best practices'' 
for geologic site selection for CO2 storage? By this I mean 
that they would not be regulators of the site selection, but instead 
recommend the technical requirements for safe, long-term geologic 
storage of CO2.
            Questions for Stephen Allred From Senator Dorgan
    Question 1. It seems to me that we need to much more quickly begin 
establishing and defining the ``rules of the road'' when it comes to 
carbon management. As we begin to unlock the opportunities for 
capturing, moving and storing larger amounts of CO2, it is 
fair to say that the federal government will likely play a greater 
role. It will be better if we begin to better define appropriate roles 
for local, state and federal government.What are the most critical 
near-term issues that your agency can address so that developers can 
begin demonstrating CCS projects?
    Question 2. Creating an infrastructure to capture, transport, 
store, and monitor CO2 will take greater federal resources 
including staff, technology and other elements. Do you think your 
agency is well-equipped to begin undertake this enormous challenge?
            Questions for Stephen Allred From Senator Smith
    Question 1. I want to thank you for your response to my December 
2007, letter concerning the pending Memorandum of Understanding between 
the Minerals Management Service (MMS) and the Federal Energy Regulatory 
Commission (FERC) regarding wave and current energy projects on the 
Federal Outer Continental Shelf (OCS). It is my understanding that this 
issue also came up at the Energy Committee on Thursday. I appreciate 
the actions taken by MMS, but I remain concerned that the potential for 
environmentally-friendly wave energy development will continue to be 
delayed on the OCS. Can you tell me when these proposed regulations, 
which have yet to be published for public comment, will be finalized? 
In the current draft of the agency rulemaking, do you address the issue 
of jurisdiction between MMS and FERC, which I understand would have 
been addressed in the MOU? If not, why can't MMS sign the MOU in order 
to provide regulatory certainty on agency jurisdiction now, and seek to 
amend the MOU if the final regulations require such a modification?
    Question 2. You stated in your letter and at the Committee hearing 
that you had been asked by the Committee not to sign the MOU. It is my 
understanding that such a request was orignally made when there was 
Senate-passed language in the 2007 energy bill that would have 
specified that FERC did not have jurisdiction over kinetic hydropower 
facilities located in the OCS. However, that language was not included 
in the final version of the bill, which is now P.L. 110-140. Can you 
tell me why, in the absence of this language, it wouldn't be helpful to 
those seeking to develop projects on the OCS to provide immediate 
clarity concerning the regulatory roles and responsibilities of the two 
agencies?
             Question for Stephen Allred From Senator Wyden
    In my State of Oregon and in the State of Washington, western 
coastal basins offer potential carbon sequestration opportunities. 
Promising basins include the Puget Trough, Tofina-Fuca Basin, West 
Olympic Basin, Whatcom Basin, and Willapa Hills Basin in Washington, 
and the Astoria-Nehalem Basin and Tyee-Umpqua Basin in Oregon.
    Furthermore, Oregon is one of the states that is part of the Big 
Sky Carbon Sequestration Partnership (BSCSP). Their vision is to 
prepare its member organizations for a possible carbon-constrained 
economy and enable the region (Montana, Idaho, South Dakota, Wyoming, 
eastern Oregon and Washington, and adjacent areas in British Columbia 
and Alberta) to cleanly utilize its abundant fossil energy resources 
and sequestration sinks to support future energy demand and economic 
growth. The BSCSP will achieve this vision by demonstrating and 
validating the region's most promising sequestration technologies and 
creating the supporting infrastructure required to deploy commercial 
scale carbon sequestration projects. BSCSP has the goal of developing 
an infrastructure to support and enable future carbon sequestration 
field tests and deployment throughout the BSCSP region.
    This technology is extremely attractive in assisting to address 
climate change issues; assuring the environmental acceptability and 
safety of carbon dioxide (CO2) storage in geologic 
formations and determining that CO2 will not escape from 
geologic formations or contaminate drinking water supplies are major 
concerns. Much research is needed to better understand and characterize 
sequestration of CO2 in geologic formations; I understand 
that researchers are building on the significant baseline of 
information and experience that exists.
    Question 1. During the second panel discussion of the hearing, Mr. 
Allred of the Department of the Interior discussed issues pertaining to 
land leasing requirements and mineral rights, as well as carbon dioxide 
ownership and eminent domain. While this discussion was informative, no 
resolution was provided on the subject matter. Mr. Allred, can you 
provide details on how carbon capture, transport, and sequestration, as 
well as the creation of carbon dioxide transport pipelines will impact 
private land owners' property and mineral rights in Oregon? And what 
are the federal land right impacts of carbon capture, transport, and 
sequestration on public property such as national forests and those 
supervised by the Bureau of Land Management?
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

