A REGULATORY PERSPECTIVE ON CARBON CAPTURE AND STORAGE IN ALBERTA

Transcription

1 A REGULATORY PERSPECTIVE ON CARBON CAPTURE AND STORAGE IN ALBERTA University of Alberta School of Business BUEC 560 Energy Technologies and Institutions Prepared For: Dr. J. Doucet Submitted By: Jeff Sansom February 15, 2005

2 TABLE OF CONTENTS 1.0 INTRODUCTION PURPOSE OF THE PAPER POTENTIAL FOR CCS IN ALBERTA ISSUES AND GAPS IN THE CURRENT REGULATORY FRAMEWORK REGULATORY JURISDICTION CO 2 CAPTURE CO 2 INJECTION CO 2 STORAGE CO 2 MONITORING AND MEASUREMENT HUMAN AND ENVIRONMENTAL HEALTH ABANDONMENT SUMMARY...16 Figure 1: Natural Gas from Coal in Canada Areas of Exploration... 1 Figure 2: Coal Zones with CBM Potential in Alberta... 2 Figure 3: Stratigraphic Interval Containing Coal Zones with CBM Potential in Alberta... 3

3 1.0 Introduction Carbon capture and sequestration (CCS) is emerging as a potentially important tool for Alberta in managing greenhouse gas (GHG) emissions generated by various industrial activities within the prov ince. Because of its compatibility with the province s energy (i.e., fossil fuel) infrastructure, CCS appears to be a viable option for industry to achieve significant reductions in CO 2 emissions at a reasonable cost. To date, many studies have explored the technological and scientific aspects of geological sequestration (GS) 1, but few studies have assessed the development of regulatory environments specific to GS 2. Like technological advancement, the development of acceptable policy and regulations for CCS are also needed to facilitate the development of an industry centered on CO 2 storage. While the feasibility of CCS will ultimately be driven by both federal and provincial government actions that place an effective price on CO 2 emissions, CCS will not flourish unless a regulatory framework is developed which provides sufficient transparency and stability concerning storage requirements. Furthermore, for any regulatory framework to be successful, it must also give the public confidence that CCS is sufficiently safe from a human health, safety and environmental perspective. Since other jurisdictions (i.e., other provinces or nations) have placed little effort to date on developing a regulatory framework for CCS, early efforts to develop such a framework would bode well for Alberta, as it would position the province at the forefront of policy development both nationally and internationally. In addition, such effort would position Alberta favorably within Canada to take a leadership role in setting acceptable standards for the geologic storage of CO 2. Such policy development could also provide a framework for incorporating storage of CO 2 into national emission inventories and foster additional credibility for GS of CO 2 as a viable option in a 1 Holloway, S Storage of Fossil Fuel-Derived Carbon Dioxide Beneath the Surface of the Earth. Annual Review of Energy and the Environment. Volume 26: Tsang, C.F., S.M. Benson, B. B. Kobelski and R. Smith Scientific Considerations Related to Regulation Development for CO2 Sequestration in Brine Formations. Journal of Environmental Geology. 1

4 national framework to help Canada meet its GHG reduction commitments outlined in the Kyoto Protocol. 2.0 Purpose of the Paper The purpose of this paper is to provide a general overview of the potential of CCS within Alberta, but more importantly, examine the existing legal and regulatory frameworks (i.e., federal and provincial) that are applicable to CCS policy development and identify any issues or gaps that currently exist. From this examination, I will provide recommendations with respect to developing a provincial regulatory framework for CO 2 storage. 3.0 Potential for CCS in Alberta Currently, Alberta is the province with the highest CO 2 emissions in Canada, estimated at approximately 205 Mt/yr in 1999 (up from 150 Mt/yr in 1990). This increase is mainly attributed to economic development and population increase. Besides levels, the profile of CO 2 emissions in Alberta is quite different from other provincial profiles and the national profile because Alberta is a major energy producer. Power generation is based on fossil fuels, mainly coal, whereas in the rest of Canada, it is based mainly on hydroelectric and nuclear energy (Figure 1) 3. Furthermore, most CO2 emissions in Alberta originate from large stationary sources such as power plants, refineries and upgraders, as well as, oil sands, petrochemical and cement plants (Figure 2) 4. This is in contrast with the CO 2 emissions profile in other provinces, where most anthropogenic CO 2 is produced by transportation, consisting of small, mobile and distributed sources. Irrespective of the fact that various industries in Alberta emit substantial amounts of CO 2 to the atmosphere, CCS is only a viable option to offset GHG if suitable storage sites are readily available. Due to the nature of CO 2 trapping mechanisms, geological storage of CO 2 can be achieved only in sedimentary basins. In that respect, Alberta s situation is again different from the 3 Alberta Geological Survey Website: 4 Alberta Geological Survey Website: 2

