One of the biggest challenges faced by California in decarbonizing its economy is the need to capture carbon dioxide and store it effectively and safely. While a variety of technologies may ultimately be available to capture and store carbon, the current main option is to store it deep underground. The 2022 Scoping Plan identified the need for 100 million tons of this type of carbon capture and storage (CCS) to achieve net-zero emissions by 2045. This is a significant share – equal to about 25% of the total solution. However, there are currently no operating CCS projects in the state. Serious questions have been raised about the difficulties and costs of CCS. Can California reliably deploy this technology and infrastructure in the timeframe required by the Scoping Plan, and if so, how can we get from here to there?
In this technical blog post – the first of a two-part series – we analyze the first main barrier: lack of a regulatory framework. SB 905 (passed in last year’s legislative session) authorized state agencies to develop this framework via proceedings that are set to commence in the coming weeks. This framework must address safety and monitoring, permitting, pipelines, liability, storage assessments and unitization. We identify key issues and opportunities for legislative clean-up as well as discuss the need for an institutional structure to support ongoing implementation of the state’s emerging CCS rules.
In part two (next month), we analyze the second main barrier: lack of a commercial framework. We consider alternative business models to enable CCS investment in California, ranging from public ownership of a majority of assets and infrastructure to a more substantive role for the private sector in the form of either a regulated utility model (similar to the power sector) or unregulated model. As the UK has made significant progress on these questions, we review the leading business models that they have developed as part of a robust stakeholder process that commenced in 2018.
Overall, we hope these analyses can serve as a useful resource for stakeholders and support the development of pragmatic, strong and fair CCS regulations and business models in California.
Carbon capture and storage (CCS) – including both point-source capture at industrial and bioenergy facilities as well as direct air capture with geologic storage – represents a set of technologies identified by the Intergovernmental Panel on Climate Change as crucial to achieving global climate goals. The California Air Resources Board (CARB) expects CCS to make-up about 25% of the state’s own net-zero portfolio, even after maximizing the potential nature-based carbon sequestration in the state’s forests, grasslands, wetlands and soils. However, despite there being about 30 CCS projects in operation around the world (and over 150 in development) there are none operating in California. A primary reason for this has been the lack of a regulatory framework to inform project development.
SB 905 (Caballero; Skinner) passed in last year’s legislative session provided the foundation for this framework by authorizing key state agencies including CARB, the California Natural Resources Agency (CNRA) and the Department of Conservation (DOC) to establish the rules and requirements for CCS project development in California. Most of these regulatory proceedings are expected to begin in the coming weeks, including the main proceeding at CARB, and in general must be completed by 1 January 2025. Here we pre-emptively analyze the key topics of these proceedings. We then discuss the idea of establishing a new Office of Carbon Management that could be charged with implementing certain aspects of the new regulations, notably permitting and monitoring.
SB 905’s regulatory pillars
SB 905 identified six key topics (or pillars) of a CCS regulatory framework, including: safety and monitoring, permitting, pipelines, liability, storage assessments and unitization (Fig. 1).
In this section, we review each pillar, including by summarizing the relevant provisions (Background), providing a short analysis (Analysis) and highlighting outstanding issues for stakeholders (Issues). For a complete analysis of SB 905 considerations, click here. For a one-page summary, click here.
Safety and Monitoring
- Background: SB 905 directs CARB to establish standards to ensure the safety and viability of CCS projects in California, including strategies to minimize air and water pollution and seismic activity as well as monitoring and reporting schedules for project operators.
- Analysis: Safety and monitoring is one area where CARB has already developed fairly rigorous requirements, primarily for CO2 storage, under the LCFS CCS Protocol. The Permanence Certification requires detailed site characterization, risk assessment studies, third party reviews, and testing and monitoring plans, as well as quarterly reporting to CARB. Overall, the Protocol provides a good starting point to develop a statewide standard for CCS projects.
