Raphael ThysAvoiding the worst effects of climate change—including drought, food insecurity and unprecedented migration—means limiting global temperature rise to 2°C (the Paris Agreement sets a more ambitious 1.5°C goal). A number of technologies are being pursued to help solve the climate crisis including carbon capture and storage (CCS). But according to the International Energy Agency, this requires a tenfold increase in CCS capacity by 2025.
But what, exactly is CCS?
Just as scrubbers remove air pollutants from emissions, CCS separates carbon dioxide from other gases. Carbon dioxide capture technology has been used since the 1920s to separate marketable gases from the rest. More recently, investment in CCS is being driven by the oil and gas industries as well as cement, iron and steel, and chemical production industries in the push for decarbonization. Once it is separated from other gases, the carbon dioxide is then compressed, transported, and injected underground for permanent storage. About 90-100% of produced carbon dioxide can be captured in this manner.
Many are betting on CCS as a key to greenhouse gas emission reductions, since leveraging CCS is expected to achieve 14-19% of the reductions needed by 2050. The industrial sector in particular could benefit from this technology, since carbon emissions are currently an unavoidable part of many production processes like iron and cement making.
Experts say there is plenty of capacity for storing carbon extracted by CCS technology for at least a century. Further, potential storage sites are near most major point sources of carbon dioxide. There is also sufficient room for growth in this still-developing industry: installations could capture just 38.5 million metric tons of carbon dioxide per year in 2020, compared to a global figure of over 35 billion tons emitted annually.
Just who are the biggest players in CCS today?
The first large-scale CCS project designed for the purpose of negative net emissions began operating in Norway in 1996. Equinor (at the time Statoil) received tax credits from the Norwegian government for the stored carbon. There are currently 26 operating commercial CCS facilities and five more in construction.
Oil Industry
One of the most notable companies developing CCS projects is ExxonMobil, which operates the Shute Creek Gas Processing Plant, in Wyoming. Shute Creek is the largest CCS project in the world with a capacity of 7.7 million metric tons. Other companies at the front of the pack include Dakota Gasification Company and Shell. Oil companies in particular back these projects, since this technology can aid in oil recovery, a type of carbon, capture, utilization, and storage (CCUS). CCS also provides a place for oil in a more sustainable (in the medium-term) economy, by decreasing its carbon footprint. Oil and gas companies have even used state decarbonization goals to promote CCS adoption.
In 2019, oil and gas companies in the United States alone emitted about 340 million metric tons of carbon dioxide equivalent. Although carbon dioxide is not currently a criteria air pollutant under the Clean Air Act, EPA is considering adding it as a secondary national ambient air quality standard (NAAQS). The oil and gas industry is already getting ahead on the issue to manage regulatory risks, to improve public perception, and to meet increasingly high Environmental, Social, and Governance (ESG) expectations to have a positive impact on employees, customers, and communities.
Federally recognized Indian tribes, some of which now produce more than 3% of U.S. oil, are also turning to CCS. The Southern Ute Tribe, located in what is today southwestern Colorado, is developing a CCS project to make a 280-MW gas-fired power plant carbon-neutral. CCS projects may provide revenue to sovereign tribes while enhancing oil recovery and maintaining the value of oil reserves during decarbonization.
Is CCS a solution, or just kicking the problem down the road for a later generation?
Given its role in aiding the oil and gas industries, CCS could play a significant role in decarbonization. This aid generates questions of moral hazard, since it may encourage continued high carbon dioxide emissions and deter nations from whole-heartedly committing to renewable energy. This is perhaps one of the biggest counterarguments to focusing on CCS. Another counterargument is that storage capacity is only sufficient for one or two centuries’ worth of emissions. In contrast, renewable energy, which faces its own obstacles, can serve as a decarbonization and energy solution over the long term. However, one to two centuries is undeniably significant when it comes to the millions of people already on the frontlines of climate change and those that must transition to employment within a cleaner economy. CCS can function as a temporary “solution,” decreasing carbon intensity much like the use of natural gas rather than coal. Should the transition to renewable energy take longer than planned, CCS may help to avoid the worst of climate change.
Stay tuned for Part 2 of this two-part series to learn about obstacles to CCS implementation and how policy could overcome them. For more on CCS and regulation of the fossil fuel industry, check out ELI’s treatise on federal environmental law, Law of Environmental Protection—now featuring a new chapter on Oil and Gas.