5 rest of Canada, as a mature and prolific sedimentary basin rich in oil and gas reservoirs, coal and salt beds, and deep saline aquifers underlies it almost entirely. In contrast, other major CO 2 emitting provinces (i.e., Ontario and Quebec) are underlain by the Canadian Precambrian Shield, which is not suitable for CO 2 injection and storage. The remaining sedimentary basins within Canada are either small, located offshore or in the Arctic. Alberta is also a favorable location for CCS since it is located in a tectonically stable area (Figure 3) 5. The differences in Alberta s CO 2 emissions profile and underlying geology coupled with its existing energy infrastructure (e.g., pipelines) point towards CCS as being the best available strategy for the province for an immediate application and significant reduction in atmospheric CO 2 emissions. 4.0 Issues and Gaps in the Current Regulatory Framework While existing statutory and regulatory provisions related to oil and gas activities can address or be modified to address many of the issues associated with CCS, there remain a number of regulatory gaps. The following sections identify these regulatory gaps, which will need to be addressed to develop an effective and safe regulatory framework for CCS. 4.1 Regulatory Jurisdiction It is not entirely clear how CO 2 sequestration activities will fall under the existing federal and provincial (Alberta) environmental assessment and protection acts. At this time, strong arguments for either federal or provincial control over CCS projects could be made based on current statutes. Simplistically, both federal and provincial agencies may be involved in CCS project due to the provincial location of the reservoir and the potential escape pathways into the federal atmosphere. 5 Natural Resources Canada Website: 3

6 Canada s constitution clearly leaves natural resources within provincial jurisdiction 6. Section 92A provides a clear provincial authority over natural resources and their management. Other considerations in Section 92A also lend further support to the provincial authority over CCS projects. For instance, any sources of captured emissions such as an electrical generating facility or an enhanced oil recovery field are clearly within the provincial jurisdiction. The close relation of a CO 2 activity to the oil and gas industry through CO 2 injection or the mining industry as a source of storage reservoirs could locate any CO 2 storage industry under provincial rules, since both are well established as provincial jurisdictions for non-renewable resources. Moreover, Alberta is the only province, which has developed a statutory capacity with the authority to develop regulations for CO tration and storage 7 2 seques. The Climate Change and Emission Management Act (CCEMA) was enacted in November 2004 and clearly defines the province s jurisdiction over climate change matters as they relate to the exploration, development, and production of natural resources. To date, no regulations specific to CO 2 sequestration activities have been passed. On the other hand, any migration of CO 2 through natural pathways into the ground or surface water movements or into the atmosphere could invoke a strong argument for involvement of a federal authority. Given that the overall rationale for CO 2 storage lies in the need for a global reduction of GHG emissions and the issue is currently being addressed under the Kyoto Accord, an international treaty ratified by the federal government in 2002, the federal government also has a strong interest and case for involvement in regulating CCS projects. The text of the Kyoto Protocol even includes direct reference to subsurface CO storage as one of the ways to reduce or limit emissions. Article 2 of the protocol reads: Research on, and promotion, development and increased use of, new and renewable forms of energy, of carbon dioxide sequestration 2 6 Section 92A, The Constitution Act (1867). 7 Climate Change and Emission Management Act (2004). 4

