Summary Report of Expert Workshop Addressing CCS Liability, Oversight, and Trust Fund Issues

Introduction

There is broad consensus in scientific, business, and political circles that carbon capture and sequestration ("CCS") must be demonstrated quickly on a large scale because it is likely to be an important technology for reducing carbon dioxide ("CO2") emissions throughout the world. Indeed, a number of commentators predict that it may be impossible to achieve significant emissions reduction in the United States and abroad without the use of CCS. Consensus regarding the value of CCS technology centers around three potential benefits.

First, CCS holds promise for significantly reducing coal‐generated CO2 emissions. The United States has large coal reserves and, at present, coal‐generated electricity is less expensive than other energy sources. Currently, almost half of the domestic energy supply is generated from coal. It is therefore not realistic to expect that coal will be eliminated from the U.S. fuel supply in the next few decades. CCS offers a potentially significant opportunity for reducing CO2 emissions from this source while other non‐CO2 emitting sources of energy are developed, refined, sited, and deployed.

Second, CCS offers the potential to create high‐quality domestic jobs in the technology, manufacturing, and construction industries. If the United States develops substantial CCS expertise quickly, it can export technologies and expertise to other countries as they develop CCS technology. Third, the creation of an accessible stream of captured CO2 will support continued domestic production of oil and gas through enhanced oil and gas recovery.

Numerous barriers impede the demonstration of large‐scale CCS projects (those that capture and sequester at least 1.5 million tons of carbon dioxide annually).4 First and foremost is the absence of any national price on or restriction of CO2 emissions in the United States. Other key barriers include uncertainty about liability; the dearth of pipelines to transport captured CO2, requiring significant investment in infrastructure; and the transaction costs and impracticality associated with acquisition of huge swaths of pore space, making access to sequestration sites difficult in many parts of the U.S. Many argue that the prospect of unknown liabilities far in the future impedes the financing of CCS projects. Lack of experience sequestering CO2 at large volumes creates uncertainty withrespect to the timing and magnitude of potential liability.

The absence of a national framework for delineating liability and financial responsibility for owners and operators of CCS projects, and for landowners who consent to having CO2 sequestered in the pore space under their land compounds this uncertainty. The U.S. also does not yet have rules in place regarding the oversight and stewardship of sites requiring management far into the future, decades after active sequestration operations have ceased. Nor is there any national legal framework in place for the financing of such long‐term site stewardship or payment of potential future liabilities decades after a site has been closed.

A number of different proposals have been made to address issues of liability, oversight, and financing for long‐term stewardship of CCS projects. The Workshop aimed to bring together experts and policymakers to discuss these issues in light of various options being put forward. Five specific proposals were discussed during the Workshop, including those put forward by American Electric Power (“AEP”), Senators Bingaman and Casey, Harvard Law School’s Emmett Environmental Law and Policy Clinic, and Southern Company. A description of each proposal discussed at the Workshop is included in Appendix B.

The Workshop discussion itself focused on the following five questions:

1. Limits on liability for demonstration v. commercial projects: Should liability be limite for the first five or ten demonstration projects to provide incentives for rapid deployment of these projects? Should there be any limits on liability for projects after the first five or ten demonstration projects?
2. If we favor limits on liability, what mechanisms should be used to limit liability: Caps? Indemnities? Industry‐financed fund? Public/private cost‐sharing? Preemption of state claims?
3. When should site‐specific risk be taken into account, if at all? At the beginning of the project? In the middle of a project? At closure? Should site‐specific risks be taken into account? For demonstration projects, post‐demonstration projects?
4. Claims resolution process: Does the group favor a stream‐lined claims resolution process such as the one described in Section 5 of the Harvard Emmett Environmental Law and Policy Clinic’s white paper?
5. What role should states play in overseeing sequestration sites and managing liability?