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CCS liability study released
Governments around the world are developing and implementing regulatory regimes for CCS. Establishing the frameworks for regulating and managing the issues around long-term liability for stored CO2 was identified as one of the most challenging and complex issues by the IEA in their most recent review of the international CCS legal and regulatory developments.
Liability arising from accidental release of CO2 at CCS projects exists not only for long-term storage, but also for the operational phase over short- to medium-term timeframes.
Liability and regulatory regimes, over any timeframe, serve as risk-control mechanisms to ensure industrial processes meet community expectations for safe and environmentally sound activities. Best practice in regulatory design for these regimes aims to minimise the sum of two costs: the cost of losses arising from an accident plus the cost of avoiding those losses.
With the CCS industry in only the early stages of development, there are concerns both in the community and in industry around identifying the first element in that equation. That is, what are the possible impacts and the associated costs of remediating, and compensating where necessary, due to an accidental release of CO2? And can those impacts and costs be identified along the entire production chain: from capture through transport to injection and permanent storage?
The Global CCS Institute was part of an international team that sponsored a study which has found that such values can be estimated by applying standard techniques from the insurance and finance industries, using information created as part of the standard CCS project development process.
Further, as a 'proof of concept', the potential damage costs at a real-world CCS project were estimated. Although the project, the FutureGen candidate site at Jewett Texas, was not ultimately selected, the Environmental Impact Statement and Risk Assessment Report provide much of the data necessary to identify the risks and impacts from the accidental release of CO2.
This is the first public study of its kind and considers a range of impacts – through human health, groundwater and CO2 emission considerations along the entire CCS production chain.
I will discuss elements of the report over the coming weeks, including some of the caveats, but the key take-away messages are below.
- A well sited and operated CCS project has a relatively small potential for damages. That is, the costs to the business of managing liabilities from an accidental release of CO2.
- For the Jewett site, for the range of damages considered, there was a less than 5 per cent chance that total damages would exceed US$19 million over 100 years – equivalent to around US$0.37/tonne sequestered over the life of the project.
- Damage estimates depend on the specific characteristics of the project such as its location, its proximity to residential areas, the local groundwater characteristics and the nature of the capture process.
- Sound site selection and site-specific monitoring is essential to ensure risks are both very low and well managed.
The graph summarises the probability of estimated total costs across all modelled accident events over a 100-year time horizon.
Sum of total costs across all scenarios
The study was made possible through the support of the following organisations – either financially, or as members of the Steering Group:
CO2 Capture Project, Chevron, Duke Energy, Environmental Defense Fund, Government of Alberta, Global CCS Institute, Integrated CO2 Network, Industrial Economics Incorporated, Natural Resources Defense Council, Southern Company, State of Wyoming, Wade, LLC and World Resources Institute.
Topics:Policy legal and regulation