7 technologies and of advanced and innovative environmentally sound technologies as emission limitation and reduction measures 8. Another argument for the federal government to assert its sole authority over CCS projects is to declare CO 2 sequestration to be for the General Advantage of Canada 9. When it comes to jurisdictional responsibility surrounding environment issues not clearly delineated in the Constitution Act (1867) (e.g., fisheries or forestry), my sense is that neither the federal nor provincial governments has sole authority 10. I believe this will apply to climate change mitigation strategies like the GS of CO 2. Some federal agencies have even recognized the overlap in jurisdiction and stated the constitutional division of responsibilities between Canadian federal and provincial/ territorial governments...means that no single jurisdiction has responsibility for all components of the climate system 11. Given this view that both federal and provincial agencies should be involved in the review of CCS projects, my recommendation is that all CCS projects should be regulated through new provisions drafted under the CCEMA and require at minimum an approval issued by the province. Furthermore, I also believe that large-scale CCS projects having volumes greater than 1 MtCO 2 /year should be defined within the provincial environmental assessment regulations as a mandatory activity, thus requiring the proponent to submit an Environmental Impact Assessment (EIA) report. 12 To avoid duplication of process, I recommend that provincial environmental assessment regulations provide the sole trigger initiating the environmental assessment process and review of large-scale CCS projects. A provincial trigger would still afford federal agencies the 8 Article 2, Paragraph 1. (iv), Kyoto Protocol. 9 Section 92A, Section 10(b), The Constitution Act (1867). 10 nd Benidickson, Jamie Environmental Law 2 Edition. 11 Environmental Canada The Canadian National Report on Systematic Observation for Climate: The Canadian Global Climate Observing System Program. 12 Environmental Protection and Enhancement Act. Environmental Assessment (Mandatory and Exempted Activities Regulation) (1993). 5

8 ability to participate in the review under the provisions (Appendix 3) of the bilateral agreement with the province 13. This would be identical to other environmental reviews of large industrial projects undertaken in Alberta. 4.2 CO 2 Capture Presently, I believe CO 2 capture activities associated with CCS projects can be effectively regulated in Alberta through existing provincial statutes and guidelines related to the movement and transportation of gas such as CO 2. Generally, my review concludes that the current framework is generally adequate for a newly emergent CCS industry; however, I feel minor revisions are necessary based on a more detailed evaluation of a few critical areas unique to CCS projects 14. First, the long-term exposure of materials to CO 2 due to long-term storage may have impacts that warrant the use of special materials. For instance, materials employed in the conventional oil and gas industry are generally designed for either short periods of time and/or commercial timeframes that generally do not exceed long periods of time (i.e., 30 years) required for the complete lifecycle of CCS projects. While materials used for CO 2 transportation (i.e., pipelines) may be adequate at current standards, this may not hold true for materials used for sealing of injection wells and other escape pathways or monitors on the surface or underground in and around the storage reservoir. For instance, CO 2 can be quite corrosive to typical wellbore installations. Recognizing this difference, I recommend that the Energy and Utilities Board s (EUB) Guide be amended to account for the different requirements for CCS projects. Second, the high volumes of CO 2 involved in some CCS projects will require special provisions for dispersion techniques in the event of leaks from pipelines, injection wells or the storage reservoir as a 13 Canada-Alberta Agreement for Environmental Assessment Cooperation (1999). 14 Carbon Sequestration Leadership Forum Consideration On Regulatory Issues For Carbon Dioxide Capture and Storage Projects. A Report From The Legal, Regulatory and Financial Issue Task Force. 15 Energy and Utilities Board. Guide 51 Injection and Disposal Wells Well Classifications, Completions, Logging, and Testing Requirements. 6

9 catastrophic leak of high levels of CO 2 poses a significant risk to the environment. High concentrations of CO 2 can asphyxiate exposed people or animals and damage local biota 16. Because of this risk, I feel that special emergency provisions should be required to be submitted by the proponent in the context of the volumes of CO 2 gas being moved (i.e., for large-scale projects). To reduce the risk of a catastrophic release, other experts have suggested based on dispersion modeling of a high volume CO 2 pipeline that some strengthening of the number and type of block valve locations may be needed to significantly reduce the potential for leaks 17. This new requirement, which could be added to the pipeline approval issued under current provincial legislation and regulations, would allow for the quick identification of large leaks and therefore reduce the associated risks of a large release to the environment. Although the potential for a large release exists, most experts feel that the occurrence of a large release is quite low and believe CCS to be a safe and effective means to make deep reductions in CO 2 releases to the atmosphere. Besides tweaking provincial regulations related to capture and transportation of CO 2, development of emission inventory guidelines (i.e., national or international levels) for the purpose of reporting to the United Nations Framework Convention on Climate Change (UNFCCC) and for emission trading purposes will need to be finalized to provide a clear framework for GS of CO 2. Without clear rules and verifiable credits, proponents may not view CCS as a viable option to reduce CO 2 emissions. 16 Carbon Sequestration Leadership Forum Consideration On Regulatory Issues For Carbon Dioxide Capture and Storage Projects. A Report From The Legal, Regulatory and Financial Issue Task Force. 17 Woodhill Engineering Consultants Carbon Dioxide Dispersion Study, Annex A. Guidelines for the Transmission and Storage of CO 2. 7

