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 SequestrationWells Sandridge Energy Corporation ("Sandridge") is pleased to submitthese 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, DocketID Number EPA-HQ-OW-2008-0390 (the "Proposed Rule"). Sandridge is a rapidly growing independentnatural 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 agreementwith 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 ofthe gas streaminitially producedby the company in the WestTexas Overthrust. Through its EaR practices and otherbusiness operations, Sandridge is committed to conducting its business in a manner thatproduces importantnew domestic supplies ofnatural gas and oil, while also working to protectthe environment. Accordingly, Sandridge supports the EPA's efforts to protectunderground sources ofdrinking water in the context of geological sequestration. However, Sandridge's comments below describe the important differences between EaR and GS and suggestways 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 ofthese comments discusses the widely accepted importance ofEaR using C02 to the U.S. domestic supply ofenergy and to the

## u.s. environment. The second part ofthese comments suggests that the Proposed Rule mustbetter distinguish GS ofC02 that occurs in connectionwith business-as-usual EaR thatis regulated

- and should remain regulated

- under Class II ofthe EPA's UIC program, from GS ofC02 thatwill occur in conjunction with UIC projects designed solely to permanently sequester large quantities of C02. Finally, the third part ofthese comments includes observations about GS ofC02 under the potential new rules.
1. EPA UIC Regulations Must Recognize ThatEaR Using C02 Increases Domestic Energy Supplies And Utilizes And Simultaneously Sequesters C02 ThatWould 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.comAs explained below, Sandridge believes that the EPA mustissue regulations under the UIC in a manner that enables new and existing owners and operators ofClass II wells to use those wells to injectC02 for EaR without additional and undue risks and costs. This process has and will significantly increase domestic sources ofenergy, while utilizing and simultaneously sequestering C02 thatwould otherwise be vented into the atmosphere.
A. EaR Using C02 Has SignificantEconomic 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 ofoil 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 percentof the oil originally contained in the reservoir. According to the Department ofEnergy (DOE), approximately 1,673 fields/reservoirs, which accountfor 146billion barrels oforiginal oil in place and 65 billionbarrels ofremaining immobile oil, are candidates for C02-miscible flooding in the U.S. The latestreport 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 billionbarrels ofeconomically 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 thatwould otherwise be vented into the atmosphere. C02 is not simply injected into a formation when itis used for EaR; C02 is also sequestered simultaneously during and after oil and gas production resulting from EaRwith C02. When C02 is injected for EaR, approximately one-third to one-halfofitbecomes trapped and stored in the field or reservoir in perpetuity and the remainder ofthe C02 is produced with the oil and then separated and reinjected to further enhance production. Each subsequentinjection traps even more ofthe original C02, and ultimately nearly all ofthe C02 is sequestered in the field or reservoir. Because ofthis sequestration, oil and gas producers mustcontinually obtain additional amounts ofthe greenhouse gas, which is then ultimately sequestered-instead ofvented-into the atmosphere. The DOE-NETL Report estimates that IIsignificantvolumes ofC02 (ranging from 10 to 13 billion metric tons depending on oil price) canbe stored with enhanced oil recovery.II

In fact, EaR is the only commercially available near-termway to sequester C02. Inhis 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 ofEconomic Geology at the University ofTexas at Austin stated that II[i]n the near term, C02-enhanced oil recovery, combined with appropriate monitoring, mitigation and verification, can make a significantcontribution to putting man-made C02 into permanent storage in depleted oil reservoirs, and it may have been a little confusing in
some ofthe previous testimony where itwas perhaps suggested that C02 involved in enhanced oil recovery isjustthere to recover the oil. lI

The time-tested and successful regulation ofC02 sequesh'ation in connection with EaR under Class II requirements (as opposed to the ongoing developing tests and regulation ofC02 sequestration from large-scale GS projects) is the reason that experts pointto EaR using C02 as

2the only near-termcommercially available way to reduce greenhouse gas emissions through carbon sequesh'ation. Injecting relatively small amounts ofC02 at relatively lightpressures 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 ofC02 used for EOR. Testamentto this successful regulation is the fact that the EPA has acknowledged that there has been no known impactpositive or negative-ofC02 used for EOR on underground sources ofdrinking water. 1
Since EOR using C02 has been successfully regulated under the Class II programfor over three decades, Sandridge believes that the EPA should continue to monitor EOR using C02 under that program. Accordingly, there mustbe a recognized line between GS that occurs in conjunction with business-as-usua1 EOR where C02 is injected atrelatively low volumes and atrelatively low pressures, and GS during which C02 is injected athigh volumes athigh pressures for the primary purpose ofpermanent sequesh'ation. Developing such a line will not only benefitregulators by clarifying the boundaries between the two types ofactivities, but also companies engaging in EOR using C02 thathave already factored the Class II requirements into their costs and risk assessments. If there is doubt thatbusiness-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. ofimportantverifiable carbon sequestration alternatives.

