IMG.gif

US Road to CCS Boom Hits Speed Bumps

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.
Carbon,Neutral,Concepts,Carbon,Capture,Emission,Clean,Energy,Transition,CO2,CCS

A new land rush is under way in the US as aspiring carbon capture and sequestration (CCS) developers race to secure the best acreage to store CO2. Great geology, plus policy incentives laid out in last year’s landmark Inflation Reduction Act (IRA), have made the US the envy of the carbon-removal world, with new projects announced almost weekly. But creeping uncertainty and a host of unanswered questions around permitting and leasing could slow the pace of development in the near term, potentially complicating the plans of giants like Exxon Mobil, Occidental Petroleum and myriad of others. The US likely has at least 2.6 trillion tons of geologic CO2-storage capacity, according to a 2015 Department of Energy estimate. Generous tax credits and a growing market for carbon offsets have sparked a wave of new interest in both point-source and direct air capture projects in the US — not just as a way to hit individual net-zero goals but to make money as well. Industry insiders say major foreign oil and gas companies are feeling increasing pressure to establish a foothold in US CCS. With the likes of Exxon, Chevron and others putting real money into the space, international counterparts feel like “they need to get on board and start advancing [projects] to stay lockstep” with their US rivals, said one observer.

Despite the enormous potential and friendly policies, the US still has a ways to go before it can become a CCS powerhouse. Uncertainty over well permitting is a key issue. The federal Environmental Protection Agency (EPA) must approve most “Class VI” underground injection permits, a process the EPA says will take at least two years from filing. The agency, which has only approved two active Class VI permits to date, faces a growing backlog of applications and, critics say, lacks the manpower to process them all in a timely manner. That has created a “bottleneck” of final investment decisions since emitters are not comfortable committing hundreds of millions of dollars to a capture project without a fully permitted storage well, according to one source. In hopes of speeding up the permitting process, the industry is pushing for the EPA to hand off Class VI oversight to state oil and gas regulators. Wyoming and North Dakota are the only states so far to secure “primacy” in approving Class VI permits; North Dakota cleared one in just eight months last year. Louisiana, one of the hottest CCS states, has submitted its application for primacy but likely won’t get it approved until late this year or early 2024, assuming it can overcome rumblings of political discord in Washington. Texas would likely be the next state to obtain primacy, but it hadn’t yet completed its application as of last month. Still, it’s not clear if state regulators necessarily will be able to move much faster than EPA.

Federal waters are not subject to the Safe Drinking Water Act so CCS developments there do not require Class VI permits. But offshore CCS in the US has more fundamental questions to answer, as no framework currently exists for leasing acreage or permitting wells on the Outer Continental Shelf. Department of Interior was supposed to promulgate rules for offshore CCS by November 2022, but that deadline has passed with no indication of when the rules will emerge. Companies are hopeful they will receive guidance this year and have been working with regulators to establish a workable system. But the uncertainty could delay ambitious plans by companies like Exxon and Repsol that see the US offshore play as one of the country’s most attractive areas to sequester CO2.

Public concerns over safety persist. Industry notes that CCS is an established technology and, if done right, poses very little risk. The stringent and comprehensive requirements of a Class VI application all but guarantee a storage site is secure, and they establish a firm chain of liability if something does go wrong, industry leaders say. In Louisiana, a federal judge last month blocked a local moratorium on CO2 injection wells — a win for the industry but a warning that public opposition is a risk that should not be ignored. Community engagement and investment will be essential in quelling public fears around CCS. Charles Fridge, CEO of private CCS player Verde CO2, says the EPA considers public impact when deciding whether to approve Class VI wells. He says environmental justice is a focus for Verde, “not because the EPA is just asking us to, it’s because it’s the right thing to do.”

Topics:
Carbon Capture (CCS), Policy and Regulation, Emerging Technologies, Resource Access, Hydrogen, ESG, CO2 Emissions, Low-Carbon Policy
Wanda Ad #2 (article footer)
#
Majors will need to make tough choices this year on capital allocation as timelines for transition strategies speed ahead.
Thu, Jan 26, 2023
TotalEnergies has been caught up in some of the recent controversy surrounding its Indian investment partner Adani Group.
Wed, Feb 1, 2023
The major is gearing up to reach FID on what it claims is the world’s largest low-carbon hydrogen plant, and may add ammonia to its plans.
Mon, Jan 30, 2023