10 4.3 CO 2 Injection Current provincial standards and procedures for injection wells have been developed almost exclusively around safe practices required for the drilling, closure and abandonment of oil and gas, sour gas, sulphur and/or water wells. Such procedures are not fully appropriate in the context of CO 2 injection for several reasons. First, nearly all of the provisions are for surface conditions and do not address subsurface conditions that will be required for CO 2 injection. Second, long-term degradation effects are not incorporated with the current design parameter requirements. To illustrate both deficiencies, the EUB s Guides 8 18 and 9 19 provide guidance on the emplacement of surface casing to avoid contamination of near surface resources, particularly water; however, they have no provisions for subsurface requirements that are necessary for CO 2 injection. Since injection wells are generally considered as the primary pathway for CO 2 escape, Keith and Wilson (2002) recommend that casing should be continuous to the target horizon and that the well bore should be flushed before cementing and the cement should run to the surface. They also recommend that perforation of the well be accomplished by milling and waterjetting to avoid fracturing the cement by conventional explosive means to avoid fracturing the cement or damaging the casing. Besides these deficiencies, the current guideline on well injection, EUB Guide 5120, has no assessment of the geochemical, hydrological or geophysical interactions that may be associated with long-term CO 2 storage. Recognizing this, Keith and Wilson point out that the geological context of the storage reservoir should be taken into consideration for proper CO 2 sequestration 21. For example, with respect to injection into a saline aquifer, they recommend that the injection well be sited such that buoyancy forces of the CO 2 in water cause an upward 18 Energy and Utilities Board. Guide 8 Surface Casing Depth Minimum Requirements. 19 Energy and Utilities Board. Guide 9 Casing Cementing Minimum Requirements. 20 Energy and Utilities Board. Guide 51 Injection and Disposal Wells Well Classifications, Completions, Logging, and Testing Requirements. 21 David Keith and Malcolm Wilson Developing Recommendations For The Management Of Geologic Storage Of CO 2 In Canada. 8

11 migration of the CO 2 in the subsurface to facilitate dissolution into the saline water and effectively trapping the CO 2 in solution. Since injection wells are generally considered the primary pathway for CO escape, my recommendation is that special attention to the applicability of the current injection provisions for the integrity of the reservoir within Guide 51 be changed to reflect the unique conditions associated with CCS projects CO 2 Storage Not surprising, storage is the key principle for a subsurface CO storage management system. Although the knowledge of surface features may be absolute, the interactions between soil, water, air and chemicals remain a relatively new science. Knowledge of the underground and underwater environments is even less well understood. Furthermore the length of time required for storage extends well beyond normal commercial forecasting periods and will require special analytical methods. In these circumstances, risk and probability analysis and modeling will be required as a central tool to make many of the decisions related to the identification of safe storage locations. Currently, models are routinely used in the oil and gas industry to identify commercial geological structures and preferred methods of extraction. Such models however will require further development to focus upon the stability of the natural underground storage environment. Particularly, further development is needed in the areas of long term, high volume, C0 2 dispersion, hydrological movement and geochemical reaction. Although such models are very sophisticated, regulatory agencies and the public must understand that they cannot be expected to reduce the leakage risk of CCS projects to zero. Knowing this, I recommend that regulators develop some probability standards for the provision of a safe level of security for CCS projects as such assurance will be demanded by the public with respect to the protection of the environmental and minimization of risk to human health. 9 2

