Putting It All Together: The Real World of Fully Integrated CCS Projects

A Study of Legal, Regulatory and Financial Barriers in Phase III of the U.S. Department of Energy Regional Carbon Sequestration Partnerships Program

The Regional Carbon Sequestration Partnerships (RCSP) program of the U.S. Department of Energy (DOE) is the United States’ leading effort to assess the performance, cost and risks of geologic carbon capture and sequestration (CCS) over a broad range of geologic conditions in order to assess its feasibility at commercial scale.

The program is organized as seven regional consortiums, each led by a university or national laboratory supported by industry partners that are tasked with conducting actual CCS projects within their region. The DOE launched the RCSP to develop the infrastructure and knowledge base needed to commercialize carbon sequestration technologies that will capture 90% of carbon dioxide (CO2) with less than a 10% increase in the cost of energy, and achieve 99% storage permanence.

The RCSP program comprises three phases: (I) characterization of national CO2 storage potential in deep oil-, gas-, coal-, and saline-bearing formations, (II) twenty-five geologic sequestration research, development, and demonstration (RD&D) test injection projects to validate that different geologic formations have the injectivity, containment, and storage effectiveness necessary for long-term sequestration, plus eleven terrestrial sequestration projects, and (III) nine commercial-scale geologic sequestration projects to demonstrate the engineering and scientific processes and to validate the long-term safe storage of CO2 in several major geologic formations capable of storing emissions generated from major point sources on a cost-effective basis.

The program has substantially completed Phases I and II, and is now implementing the Phase III projects. Appendix A lists the nine Phase III geologic sequestration projects surveyed in this study. The RCSP program was designed to provide real world experience on actual projects to researchers, regulators, project developers, investors, lenders, service providers and other stakeholders, and the projects were not intended to be challenge-free.

Phase III of the RCSP is important because full integration is a critical step to validating CCS technology, driving down its costs, and diffusing it broadly. Putting all the pieces of a first-of-kind project together – technological, engineering, geological, financial, legal, and regulatory – involves significant challenges. Full-integration also necessitates a high degree of coordination among project stakeholders (e.g., investors, lenders, equipment suppliers, CO2 sources, transportation providers, and pore space owners), and requires sophisticated institutional arrangements among these parties to allocate project responsibilities and risks.

In Phase III, financial issues posed the most significant barrier and dominated the outcomes in these projects, directly causing termination of three of them and contributing to termination of another two projects. Liability for sequestration of CO2 and lack of coordination among regulatory authorities also posed significant barriers. The financial, legal and regulatory challenges of fully integrated commercial-scale projects in Phase III are far more complex than encountered in the Phase II test injection projects that were the subject of an earlier study, and the need for policy support is more pressing. Phase III comprises nine planned projects that will inject and monitor between 1 to 5 million tonnes of CO2 into geologic formations, eight of which are saline formations. Several of these facilities will continue to inject CO2 after completion of the Phase III projects, in some cases up to 20 million tonnes of CO2 will be injected.

Phase III also demonstrates several leading capture technologies and applications. Three of the planned projects are commercial scale power plants (two post-combustion and one oxy-fuel), two are natural gas processing facilities, and two are ethanol production facilities. These seven projects are fully-integrated commercial facilities that would capture, transport, and inject CO2 as part of their planned operation. The remaining two projects inject CO2 from natural sources and therefore are not fully integrated operations because they do not involve industrial capture operations.

The nine planned projects that are the subject of this study were identified by the regional partnerships and approved by the DOE for inclusion in Phase III of the RCSP. The DOE RCSP program provides financial support for the sequestration component of these projects. These projects must seek other financial support for the capture and transport aspects from commercial sources, and may seek other federal financial incentives to supplement the DOE grant for the sequestration component.

During the period of this study, several of the original nine projects were terminated due to legal, financial, and regulatory barriers, and other projects have been or will be identified to take their place. This study evaluates Phase III of the RCSP based on the nine projects that were active as of mid-2009, tracking the outcomes through the end of 2010. It does not examine projects that replaced any of the original nine projects.