B. Benefits FromEaR With C02 Can Only Be Realized If Costs Are Contained

As suggested above, Sandridge believes that the economic and environmentalbenefits from EOR using C02 will only continue and grow ifcosts and risks are contained. As itis, under the current business and regulatory environments, costis a major barrier to EOR with C02, Occidental PetroleumVice President ofWorldwide 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 ofrecovering abarrel ofoil by more than 50 percent over typical primary and secondary recovery operations. II First, a business must spend significantcapital 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, abusiness mustbe able to figure thatitwill recover the capital costs from the long-term oil production potential ofthe targetformation and the expectations offuture oil prices. Oil price volatility is "a significant deterrent to C02 pipeline and projectinvestmentby industry, particularly for smaller independentproducers. II EOR with C02 becomes more attractive from abusiness costperspective as oil prices go up.
Given recent and future oil price volatility and the enormous costs associated with EOR using C02, itis crucialfor businesses engaging in that activity to keep costs as stable and predictable as

1 See U.S. Environmental Protection Agency, Proposed UICRegulationsfor Geologic Sequestration ofCarbon Dioxide, Meeting Summary, Appendix 3, Page 2 of2 (Dec. 3-4, 2007) (responding to a written question after the meeting, EPA stated, "[t]O date, according to rule-making research, we know ofno cases ofC02 being used for EOR where the C02 has impacted a USDW").

3possible. Since these businesses have been operating under Class II regulations, they are able to predictthose regulatory costs with some precision. This predictionhas encouraged businesses to investin C02 since they do not have to factor much regulatory volatility into theirbusiness plans for conducting EaR with C02.

II. EPA Regulations Must ReflectA BrightLine Between C02 Sequestered In Conjunction With Business-As-Usual EaR Regulated Under Current Class II Regulations And C02 Sequestered For The Purpose OfPermanent GS Regulated Under A New Regime Sandridge is concerned that the Proposed Rule does not adequately recognize thatindustry may only be expected to continue investing in EaR projects using C02 as long as industry may rely on the activity's regulationunder tested and predictable Class II requirements for injectionwells. In its currentform, the Proposed Rule indicates that " [i]njection ofC02 for the purposes ofenhanced oil and gas recovery
.. .

### ,as long as anyproduction is occurring, will continue to be permitted under the Class II program" (emphasis added). However, the Proposed Rule does not set a minimum level atwhich production mustbe occurring to appropriately distinguish injection ofC02 for businessas-usual EaR thatwill be regulated under Class II regulations, from injection ofC02 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, itis importantto make clear that C02 sequesh'ation can occur in conjunctionwithbusiness-as-usual EaR with the proper level of regulatory scrutiny under Class II regulations, and it can also take place in conjunctionwith activities specifically designed to sequester large amounts ofC02 thatwill be regulated under a new regime. Sandridge believes thatitis crucial that EP

### Ns final rule makes this clarification to help ensure thatindustry 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 ofenergy in ways thatreduce greenhouse gas emissions. Accordingly, as a member ofan industry actively involved in EaR using C02, Sandridge believes that EPA should ensure that the final rule contains a brightline, minimum level atwhich production mustbe occurring to appropriately distinguish injection ofC02 for business-as-usual EaR thatwillbe regulated under Class II regulations from injection ofC02 for permanentGS thatwill be regulated under a new class.

III. Suggested Injection Well Definition To Create Necessary BrightLine 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 ofoil or natural gas where geologic sequestration is occurring during or in connectionwith enhanced recovery ofoil or natural gas

### provided (i) there is reasonable expectation ofmore than insignificantfuture production volumes or rates as a result ofcarbon 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").


### 4This suggested formula to define injection wells that should be regulated under Class II has been reviewed and approved by several interested parties, including representatives ofenvironmental organizations, as well as indush·y. Therefore, Sandridge believes that EPA should 1) be satisfied that the definitionhas 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 thatwill continue to be regulated under traditional Class II requirements, from C02 sequestration that occurs as a result ofC02 injection in large quantities for the sole purpose ofpermanentGS thatmay be regulated under a new class.



### N. Conclusion

Itis widely accepted thatbusiness-as-usual EOR using C02 has the potential to unlock enormous new domestic energy supplies while reducing C02 through simultaneous sequestration. Since this importantindustry practice has been tested and regulated successfully for more than three decades, with no known negative impacts to the environment or underground sources ofdrinking water, Sandridge urges the EPA to ensure thatindush-y will continue to investin 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 conjunctionwith business-as-usual EOR thatwill continue to be regulated under h'aditional Class II requirements, from C02 sequestration that occurs as a result ofC02 injection in large quantities for the sole purpose ofpermanent GS thatmay be regulated under a new class. For the reasons explained above, Sandridge suggests the EPA create this brightline by classifying injection wells thatmeet the following formula as those thatwillbe regulated under Class II:
(1) For enhanced recovery ofoil or natural gas where geologic sequestration is occurring during or in connectionwith enhanced recovery ofoil ornatural gas

### provided (i) there is reasonable expectation ofmore than insignificantfuture production volumes or rates as a result ofcarbon 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 ofC02 atvolumes 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 outthe extraordinarily importantbusiness, environmental, and regulatory reasons why itbelieves that the EPA must ensure that the final rule properly distinguishes C02 injected for business-asusual EORfrom C02 injected for GS.

Thank you for your consideration ofthese comments. Sincerely, 

# *

TomWard ChiefExecutive Officer



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