12 Existing provincial regulations surrounding reservoir storage apply to the storage of oil and natural gas and have no provisions for the storage of CO 2. These regulations do not appreciate the differences in storing CO 2 underground. For instance, natural gas storage reservoirs are identified for short-term cyclical use to balance differences in short-term production and market conditions and to take advantage of commodity price cycles. They are not designed for long-term storage and do not require the maintenance of a high level of reservoir integrity over a long period of time. Consequently, regulatory considerations around the siting of natural gas storage reservoirs have focused on matters of protecting drinking water supplies and safety during injection and closure. Matters that are central to long-term CO 2 storage such as reservoir monitoring, well abandonment and reservoir design are not addressed in existing provincial storage regulations for natural gas storage. Current regulations never envisioned the type of long-term storage required for CO 2, so at most existing regulations would serve only as a reference for the kinds of considerations that should be included if new regulations were drafted. As mentioned earlier, Alberta recently enacted new legislation, the CCEMA, to address the issue of climate change. Section 5 of this Act allows the Lieutenant Governor in Council (Cabinet) to make regulations respecting emission offsets, credits and sink rights for the purpose of achieving reductions in specified gas emissions consistent with specified gas emission targets. I am recommending that regulations and guidance documents be developed under this new statute to address the issues associated with the storage of CO 2 underground. Particularly, emphasizing those requirements that are unique to CCS projects such as site selection and screening, monitoring, post abandonment operations and issues of liability. Until such regulations are in place, the only acceptable method of CO 2 storage available in Alberta is its use for enhanced oil and gas recover operations as per the definition of a CO 2 project under the Oil and Conservation Act Oil and Gas Conservation Act (2000). 10

13 While making such changes, a more stringent definition of CO 2 within the new regulations is also required, as the present definition is too general. The only current definition of CO 2 is found in the CO 2 Projects Royalty Credit Regulation 23. Here, CO 2 is described as a gaseous mixture consisting mainly of carbon dioxide. If the injections of CO 2 into subsurface formations are to be counted as a reduction in GHG emission, I suggest that a definition of CO 2 should also include a percentage volume that must be pure CO 2, while allowing for some impurities. Drafters of the new definition will have to consider the capabilities of the extraction technologies in existence. 4.5 CO 2 Monitoring and Measurement Nowhere in existing provincial legislation is any reference made specific to monitoring or measuring requirements for CO 2 gas. To determine the quantity and quality of gas being injected in CCS projects, there has to be some provisions in place governing the methods and equipment to be used. Filling this regulatory gap is paramount in terms of transparently meeting reductions targets set out in the Kyoto Protocol. Because unless there is a standardized way of verifying the percentage of gas being injected is actually CO 2, an accurate accounting system cannot be created. Such a system is fundamental if carbon credits are to be assigned and traded. Although there are no references to monitoring or measurement of CO 2 in existing provincial acts or regulations, I found mention of reporting and measurement requirements associated with oil and gas activities in some regulations. For instance, the Pipeline Act 24 permits the EUB to make regulations prescribing: 1) methods and facilities to be utilized for the measurement of any substance transmitted by a pipeline; 2) methods of recording the measurement; and 3) standard conditions to which the measurements are to be converted. Likewise, the Oil and Gas 23 CO 2 Projects Royalty Credit Regulation (2003). 24 Pipeline Act (2000). 11

14 Conservation Regulations 25 (Section 6.130(1)), allows the EUB to ask for and direct any measurement it feels is necessary for a completed oil and gas well. Although these provisions exist, none of them have direct application to CO 2 storage. This regulatory gap must be addressed. Due to the significance of the long-term environmental integrity of CO 2 reservoirs and the environmental and economic consequences, monitoring must also take on additional significance with CCS projects. Because of Kyoto Protocol requirements, I believe new monitoring and measurement requirements would need to have very prescriptive to achieve synchronicity across Canada or even internationally to allow for the calculation of carbon credits. Such new provisions for CO 2 monitoring and verification standards would have to comply with the UNFCCC inventory review process. Moreover, since the requirements for monitoring and verification of CCS project are so unique, I would recommend that such standards also be distinct (i.e., a stand alone document) and not simply an amendment of current acts or regulations. In developing these new standards, I believe that the following provisions for monitoring standards are required: i) For the lifetime of the project. ii) Throughout the project operations and including the following locations: a. Capture monitoring b. Transportation monitoring c. Well monitoring (during injection and when abandoned) d. Reservoir monitoring e. Surface monitoring. Beside project lifecycle considerations, monitoring of CCS projects provides additional complications due to the subsurface location of the storage reservoirs. Different approaches will be required to monitor different locations in and around the reservoir. Furthermore, different frequencies of monitoring will be required. For instance, I would recommend that inspections should be more frequent during those periods when the risk of leaks are higher, such as during and 25 Section 6.130(1) Oil and Gas Conservation Regulations (1971). 12

