ARKANSAS ENVIRONMENTAL FEDERATION GHG EMMISSIONS TRADING CONFERENCE LITTLE ROCK, ARKANSAS MARCH 2006 Interstate Oil and Gas Compact Commission

The Interstate Oil and Gas Compact Commission

WHAT DO WE KNOW OR KNOW WE DO NOT KNOW ? CO2 LEVLES ARE INCREASING – 316 ppm to 375 ppm last 45 yrs GLOBAL ISSUE REQUIRING GLOBAL SOLUTIONS HUMAN ACTIVITY IMPACT CO2 LEVELS – LEVEL OF IMPACT DEBATED INCREASED CO2 LEVELS WILL IMPACT CLIMATE – LEVEL OF IMPACT DEBATED U.S. POLITICAL CLIMATE CHANGING TO MOVE FORWARD WITH SOME LEVEL OF ACTION TO REDUCE GHG

WHAT IS CO2 ? CO2 IS NOT A POLLUTANT UNDER FEDERAL AIR REGULATIONS CO2 IS NATURALLY OCCURING, MAKING UP 0.03% OF THE EARTHS ATMOSPHERE, AND IS ESSENTIAL TO PLANT LIFE ON EARTH CO2 IS A NON-HAZARDOUS, ODORLESS GAS, WHICH CAN BE HARMFUL TO HUMANS, IN HIGH CONCENTRATIONS, AS A SUFFACANT CO2 OCCURS AS A GAS, LIQUID, SUPERCRITICAL FLUID, AND A SOLID CO2 OCCURS NATURALLY IN GEOLOGIC FORMATIONS CO2 IS A COMMODITY, BOUGHT AND SOLD FOR MANY USES

GREENHOUSE GAS RESOURCE

REDUCING ANTHROPOGENIC SOURCES OF GREENHOUSE GASES REDUCING ANTHROPOGENIC SOURCES OF GREENHOUSE GASES ENERGY CONSERVATION INCREASING ENERGY EFFICIENCIES USE OF RENEWABLE ENERGY SOURCES USE OF NON-FOSSIL FUEL ENERGY SOURCES,SUCH AS NUCLEAR, HYDROGEN AND OTHER DEVELOPING TECNOLOGIES SEQUESTRATION THROUGH NATURAL PROCESSES OR PHYSICAL STORAGE

Primary Sequestration Mechanisms Geologic storage – Oil & Gas Reserviors – Coal Seams – Saline Formations Ocean sequestration Terrestrial sequestration Advanced chemical and biological approaches

Resource Management Drivers Environmental Drivers Economic Drivers CCS REGULATORY FRAMEWORKS EMMISSIONS TRADING REGULATIONS OWNERSHIP AND RESERVOIR PROTECTION UIC AND HEALTH & SAFETY

CO2 CAPTURE TRANSPORTATION AND GEOLOGIC STORAGE PROCESS

EXISTING ANALOGS PROVIDE GUIDANCE FOR CCGS NATURALLY OCCURING CO 2 CONTAINED IN GEOLOGIC RESERVOIRS CO 2 ENHANCED OIL RECOVERY (EOR) PROJECTS NATURAL GAS STORAGE PROJECTS

CO 2 ENHANCED OIL RECOVERY INJECTION

CCGS Regulatory Stages Capture Stage Transport Stage Injection Stage Storage Stage

Capture Stage CO 2 for CCGS will initially be a direct or processed emission stream with a purity in excess of 95% or a processed emission streams with commercial value. CO 2 is not currently defined in existing federal air regulations as a pollutant. While pollutants such as NO 2, SO 2 and other contaminants should remain regulated for public health, CO 2 should not be classified as a pollutant and be viewed as a commodity. Existing state and federal regulations dealing with facility permitting, operating and emission standards can be easily modified to address CO 2 capture technologies.

Transport Stage Existing Federal and State transport regulations easily adaptable to address CO 2 transport. Large body of experience in CO 2 pipeline construction and operation, including well established materials standards and regulatory frameworks, will necessitate limited need for additional regulation. Eminent domain will require state statute review to determine extension of eminent domain powers to CO 2 storage sites and pipelines. Federal agencies will ultimately need to address “open access” issue for CO2 pipelines.

Injection Stage Existing regulations for CO 2 EOR and underground natural gas storage provide the necessary analogs for establishment of regulatory frameworks for CO 2 injection operations. Adapt and modify established permitting procedures and standards for site characterization for CCGS. Establishment of monitoring, measurement and verification protocols for emissions trading, resource management and environmental regulatory frameworks.

Post Injection Storage Consider the potential need for legislation to clarify and address the unknown issues which may arise in the ownership of storage rights (reservoir pore space) and payment for use of those storage rights. Construct a regulatory framework for storage which will allow for withdrawal of CO 2 for commercial purposes. Establish procedures for long-term reservoir management and monitoring technologies to confirm that injected CO 2 volumes remain in place for emissions trading and environmental purposes. Establish protections for nonperformance of responsible parties. Long term nature of projects will require innovative solutions beyond current analogs such as government backed surety bonds and insurance funds, government trust funds, and specialized Public, Private or Semi-Private Partnerships or federally guaranteed industry funded abandonment programs.

CONCLUSIONS At earliest possible time involve all stakeholders including general public in the development of regulatory frameworks. CO 2 should be regulated as a commodity to allow the application of expansive regulatory frameworks to address emissions trading, resource management and environmental issues. States have necessary regulatory analogs in place to facilitate development of comprehensive CCGS regulatory frameworks. Experience gained by industry and states in the production, transport and injection of CO 2 over last 30 years will enable development of technically sound regulatory frameworks.

CONCLUSIONS CO 2 EOR injection and storage promise a potentially substantial additional benefit to our economy and national security by increasing the amount of oil the U.S. is able to produce domestically from existing fields. This increases the likelihood that CO 2 EOR will be the vehicle that will drive CCGS development – providing the means by which we build injection/storage experience, regulatory and otherwise, and physical infrastructure (pipelines/facilities). CO2 EOR will likely provide a technical, economic and regulatory pathway for long-term CO 2 storage.