- Issues: Gaps in the Protocol relative to SB 905 include limited standards for CO2 capture as well as strategies to mitigate co-pollutant emissions. Additionally, a recent study identified ways in which the Protocol could be updated to include the latest techniques in subsurface monitoring.
- Background: SB 905 authorizes CARB to adopt a unified permit application that would solicit from applicants, and direct to all relevant state agencies, the information needed to obtain permits for CCS project development. This ‘central checklist’ path is optional and does not replace the review or issuance of individual permits from state and local agencies.
- Analysis: Overall, while enabling some efficiency improvements the unified permit application is unlikely to do much to further incentivize CCS project development. This is because there are multiple larger issues related to CCS permitting reform that need to be addressed.
- Issues: While these go beyond the scope of SB 905, there are three key issues related to CCS permitting that stakeholders should deliberate as part of a public proceeding:
- CEQA Lead Agency: Should California establish a CEQA Lead Agency to simplify the CCS permitting process and build the relevant project review expertise in one agency? How consolidated would the permitting authority of this Lead Agency be?
- ELDP designation: Should California designate certain CCS projects, such as direct air capture powered by renewable energy, as Environmental Leadership Development Projects, which enables streamlined judicial review?
- Class VI primacy: Should California adopt the US EPA’s Class VI well permit authority for underground CO2 injection? And if so, which state agency should assume responsibility?
- Background: SB 905 establishes that intrastate pipelines can only be used to transport CO2 once the Pipeline and Hazardous Materials Safety Administration (PHMSA) concludes its rulemaking on minimum federal safety standards for CO2 transport. Additionally, it directs CNRA to develop a state framework for the design, operation, siting and maintenance of intrastate CO2 pipelines.
- Analysis: While the rulemaking at PHMSA is important, it is possible that it will take multiple years to complete, thereby greatly harming California’s competitiveness as a CCS project destination. This is a critical obstacle, especially as constructing core pipeline infrastructure this decade is essential for the state to scale to 100 Mt/yr sequestration in only 22 years.
- Issues: There is currently no state agency with explicit authority to regulate intrastate pipelines to transport CO2 in California. Empowering an agency with this authority is a key first step. That agency could also then be charged with developing state standards for CO2 transport, providing an option for the state to adopt these standards in lieu of waiting for PHMSA. (These are the recommendations of CNRA as outlined in their recent pipelines framework publication).
- Background: SB 905 requires CARB to adopt regulations for CCS operators to maintain financial responsibility for a time that is sufficiently long enough to demonstrate that the risk of CO2 leakage poses no material threat to public health and the environment, and that also terminates no earlier than 100 years after the last date of injection of CO2 into a geologic reservoir.
- Analysis: Similar to safety and monitoring, liability is another area where CARB has already given detailed consideration as part of the CCS Protocol. Specifically, the Protocol outlines the resources a CCS operator must maintain to demonstrate financial responsibility, including the ownership of a financial instrument (trust funds, surety bonds, insurance, etc.) that is sufficient to cover the cost of corrective action, well-plugging, post-injection site care and site closure, emergency response, and potential negative third party impacts from CO2 leakage. Overall, the Protocol should provide a good starting point for CARB to develop a liability regulation.
- Issues: A key issue for stakeholders to consider is whether having private companies maintain financial responsibility for 100 years is a good approach. The rationale behind this is quite simple: how many companies exist for 100 years? As a matter of practice (and safety), it may be in the public interest for companies to meet higher compliance thresholds while at the same time ceding their responsibility to the State sooner. A public service could then take over CO2 monitoring requirements. (For more information, see the Office of Carbon Management section, below).
- Background: SB 905 establishes a Geologic Carbon Sequestration Group, led by the California Geological Survey, to identify high quality, suitable locations of Class VI injection wells, hazards that may require the suspension of CO2 injection, and appropriate subsurface monitoring approaches. ‘High quality, suitable locations’ means reservoirs that have been modeled to be capable of maintaining integrity for at least 1,000 years.