15 immediately after injection or following significant changes in a water table following flooding or intense rains. I believe that it is critical that proposed monitoring requirements be closely related to reservoir modeling and risk analysis to make early identification of any potential pathways of CO 2 escape. 4.6 Human and Environmental Health With respect to human exposure to elevated levels of CO 2, some symptoms include dizziness, headache, elevated blood pressure and abnormally rapid heartbeat (i.e., tachycardia) 26. Given the fact that the highest incidence of human exposure to CO 2 from a CCS Project would occur outside (i.e. not in a confine area), there is a general consensus among experts that the probability of CO 2 reaching levels high enough to cause such symptoms is quite low. Regardless of the inherent low risk to human health from CO 2 exposure, proper planning of CCS projects can minimize the risk even further. For example, injection wells can be relocated away from natural depressions thereby reducing the chances of concentrations becoming elevated in the vicinity of the project. Given that high levels CO 2 can harm people and a general lack of public awareness and understanding about CCS, I believe it is imperative that regulators require proponents to submit an emergency response plan (ERP) with their operational plans, a requirement already within the EUB s Guide 65 for oil and gas projects, to address the various safeguards that would need to be put in place to minimize the risk to human health from CCS projects. The ERP should include emergency procedures, backup monitoring systems for detecting leaks and provisions for employee safety training and proper equipment to work in areas where there is the potential for elevated levels of CO. 2 With respect to human and environmental health regulatory provisions, current laws, guidelines and standards have generally been developed in the context of short-term exposure to relatively 26 Material Safety Data Sheets. 13

16 small volumes of CO 2. Such guidelines will require review in the context of both longer-term environmental exposure and any specific occupational health and safety requirements that may be associated with much higher volumes of CO 2 from CCS projects. Furthermore, due to increasing public concern over all forms of risk to human and environmental health, and in particular to potable water supplies, existing standards and limits for CO 2 concentration would also need to be examined in CO 2 reservoir zones Abandonment To date, the abandonment of injection wells has not been considered in existing provincial regulations within the context of continual usage. For the most part, abandonment procedures for oil and gas wells in Alberta protect against surface and geomorphologic damage, but do not necessarily ensure the integrity of any underground reservoirs. CO 2 injection wells or the use of old oil and gas wells will require new guidelines from the EUB to ensure not only surface integrity, but also full closure at the point of entry into the reservoir and throughout the well shaft. Failure to achieve comprehensive integrity belowground would provide a constructed pathway for CO 2 to escape into shallower zones or even the atmosphere. Beside new operational criteria, current principles of abandonment that exist within current oil and gas legislation and regulations are based on the concept that private individuals/firms assume liability for the site for a period of years during operations. Following that period, the site is restored to a state that is acceptable to the government and at that point the liability for the site reverts back to the province. Due to the geological length of time involved in CO 2 reaching its steady state, the current process could extend into future generations. By endorsing CCS as a viable option to meet provincial GHG emission targets, I believe that the Government of Alberta ultimately should take responsibility (i.e. long-term liability) for CO 2 stored in geological reservoirs. 27 Personal Communication with Alex Mackenzie from Alberta Health and Wellness. 14

