The Regional Carbon Sequestration Partnerships (RCSP) program of the US 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 RCSP program comprises three phases: (I) characterization of national CO₂ storage potential in deep oil-, gas-, coal-, and saline-bearing formations, (II) 25 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 11 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.

Phase III of the RCSP comprises nine planned commercial-scale projects, seven of which will fully-integrate industrial capture, transport, and inject and monitor between 1 to 5 million tonnes of CO₂ into geologic formations. Phase III is the critical step to validate CCS technology, drive down its cost, and diffuse it broadly.

This post summarizes two research papers written by Craig Hart on RD&D in Phases II and III of the RCSP. Both were published by Harvard University and are available from Harvard University's Belfer Center.

This study surveyed 19 of the 25 Phase II geologic sequestration pilot projects of the DOE RCSP for which data was available in 2009, and examined in detail two of these projects as case studies.

The survey and case studies reveal that issues surrounding long-term liability have created significant barriers in a number of small-scale RD&D projects that are acknowledged to involve little or no risk. Without a clear legal framework governing liability or the ability of research partnerships to indemnify third parties for potential liability, substantial staff time and resources of research organizations were required to address these issues, leading to delays and in one case cancellation of a project. The study also found that permitting requirements under the Safe Drinking Water Act for small-scale research projects have required significant research organization staff time.

To overcome these barriers, the study recommends the federal Government provide a legal framework that supports CCS research, specifically a liability shield for research organizations and organizations that support research, and government indemnity for third parties including property rights holders, parties granting consent to projects, and those who may be affected by CCS research projects. It also recommends that the US Environmental Protection Agency (EPA) consider adopting a simplified approval process under the Safe Drinking Water Act for research injections.

The Phase III study surveyed nine planned Phase III RCSP projects during the period of mid-2009 through 2010. Financial, legal and regulatory considerations were tracked in order to assess the impact of these factors on resources (time and cost) and project design. In Phase III, financial issues posed the most significant barrier and dominated the outcomes in these 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.¹ A review of available federal financial incentives however, reveals that few of the nine projects would qualify due to eligibility requirements in legislation (e.g. size of project, etc.). The study suggests revision of an incentives program to better support these critical projects.

Financing Issues

Financing issues are the paramount barrier to fully integrated CCS projects. Of the nine planned Phase III projects, significant financial issues caused termination of three projects and contributed to termination of two other projects*. Federal financial incentives to support CCS were generally inadequate or not available to projects due to restrictions on project size, technology or fuel.

Significantly, many of the Phase III projects could not access federal incentives due to restrictions on technology, fuel or project size. In cases in which incentives could be accessed, the incentives were generally inadequate to bridge the financing gap between first-of-a-kind CCS projects and conventional facilities without CCS.

The study argues that financial incentives for CCS activities should be designed as flexibly as possible to promote innovation and broaden access. Requiring specific technologies or fuels favors certain technology providers and commodity producers, an approach which is not optimal if the goal is to achieve cost effective CCS. Policies should be technology and fuel neutral, providing financial incentives to any technology that meets performance criteria. Policies should set sequestration, environmental and economic performance goals, and allow technologies to compete freely for federal support.

Phase III CCS Financial Incentive – Selected Criteria

Note:  The full table is presented in C. Hart (2011).  “Putting It All Together: The Real World of Fully Integrated CCS Projects - A Study of Phase III of the DOE Regional Carbon Sequestration Partnerships Program.” Cambridge, Massachusetts:  John F. Kennedy School of Government, Harvard University.

Liability

Liability for stewardship of CO₂ remains a significant barrier to advancing CCS RD&D research. Liability was an issue in all of the Phase III projects. It was successfully resolved in five cases because commercial partners accepted liability in these projects. Without these parties, government-supported research projects could not have gone forward. As projects become larger in scale, we can expect liability issues to be increasingly important. Without a policy addressing liability, CCS research efforts may be increasingly difficult to undertake due to liability issues.

Several states have adopted risk sharing mechanisms and liability funds for CCS, allowing the transfer of liability after well closure and plume stabilization for qualifying CCS projects. While these state liability programs are extremely important, failure of the federal Government to take action on liability transfer mechanisms is likely to result in incomplete coverage as demonstrated by the fact that only one Phase III project is covered by a state risk sharing mechanism.

Regulatory Coordination

Phase III study revealed concern over the potential for different government agencies to exercise overlapping or competing jurisdiction over different aspects of projects. Coordination among agencies responsible for permitting CCS projects would reduce the costs and time associated with progressing projects. Interviews suggested that uncertainty of outcome and uncertain duration of the permitting review process should be addressed, especially where multiple regulators are involved. Better coordination among regulatory agencies appears to be the dominant concern for larger projects.

Applying Learning from Phase III

Phase III of the RCSP program should inform policies to support national CCS RD&D efforts. Without accessible financial incentives and liability transfer mechanisms, Phase III and other early stage projects face increased potential for delay or cancellation, increased costs,and loss of staff time as project developers struggle to overcome the challenges presented by these projects.

*Note: 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.

1. See C. Hart (2009).  “Advancing Carbon Sequestration Research in an Uncertain Legal and Regulatory Environment: A Study of Phase II of the DOE Regional Carbon Sequestration Partnerships Program.” Cambridge, Massachusetts:  John F. Kennedy School of Government, Harvard University.