Part 1 of this two-part blog series explored the history and current use of carbon, capture, and storage (CCS). Part 2 discusses the policy challenges that limit CCS use and how these policies can be improved to expand it.
The biggest question is: if CCS can reduce carbon dioxide emissions so drastically, why isn’t everyone implementing it?
The primary downside to CCS technology is the additional expense it adds to energy production and the unknown impacts of storage in the long term. Transportation of captured and compressed carbon requires specially designed pipes that are expensive to build. Producers that seek to compete with cheap natural gas prices—produced by companies that don’t use CCS technology—are reluctant to add this expense, especially without stronger policy incentives.
The limited regulatory framework governing CCS also creates uncertainty. While EPA’s Underground Injection Control (UIC) program regulates the underground storage of captured emissions and obtaining one is considered a burdensome process (a Class VI permit is needed both to drill and actually inject gases beneath the ground), there are currently no federal regulations specific to CCS projects or pipelines. Instead, they are primarily regulated by the states. At least 21 states have promulgated regulations specific to CCS. These regulations relate to liability (six states), storage funds (six states), pore-space (three states), carbon dioxide ownership (six states), the percentage of pore-space owners that must consent to a project (three states) and interstate issues (three states). State legislatures have created storage funds for the long-term management of carbon storage facilities. The minimum percentage of landowners that must agree to a project range from 60 to 80% by state.
The UIC program also requires owners to set aside money to maintain, plug, and abandon wells consistent with approved closure plans, another barrier to development.
Furthermore, the UIC Class VI permit sets a 50-year post-injection period in which the site must be maintained. This long period disincentivizes development of carbon storage facilities, since the maintenance and liability costs are uncertain. No estimates have been made of the cost to repair failing storage facilities. There are also environmental and health risks associated with carbon storage facilities, such as the escape of the carbon dioxide from the site, the displacement of groundwater, and seismic activity. Carbon dioxide can leak through permeable substances or man-made routes like abandoned drilling wells. However, best practices are expected to contain 98% of stored carbon after 10,000 years more than half the time. Over the same period under best practices, maximum leakage of 6.3% of stored carbon is expected to occur, but in fewer than 5% of cases. To further minimize risks to developers, some states (for example, Montana and Texas) will assume liability after a given time period if the project meets certain requirements. This could promote CCS development.
Oil Industry
Complexity in property rights also complicates CCS development. Many property documents do not directly address “pore-space” rights, the spaces underneath the surface of land into which gases can be stored. An oil drilling company might be the mineral owner, owning just the underground substances but not the pore-space or the surface. Under the “American Rule,” which most states in the United States follow, pore-space rights are reserved to the surface owner. As a result, an oil drilling company that has only mineral rights may not be able to use the space for carbon storage once it exhausts all mineral reserves in an area. In other jurisdictions, pore-space rights have been awarded to the mineral owner. This inconsistency can cause complications for developers seeking pore-right ownership. CCS proponents argue that state legislatures must more clearly define property rights to promote CCS development.
In summary, for CCS development to play a key role in preventing climate change, the Class VI permitting process must become more efficient, liability for storage must be clarified, and property rights must be consistently interpreted. To promote CCS development, liability may be reduced as some states have already done. To learn more about CCS regulation, check out the Law of Environmental Protection’s new chapter on Oil and Gas.
What is the government doing about CCS?
Some CCS-promoting policies already exist. Tax credits of up to about $32 per metric ton of carbon dioxide are currently awarded through Section 45Q of the Internal Revenue Code. State tax credits and other crediting mechanisms also incentivize CCS development in California, Louisiana, Montana, North Dakota, and Texas.
The “Build Back Better” Act allocates about $12 billion to CCS and increases the CCS tax credit to up to $85 per metric ton of carbon dioxide. In early October, the U.S. Department of Energy announced it plans to invest $45 million to support CCS projects and to provide $20 million to states for CCS. CCS technology has support from both parties, since it decarbonizes energy while creating a pathway for the fossil fuel industry to extend its lifetime. Indeed, state carbon emission reduction goals have aided oil and gas companies in promoting CCS technology.
Some of these efforts may have paid off. Carbon capture project plans surged 50% in the first nine months of 2021 with a total planned capacity of 122 million tons per year.
One thing is clear: if CCS is to play a large role in decarbonization, policy must advance to support a rapid increase in capacity.