Developing a Pipeline Infrastructure for CO 2 Capture and Storage: Issues and Challenges

Transcription

1 Interstate Natural Gas Association of America Developing a Pipeline Infrastructure for CO 2 Capture and Storage: Issues and Challenges An INGAA Foundation Study April, 2009 Presented by Lisa Beal Director, Environment and Construction Policy Interstate Natural Gas Association of America 1

2 Why this Study? Research and policy analysis to date has focused on carbon capture technologies and geologic sequestration issues Little analysis of pipeline transportation requirements The INGAA Foundation sponsored this study to examine the implications for a pipeline network Physical requirements Costs Development policies Regulatory framework 2 2

3 Waxman/ Markey Legislation Released March 31, Will be the framework for the next round of Federal legislative negotiations. National, economy-wide cap and trade program starting in Reductions from 2005 levels: 3% in % by % by % by

4 Overview of CCS Carbon Capture and geologic Storage has three steps 1) CO 2 capture and compression 2) pipeline transportation 3) underground storage The capture component of CCS is the most technically challenging and uncertain cost Storage cost and operational issues vary widely with the geologic setting Transportation of CO 2 by pipeline is a mature technology and should not see significant change Across all steps, the scale needed for a national program will be most challenging 4 4

5 Uncertainties are Reflected in Costs by Step 5 5

6 Sequestration Potential is Large Depleted natural gas and oil reservoirs, saline aquifers, coal beds, and shales are most suitable for CO 2 storage Coal power plants will dominate the proposed CCS projects in the future Geological storage capacity in the Lower 48 states is estimated to be over 450 years at recent U.S. GHG emissions rates Geologic storage capacity in Canada may be about 2,000 years equivalent of Canadian GHG emissions Large scale sequestration has been successful at sites in the North Sea, Algeria, and Saskatchewan 6 6

7 Estimated Geologic Storage Capacity (million tonnes) Lower 48 States Canada Enhanced Oil Recovery 17,000 1,000 Depleted Oil and Gas Fields 110,000 2,702 Coal and CBM 51,000 5,000 Shale Formations 107,000 0 Deep Saline-filled Basalt 100,000 0 Deep Saline Reservoirs 2,990,000 60,730 Total 3,375,000 69,

8 U. S. Sources of CO 2 There are 1,715 large (> 100,000 tonnes CO 2 /yr) CO 2 sources in United States 1,053 electric power plants 259 natural gas processing plants 126 petroleum refineries 105 cement kilns Rest are iron and steel foundries and ethylene, ammonia, hydrogen, ethanol, and ethylene oxide plants Coal-fired power plants will be the major source of CO 2 The analysis expects the following levels of sequestration by to 1,000 million tonnes per annum in the United State 90 to 150 million tonnes per annum in Canada 8 8

9 Coal Plants and Sequestration Potential 9 9

10 Pipeline Requirements U.S. has 3,600 miles of pipelines for delivering CO 2 to EOR projects The future CCS pipeline network infrastructure depends on three factors The location of the CO 2 sources and sinks Whether the network can be built in an integrated manner to combine flows and minimize costs rather than piecemeal How large a role EOR will play in early CCS development The study evaluated 4 cases 2 Low cases (300 MT/y by 2030) with more or less CO 2 in EOR 2 High cases (1,000 MT/y by 2030) with more or less CO 2 in EOR 10 10

11 Pipeline Requirements are between 5,900 and 36,000 Miles 40,000 35,000 30,000 36, ,000 Miles 20,000 20,610 15,000 10,000 7,900 5,900 5,000 2,950 4, High CCS Case: Less EOR Low CCS Case: Less EOR 910 High CCS Case: Greater EOR Low CCS Case: Greater EOR 11 11

12 Costs Range between $8.5 and $65.6 billion 70,000 60,000 65, ,000 Million Dollars 40,000 30,000 32,234 20,000 12,836 10,000 4,256 8,512 6, ,044 High CCS Case: Less EOR Low CCS Case: Less EOR 1,044 High CCS Case: Greater EOR Low CCS Case: Greater EOR 12 12

13 Potential CO 2 Network 13 13

14 Regulating CO 2 Pipelines Today CO 2 pipelines operate as private contract carriage transporters of CO2 from naturally occurring resources to EOR projects No rate regulation, rates determined in bilateral negotiations Some states have jurisdictional authority on tariffs where eminent domain has been granted State resource agencies and federal land management agencies issue construction permits and environmental oversight U.S. DOT, Office of Pipeline Safety, Pipeline and Hazardous Materials Safety Administration (PHMSA) is responsible for safe design and operations Pipelines are project specific, unlike oil and gas pipelines 14 14