17 Although it is tempting to claim that liability for failures of CCS facility should remain in private hands, such a position to me is not credible. Realistically, firms do not live long enough to make private liability an acceptable policy in the case of CCS. Moreover, even long-lived firms often transfer their outstanding liabilities to smaller firms with shorter life spans. Furthermore, putting responsibility for the long-term storage of CO 2 in public hands reflects the fundamentally public nature of the risks and benefits of this type of activity. If a firm chooses CO 2 storage as its least costly method to meet emissions constraints (versus taxes or tradable permits) then I view the lowered compliance cost as a private benefit. Nevertheless, the ultimate benefit of storage is the (comparatively) low overall economic impact of reducing CO 2 emissions into the atmosphere, and the ultimate risks are future emissions of CO 2 due to leaks and harm to the surface environment. Both benefits and risks extend over centuries and, with the exception of local impacts, both are ultimately global in nature. Therefore, I believe them to be naturally public benefits requiring the Government of Alberta to bear some of the long-term risk. Recognizing that storage of CO 2 is a public benefit and that long-term liability rests with the Government of Alberta, I believe that regulators will need to develop statutes that provide an orderly way of transferring responsibility for CCS project after abandonment from private to public hands. I believe such a protocol could be analogous to the current practice of abandoning individual oil and gas wells; however, I would impose more stringent and more general conditions on the private owner. For instance, the requirements for abandoning a well pertain only to the well itself, whereas the procedure for abandoning a large CCS project might require demonstration of overall system performance, such as testing for confinement of the CO 2 in specific areas of the target reservoir prior to release to the Crown. Without a clear and orderly method for transferring liability to public entities, private firms may be very reluctant to commit resources to CCS projects, even in the face of direct incentives for CO 2 storage or strong constraints on CO 2 emissions. The 15

18 disincentive to private action that arises from uncertainty about long-term liability may be a particularly important problem in the near term, if Government of Alberta accepts that there are important public benefits that arise from starting CO 2 storage projects early to maximize the opportunities for learning that would inform future actions 28. Recognizing that a current abandonment protocol exists for oil and gas well sites, I would recommend that a similar protocol be used for CCS projects. First, prior to any approval of a CCS project being issued, the firm would be required to put in place a refundable bond that would cover remedial work and abandonment in the event of a catastrophic loss of well integrity or the insolvency of the firm prior to abandonment. Second, I would create an environmental fund (i.e., similar to the Orphan Well Fund) in which firms are required to contribute moneys to based on the size of their CCS project (i.e., volume of CO 2 stored). Proceeds of this fund would be used for future post-injection monitoring and potential remedial work by the province after an abandonment certificate is issued to the firm. 5.0 Summary Existing legislation, regulations and guidelines are not fully equipped to deal with all aspects of a CO 2 subsurface storage and management systems. The most noticeable gaps are those surrounding the areas of reservoir characterization, monitoring and measurement, and long-term ownership. If the quality and quantity of gas being injected are unknown and there is no way of monitoring any leakage or migration to the surface, a firm would be foolish to spend the money involved establishing a storage system if the goal is to meet Kyoto targets versus enhanced oil recovery. Such a CO 2 storage system would fail, if there is no way of proving that it is successful in effectively decreasing CO 2 emissions of to the atmosphere. Furthermore, none of the existing 28 David Keith and Malcolm Wilson Developing Recommendations For The Management Of Geologic Storage Of CO 2 In Canada. 16

19 provincial laws or regulations reviewed contains any provisions for long-term ownership considerations for CCS projects. The regulatory framework needed to address this concern does not yet exist. It is a significant area that must be dealt with if there is to be any progress in developing a CO 2 capture, transport, injection and storage management and accounting system in Alberta. Review of the relevant legislation, regulations and guidelines in place suggest that they are not adequate to deal with all aspects of a CCS management system in Alberta. I believe that there needs to be a single regulation under CCEMA integrated with other guidelines (EUB) that can be accepted on both a technical level by the industry and a public level by Albertans to govern this newly emerging industry. I believe any such rules would best be developed collaboratively among federal and provincial governments with input from relevant stakeholders. Any new provincial regulation would also have to be fully consistent with existing international provisions and standards. 17

20 Figure 1: Alberta and Canada s CO Emissions Profile in

21 Figure 2: CO2 Emissions by Alberta Largest Emitters (> 100 kt/yr) in

22 Figure 3: Locations and Magnitudes of Earthquakes in Canada 3