                         American Public Power Association,
                                  Washington, DC, January 28, 2008.
Hon. John Kerry,
U.S. Senate, 304 Russell Senate Office Building, Washington, DC.
    Dear Senator Kerry: I am writing to express the American Public 
Power Association's (APPA) support for Section V of your bill (S. 2323) 
that establishes an interagency task force to develop regulations 
providing guidelines and practices for the capture and storage of 
carbon dioxide.
    As Congress continues to debate climate change, one of the most 
frequently discussed technologies is that of carbon capture and 
storage. While this may be a viable option to address climate change, 
there are major challenges that must be overcome, both technically and 
in public policy, before widespread commercial-scale carbon capture and 
storage can be achieved. APPA believes your bill is a step in the right 
direction to overcoming these challenges.
    Again, thank you for your dedication and hard work on this matter 
and we look forward to working with you as your legislation moves 
forward.
            Sincerely,
                                              Mark Crisson,
                                                   President & CEO.
                                 ______
                                 
  Statement of Robert J. Finley, Director, Energy and Earth Resources 
                   Center, Champaign, IL, on S. 2323
    The Illinois State Geological Survey is one of the largest and most 
diverse state geological surveys in the United States. We have been 
researching carbon sequestration in the Illinois Basin of Illinois, 
southwestern Indiana, and western Kentucky since 2001. In 2003, we 
submitted a successful competitive proposal that began our work as a 
lead agency for a Department of Energy (DOE), Regional Carbon 
Sequestration Partnership. Phase I of that work was completed in 2005, 
and a Phase II program was awarded in 2005 that runs through 2009. Our 
Phase III large-scale sequestration test was awarded this past December 
and we will inject one million metric tonnes of carbon dioxide (CO2) 
into a saline reservoir with the collaboration of the Archer Daniels 
Midland Company who is providing the site and the high-purity carbon 
dioxide for the test. Other tests we are conducting include injection 
into mature oil reservoirs and into coal seams to evaluate enhanced oil 
recovery and the ability of coal to adsorb CO2. With these efforts we 
have established a program to address the major potential reservoirs 
for carbon sequestration, as have the six other Regional Carbon 
Sequestration Partnerships in their respective regions around the 
country. The existence of these efforts leads me directly to offer 
comments on S.2323.
    Section 3 of this bill is essentially duplicative of the work that 
the DOE Regional Carbon Sequestration Partnerships are conducting as 
part of their Phase III efforts. The projects already planned and 
underway involve 1 million tonnes from a variety of commercial sources. 
For purposes of sequestration, and assessing the safety and 
effectiveness of the process of isolating CO2 from the atmosphere, the 
Partnership tests are addressing the very issues this bill proposes to 
address. Given the urgency in developing responses to climate change, I 
cannot support initiating a new effort that duplicates work that is 
already in place with similar goals, volumes of CO2, and geographic 
diversity.
    I would also call your attention to Section 6. A significant amount 
of research has already been conducted or is now underway with respect 
to carbon capture by the Office of Fossil Energy within DOE. S.2323 
seemingly does not provide for coordination between Office of Science 
and the Office of Fossil Energy with respect to the work that already 
has been accomplished. Thus, the potential for duplicative work again 
arises.
    It is important that Section 7 of S.2323 recognizes the work on 
capacity assessment that has been completed and is now being updated by 
the DOE Office of Fossil Energy. The initial methodology is already 
undergoing modification and refinement. However, some of the work 
proposed in this section is likely to be duplicative and the required 
coordination provisions should be strengthened. Certainly, some 
detailed, recent assessments of the volumes of oil incrementally 
recoverable through CO2 enhanced oil recovery have been made on a basin 
scale, published, and presented around the nation. With regard to the 
Geological Verification provision of Section 7, I would suggest that 
this element be dropped. The authorized funding will not cover any 
useful new drilling in its entirety while providing for the other 
aspects of this Section. It would be far more effective to focus on 
partnerships with existing drilling efforts in order to specifically 
cofund data collection (coring, advanced well logging, and similar) but 
not make any contributions to actual drilling expenditures or footage 
rates.
    Senator Bingaman and Members, I appreciate the opportunity to 
submit these comments to the committee and would welcome any follow-up 
communications that may be useful to you.

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