15 Comparison of Regulatory Regimes Element Oil Pipelines Gas Pipelines CO 2 Pipelines Rates Regulation Authority (Interstate) FERC FERC None (Possibly STB) Regulatory Regime Ownership of Commodity Tariffs / On-going regulatory oversight Rate disputes Siting Common Carriage Mostly third-party ownership Yes - rates are approved by FERC and increase indexed to PPI +/- an increment Every five years the increment to PPI is modified. State and local governments Common Carriage / Contract Carriage Mandated that interstate pipelines only transports gas owned by others. Yes - Rates are periodically set by rate cases before FERC Rare for disputes outside of rate cases. However they can be brought before FERC FERC Private, Contract, or Common Carriage Common for CO 2 owned by pipeline owner / third-party No - STB would only look at rates if a dispute is brought before it. Uncommon due to ownership relationships and prearranged deals State and local governments Safety PHMSA PHMSA PHMSA Market Entry and Exit Product Quality Posting information Eminent Domain Unregulated entry and exit Batch modes transport different products at different times. Not Tariff information is available on-line Yes - Varies by state. More often if pipeline is a common carrier. Need approval for both entry (construction) and exit (abandonment) Specifications individually set in tariff approved by FERC 15 Daily operational and tariff information is available on-line Unregulated entry and exit No Federal Regulations* None Required Yes Varies by State Law 15

16 Key Issues Identified by Industry and Government Experts Liability for performance of both the pipelines and the sequestration reservoirs in short term and long term ensuring pipeline deliverability and the permanence of storage Financing of pipeline and sequestration facilities corporate balance sheet financing, to project financing, to hybrid approaches including some public financing Siting and right-of-way acquisition whether federal eminent domain is desirable how to address overlapping federal, state, and local siting authorities and processes 16 16

17 Possible Pipeline Ownership Structures On-site Sequestration Model. A large power plant pipes CO 2 to a sequestration structure on or near the site of the plant Project Ownership Model. A plant partners with or signs long term contract with a sequestration site developer and pipeline operator (possibly the same entity) to transport and sequester CO 2 (most likely structure for EOR projects) Municipal Solid Waste Model. A plant contracts for CO 2 removal services with an independent collector pipeline/sequestration service provider Public Utility or Government Ownership Model. An independent government chartered corporation collects and sequesters CO

18 Federal Regulatory Options Area of Potential Federal Regulation 1. Federal jurisdiction for commercial regulation in one agency 2. Economic Regulation, Rates 3. Common Carriage Regulation 4. Private Contract Carriage 5. Access to Pipeline Capacity Pros Current confused state of affairs may not support the large potential CO 2 pipeline investments needed in next 20 years. Provide more certain costs for shippers and adequate returns for pipelines. Ensure access for all CO 2 producers. Would provide performance assurance, especially for first movers, and provide contract commitments for financing. Requiring open access through common carriage would encourage fewer pipelines to be built, better economies of scale. Cons Although some clarification by Congress may be inevitable, objections may be raised by states and special interest groups (industry, environmental, local government, etc.). May hinder early CO 2 pipelines profits from innovative contract terms with shippers given that volume flows will be uncertain. Where capacity is prorated, may not provide assurance of adequate disposal of captured CO 2 May reduce access to the system. Economic incentives can lead to optimally sized pipelines in any case. If pipeline developers or shippers want to tie up capacity for themselves (e.g. to support CCS projects planned for the future) they should be able to do so

19 Federal Regulatory Options (contd) Area of Potential Federal Regulation 6. Federal Lead for Environmental Reviews (e.g., Hackberry for LNG terminals) 7. Federal Eminent Domain 8. Federal Corporation for Storage Development and Operations 9. Market Entry and Exit Permission for Interstate CO 2 Pipelines 10. Product Quality Pros Will reduce burden to pipeline developers and make CCS more economically viable. May be needed to improve planning and system wide design and operating efficiencies. Would provide a federal commitment towards a broadly social goal. Would likely be tied to other regulations. Incentive to regulate might be to limit environmental foot prints of similar projects that can be consolidated. Federal standards may help reduce environmental concerns. Would allow linking of separate systems in the long-run. Cons Would upset state officials and lead to backlash among citizens against CO 2 pipelines and CCS. May create backlash among property owners. Trade off for ED might be impractical rate regulation. May stifle private sector opportunities and depending on how structured could result in political considerations driving decision making. No reason to restrict entry or make it more burdensome. Might restrict most the economic choices (e.g. Oxy-firing of low-sulfur coals without an FGD). Work-around might include a clean CO 2 spec for EOR and a dirty CO 2 spec. In the long run pipeline quality specs may have to be tied to EPA underground CO 2 injection rules

20 Need for a National Approach Future CO 2, unlike in EOR applications, will have no economic value outside what a GHG carbon policy (cap and trade or tax) confers on it Creates special challenges for financing CO 2 transport and sequestration will be continent wide Involving large investment Requiring standard operating capabilities and rules, e.g., CO 2 quality standards Ensure access and performance Future pipelines will be in more heavily populated areas with more siting and construction challenges 20 20

21 Questions Contact Information Lisa Beal