December 22, 2008

Submitted Via E-Mail

Water Docket

Environmental Protection Agency

Mai1code: 2822T

1200 Pennsylvania Avenue, NW

Washington, DC 20460

101010.regulations.gov

Re: Docket ID No. EPA-HQ-OW-2008-0390: Comments to Proposed Rule on Federal

Requirements Under the Underground Injection Control Program for Carbon Dioxide

Geologic Sequestration Wells

Sandridge Energy Corporation ("Sandridge") is pleased to submit these comments to the

Environmental Protection Agency's ('IEPA") Proposed Rule re Federal Requirements Under the

Underground Injection Control Program ("UIC') for Carbon Dioxide ("C02") Geologic

Sequestration ("GS") Wells, Docket ID Number EPA-HQ-OW-2008-0390 (the "Proposed Rule").

Sandridge is a rapidly growing independent natural gas and oil company concenh'ating in

exploration, development and production activities. The company also engages in enhanced oil

recovery ("EaR") using industrial C02 and has an agreement with a dominant EaR operator to

use/sequester C02 from the Sandridge wells for 30 years. The indush'ial C02 is created through a

process in which C02 is stripped out of the gas stream initially produced by the company in the

West Texas Overthrust. Through its EaR practices and other business operations, Sandridge is

committed to conducting its business in a manner that produces important new domestic supplies

of natural gas and oil, while also working to protect the environment. Accordingly, Sandridge

supports the EPA's efforts to protect underground sources of drinking water in the context of

geological sequestration. However, Sandridge's comments below describe the important

differences between EaR and GS and suggest ways that the Proposed Rule can better distinguish

EaR from GS so that even more C02 may be sequestered in connection with EaR.

The first part of these comments discusses the widely accepted importance of EaR using C02 to

the U.S. domestic supply of energy and to the u.s. environment. The second part of these

comments suggests that the Proposed Rule must better distinguish GS of C02 that occurs in

connection with business-as-usual EaR that is regulated - and should remain regulated - under

Class II of the EPA's UIC program, from GS of C02 that will occur in conjunction with UIC

projects designed solely to permanently sequester large quantities of C02. Finally, the third part

of these comments includes observations about GS of C02 under the potential new rules.

1. EPA UIC Regulations Must Recognize That EaR Using C02 Increases Domestic Energy

Supplies And Utilizes And Simultaneously Sequesters C02 That Would Otherwise Be

Vented Into The Atmosphere

Discovering Beneath Exploring Beyond'"

123 Robert S. Kerr, Oklahoma City, OK 73102-6406 • Phone 405-429-5500, Fax 405-429-5975 • sandridgeenergy.com
As explained below, Sandridge believes that the EPA must issue regulations under the UIC in a

manner that enables new and existing owners and operators of Class II wells to use those wells to

inject C02 for EaR without additional and undue risks and costs. This process has and will

significantly increase domestic sources of energy, while utilizing and simultaneously sequestering

C02 that would otherwise be vented into the atmosphere.

A. EaR Using C02 Has Significant Economic And Environmental Benefits

EaR using C02 has and will substantially increase the U.S. domestic energy supply, which places

the counh-y in a more favorable economic and national security position. After the primary and

secondary phases of oil recovery are complete, C02 may be injected into oil and gas fields and

reservoirs during a tertiary recovery phase known as EaR to recover between 10 and 50 percent of

the oil originally contained in the reservoir. According to the Department of Energy (DOE),

approximately 1,673 fields/reservoirs, which account for 146 billion barrels of original oil in place

and 65 billion barrels of remaining immobile oil, are candidates for C02-miscible flooding in the

U.S. The latest report on IIStoring C02 with Enhanced Oil Recoveryll published by the DOE's

National Energy Technology Laboratory (the IIDOE-NETL Report") explains that lithe 39 to 48

billion barrels of economically recoverable domestic oil[,] economically recoverable from storing

C02 with EOR[,] would help displace imports, [create] a path toward energy independence...[and]

help build pipeline infrash'ucture subsequently usable for storing C02 in saline formations. II

EaR using C02 contributes to the u.s. domestic energy supply in an environmentally responsible

way that traps C02 that would otherwise be vented into the atmosphere. C02 is not simply

injected into a formation when it is used for EaR; C02 is also sequestered simultaneously during

and after oil and gas production resulting from EaR with C02. When C02 is injected for EaR,

approximately one-third to one-half of it becomes trapped and stored in the field or reservoir in

perpetuity and the remainder of the C02 is produced with the oil and then separated and

reinjected to further enhance production. Each subsequent injection traps even more of the

original C02, and ultimately nearly all of the C02 is sequestered in the field or reservoir. Because

of this sequestration, oil and gas producers must continually obtain additional amounts of the

greenhouse gas, which is then ultimately sequestered-instead of vented-into the atmosphere.

