Energy ministers from participating Carbon Sequestration Leadership Forum (CSLF) countries will meet to discuss carbon capture and sequestration (CCS) issues in Abu Dhabi December 3-7. Below are some suggestions for a US position heading into the meeting. Before listing them, perhaps a bit of background on the CSLF and CCS is in order.
The CSLF was founded in 2003 with a mission to promote development and deployment of CCS technologies. It describes itself as “a Ministerial-level international climate change initiative that is focused on the development of improved cost-effective technologies for . . . CCS. It also promotes awareness and champions legal, regulatory, financial, and institutional environments conducive to such technologies.” Participants currently include 25 countries plus the European Union. It is unique in bringing together energy ministers and various stakeholders to discuss issues in open dialogue.
Hunton & Williams has hosted several meetings of the CSLF Financing Task Force, which (as the name suggests) focuses on what issues arise in financing CCS projects. These can include regulatory and legal issues as well as purely financial ones. The most recent meeting was just a few weeks ago at our offices in Washington, DC.
Regarding CCS, it is the process of capturing CO2 emissions from an industrial source–a power plant or factory–and storing them underground to prevent them from entering the atmosphere. In this post, I am using the acronym to include carbon capture, utilization, and sequestration, or CCUS. That process puts CO2 to economic use rather than just storing it. By far the most widespread use is for enhanced oil recovery (EOR): injecting the CO2 into an oil field to increase oil production. About 4% of U.S. oil production today comes from EOR.
Here are some key points for Secretary of Energy Rick Perry and his team to consider as they prepare for the CSLF Ministerial next week.
- CCS is neither a climate technology nor an economic one, but both, and more. Whether the priority is reducing CO2 emissions, as during the Obama Administration, or energy dominance, as articulated by President Trump, CCS has a key role to play. America has billions of barrels of oil that can only be produced with CO2. What is holding back that production is lack of CO2. As for climate change, it is clear, and underreported, that the world simply cannot get to emission reduction targets without widely deploying CCS.
- Even with the Trump Administration stepping back from the Obama Administration’s aggressive CO2 regulatory posture, many companies view CCS as an important priority. Regulation, which we know can change with Administrations, is not the sole driver for CCS. Companies are seriously considering the views of investors. This is likely to be even more pronounced in the wake of Norway’s central bank, which runs its sovereign wealth fund (the world’s largest), recommending divestment of oil company holdings because of climate concerns. Considering that much of Norway’s wealth comes from oil production, it is a very significant development.
- Carbon capture technology still needs work and government encouragement. Over the past few years, the world’s first large power plant carbon capture projects have entered operation at two North American facilities. While these are working, significant advances must be made for CO2 to be deployed more broadly. Whether the benefit to the public is reducing CO2 emissions or energy dominance, a public role is important to bringing about the benefits.
- CCS can facilitate energy dominance through US technology and expertise. Eastern Europe, for example, relies on Russian hydrocarbons, which have been used at times as political leverage. Eastern Europe has plenty of coal, but will only be able to use it with technology addressing CO2 emissions, and CCS is that technology. There also are opportunities there for EOR. CCS presents a key opportunity for energy diplomacy that enhances US influence.
- Non-climate regulation matters in encouraging or discouraging CCS. Overly prescriptive and burdensome regulations through programs such as the Underground Injection Control program, as well as the normal regulatory burdens to siting and permitting infrastructure, affect whether projects will go forward. These issues generally are not within the Department of Energy’s responsibility, but the Secretary can be persuasive in addressing them in the US and in encouraging other countries to set properly their own regulatory framework.
The good news is that Secretary Perry has supported CCS and EOR for a long time, going back to his time as Governor of Texas. His support has been evident in his first months as Secretary, including just a few weeks ago in co-chairing the International Energy Agency’s CCUS Summit. Perry said “While we come from different corners of the world, we can all agree that innovation, research, and development for CCUS technologies can help us achieve our common economic and environmental goals.” The CSLF is an important venue for that work.