The DOE-NETL Report estimates that IIsignificant volumes of C02 (ranging from 10 to 13 billion

metric tons depending on oil price) can be stored with enhanced oil recovery. II

In fact, EaR is the only commercially available near-term way to sequester C02. In his recent

testimony during the u.s. House Energy and Commerce Subcommittee on Environment and

Hazardous Materials hearing on IICarbon Sequestration: Risks, Opportunities and Protection of

Drinking Water,II Dr. Ian Duncan from the Bureau of Economic Geology at the University of Texas

at Austin stated that II [i]n the near term, C02-enhanced oil recovery, combined with appropriate

monitoring, mitigation and verification, can make a significant contribution to putting man-made

C02 into permanent storage in depleted oil reservoirs, and it may have been a little confusing in

some of the previous testimony where it was perhaps suggested that C02 involved in enhanced oil

recovery is just there to recover the oil.lI

The time-tested and successful regulation of C02 sequesh'ation in connection with EaR under

Class II requirements (as opposed to the ongoing developing tests and regulation of C02

sequestration from large-scale GS projects) is the reason that experts point to EaR using C02 as

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the only near-term commercially available way to reduce greenhouse gas emissions through

carbon sequesh'ation. Injecting relatively small amounts of C02 at relatively light pressures for

EOR purposes has been tested and regulated since the early 1970s under Class II requirements.

These requirements include rules to ensure proper monitoring, mitigation and verification and

have resulted in the successful regulation of C02 used for EOR. Testament to this successful

regulation is the fact that the EPA has acknowledged that there has been no known impactpositive or negative-of C02 used for EOR on underground sources of drinking water.1

Since EOR using C02 has been successfully regulated under the Class II program for over three

decades, Sandridge believes that the EPA should continue to monitor EOR using C02 under that

program. Accordingly, there must be a recognized line between GS that occurs in conjunction

with business-as-usua1 EOR where C02 is injected at relatively low volumes and at relatively low

pressures, and GS during which C02 is injected at high volumes at high pressures for the primary

purpose of permanent sequesh'ation. Developing such a line will not only benefit regulators by

clarifying the boundaries between the two types of activities, but also companies engaging in EOR

using C02 that have already factored the Class II requirements into their costs and risk

assessments. If there is doubt that business-as-usua1 EOR using C02 may be subject to new

regulations, companies may decide that taking steps necessary to qualify such projects for carbon

credits are no longer worth it, thereby potentially depriving the U.s. of important verifiable carbon

sequestration alternatives.

B. Benefits From EaR With C02 Can Only Be Realized If Costs Are

Contained

As suggested above, Sandridge believes that the economic and environmental benefits from EOR

using C02 will only continue and grow if costs and risks are contained. As it is, under the current

business and regulatory environments, cost is a major barrier to EOR with C02, Occidental

Petroleum Vice President of Worldwide Engineering and Technical Services William Roby

illustrated the enormous costs associated with EOR using C02 in recent testimony when he

described that II[Occidental] estimate[s] that using C02 enhanced recovery at [its] Permian Basin

operations increases the cost of recovering a barrel of oil by more than 50 percent over typical

primary and secondary recovery operations. II

First, a business must spend significant capital to build the pipeline infrastructure necessary to

carry the C02 from its source to the targeted fields and reservoirs. In order to make the necessary

investments in EOR with C02, a business must be able to figure that it will recover the capital costs

from the long-term oil production potential of the target formation and the expectations of future

oil prices. Oil price volatility is "a significant deterrent to C02 pipeline and project investment by

industry, particularly for smaller independent producers. II EOR with C02 becomes more

attractive from a business cost perspective as oil prices go up.

Given recent and future oil price volatility and the enormous costs associated with EOR using

C02, it is crucial for businesses engaging in that activity to keep costs as stable and predictable as

1 See U.S. Environmental Protection Agency, Proposed UIC Regulationsfor Geologic Sequestration ofCarbon

Dioxide, Meeting Summary, Appendix 3, Page 2 of 2 (Dec. 3-4, 2007) (responding to a written question after

the meeting, EPA stated, "[t]O date, according to rule-making research, we know of no cases of C02 being

used for EOR where the C02 has impacted a USDW").

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possible. Since these businesses have been operating under Class II regulations, they are able to

predict those regulatory costs with some precision. This prediction has encouraged businesses to

invest in C02 since they do not have to factor much regulatory volatility into their business plans

for conducting EaR with C02.

II. EPA Regulations Must Reflect A Bright Line Between C02 Sequestered In Conjunction

With Business-As-Usual EaR Regulated Under Current Class II Regulations And C02

Sequestered For The Purpose Of Permanent GS Regulated Under A New Regime

Sandridge is concerned that the Proposed Rule does not adequately recognize that industry may

only be expected to continue investing in EaR projects using C02 as long as industry may rely on

the activity's regulation under tested and predictable Class II requirements for injection wells. In

its current form, the Proposed Rule indicates that " [i]njection of C02 for the purposes of enhanced

oil and gas recovery.. .,as long as any production is occurring, will continue to be permitted under the

Class II program" (emphasis added). However, the Proposed Rule does not set a minimum level

at which production must be occurring to appropriately distinguish injection of C02 for businessas-usual EaR that will be regulated under Class II regulations, from injection of C02 for GS that

will be regulated under a new class.2

This omission increases the potential risks and costs to industry and could lead to a chilling effect

on industry efforts to seek carbon credits. As such, it is important to make clear that C02

sequesh'ation can occur in conjunction with business-as-usual EaR with the proper level of

regulatory scrutiny under Class II regulations, and it can also take place in conjunction with

activities specifically designed to sequester large amounts of C02 that will be regulated under a

new regime. Sandridge believes that it is crucial that EPNs final rule makes this clarification to

help ensure that industry continues its EaR activities and taking steps necessary to earn carbon

credits, especially at this time when the U.S. is searching for ways to increase the domestic supply

of energy in ways that reduce greenhouse gas emissions. Accordingly, as a member of an industry

actively involved in EaR using C02, Sandridge believes that EPA should ensure that the final rule

contains a bright line, minimum level at which production must be occurring to appropriately

distinguish injection of C02 for business-as-usual EaR that will be regulated under Class II

regulations from injection of C02 for permanent GS that will be regulated under a new class.

III. Suggested Injection Well Definition To Create Necessary Bright Line Between Class II

And Class VI C02 Injection Activities

Sandridge suggests that EPA continue to regulate under Class II requirements injection wells that

meet the following definition:

(1) For enhanced recovery of oil or natural gas where geologic sequestration is occurring during or

in connection with enhanced recovery of oil or natural gas provided (i) there is reasonable

expectation of more than insignificant future production volumes or rates as a result of carbon

dioxide injection and (ii) operating pressures are no higher than reasonably necessary to produce

such volumes or rates.

2 See id. (responding to a question about activities that the Proposed Rule is designed to cover, EPA clarified

that "[t]his [proposed] rule applies to geologic sequestration, not EORjEGR activities").

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This suggested formula to define injection wells that should be regulated under Class II has been

reviewed and approved by several interested parties, including representatives of environmental

organizations, as well as indush·y. Therefore, Sandridge believes that EPA should 1) be satisfied

that the definition has been well-vetted and enjoys broad support, and 2) adopt the formula as the

standard that separates C02 sequestration that occurs in conjunction with business-as-usual EOR

that will continue to be regulated under traditional Class II requirements, from C02 sequestration

that occurs as a result of C02 injection in large quantities for the sole purpose of permanent GS

that may be regulated under a new class.

N. Conclusion

It is widely accepted that business-as-usual EOR using C02 has the potential to unlock enormous

new domestic energy supplies while reducing C02 through simultaneous sequestration. Since this

important industry practice has been tested and regulated successfully for more than three

decades, with no known negative impacts to the environment or underground sources of drinking

water, Sandridge urges the EPA to ensure that indush-y will continue to invest in EOR using C02

(and thereby simultaneously storing C02 which would otherwise be vented into the atmosphere)

by revising the Proposed Rule to define and distinguish C02 sequestration that occurs in

conjunction with business-as-usual EOR that will continue to be regulated under h'aditional Class

II requirements, from C02 sequestration that occurs as a result of C02 injection in large quantities

for the sole purpose of permanent GS that may be regulated under a new class. For the reasons

explained above, Sandridge suggests the EPA create this bright line by classifying injection wells

that meet the following formula as those that will be regulated under Class II:

(1) For enhanced recovery of oil or natural gas where geologic sequestration is occurring during or

in connection with enhanced recovery of oil or natural gas provided (i) there is reasonable

expectation of more than insignificant future production volumes or rates as a result of carbon

dioxide injection and (ii) operating pressures are no higher than reasonably necessary to produce

such volumes or rates.

Sandridge recognizes that EPA is considering new regulations for the injection of C02 at volumes

and pressures that go beyond traditional EOR activities for which the proposed Class VI

requirements may be appropriate. However, in these comments, Sandridge only seeks to point

out the extraordinarily important business, environmental, and regulatory reasons why it believes

that the EPA must ensure that the final rule properly distinguishes C02 injected for business-asusual EOR from C02 injected for GS.

Thank you for your consideration of these comments.

Sincerely,

*

Tom Ward

Chief Executive Officer

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