- Analysis: Assessing and identifying potential CO2 storage sites is usually the most time-consuming step in CCS project development, often taking multiple years. It is also risky, as there is no guarantee that a site turns out to be viable. Having the state absorb some of this risk is therefore an important policy intervention that can support broad CCS development.
- Issues: A robust assessment of California’s CO2 storage potential is likely to be a costly and time-consuming undertaking. This could be substantially mitigated if there is a prioritization of sites, such as by first assessing potential megaton storage hub locations. Expanding the current policy to include physical drilling and testing (i.e., not just modeling) should also be considered, as this can identify sites that are not only ‘high-quality’ and ‘suitable’, but also ‘development-ready’. A recent study considers this to be the most high-impact, near-term CCS policy action.
- Background: SB 905 requires CNRA to publish a framework for governing agreements regarding two or more tracts of land overlying the same geologic storage reservoir for the purpose of managing, developing and operating a CCS project. This process is known as unitization.
- Analysis: Establishing a process for unitization is important as in many cases a geologic reservoir will cross multiple different surface land holdings. This is particularly true in favorable CO2 storage areas including the San Joaquin-Sacramento River Delta. The framework requirements listed in the bill are comprehensive, covering minimum ownership (i.e. at least 75% of landowners are required to propose an agreement), fair and reasonable compensation, as well as standards for financial responsibility, surface site access, royalty payments, and more.
- Issues: The key issue for stakeholders is that, despite a comprehensive set of requirements, SB 905 does not empower an agency with the regulatory authority to approve or deny agreements. Hub-scale CO2 storage developments are therefore likely to be limited until this time. New legislation is likely needed to address this obstacle.
Office of Carbon Management
CCS presents a new and diverse class of decarbonization projects in California requiring new rules, standards and (as we will explore in our next blog) commercial models. SB 905 started the process of delegating responsibilities to different agencies, notably CARB, to develop this core policy foundation. However, as more projects are initiated it will become clear that developers need assistance with / to be scrutinized over a host of implementation issues related to grants, permits, technical studies, and more. Assigning this responsibility to an existing or new agency or department is a key area of consideration.
Establishing a new Office of Carbon Management (OCM) to be responsible for CCS implementation in California is one approach that could be beneficial. This follows the Department of Energy’s own energy office rebrand to include carbon management. OCM could be established within CNRA, which is also home to the California Energy Commission (main state energy permitting agency), the Office of the State Fire Marshall (pipeline agency) and Department of Conservation (geology agency). With CARB responsible for developing and managing the standards and main incentive programs for CCS, OCM could be responsible for the operational aspects of the following topics (not an exhaustive list):
- Permitting: OCM could function as the one-stop permitting shop and CEQA Lead Agency for CCS projects in California, not dissimilar to the CEC for thermal energy and renewables projects. OCM could also apply for Class VI primacy, provided it has sufficient staff capacity and expertise to reliably deliver the Class VI permit.
- Grantmaking: OCM could work with CARB to help identify and then ultimately manage capital grants to promising CCS projects.
- Storage characterization: OCM could house geologist expertise as it pertains to CO2 storage and have the capacity to either perform or contract for and manage well drilling and testing for purposes of storage characterization.
- Basin-wide management and monitoring: As mentioned, liability is a key CCS issue. OCM could be responsible for taking over storage monitoring from private companies after they have met their obligations under the CCS standards to be developed by CARB.
- Technical assistance: Developers often require assistance from regulatory agencies related to project development, such as for data sharing, advice on site opportunities and as a sounding board on technical considerations. OCM could house the expertise to perform this service.
- Emergency response: OCM could develop and execute protocols related to emergency response in the event of CO2 leakage, seismic impacts and other public safety challenges.
It is plausible that OCM could be an integrated team of disparate agencies, including CARB, CEC, OSFM, and DOC. However, the risk with this approach is that no one agency is responsible for and can be held accountable for CCS implementation in California. A single agency can also absorb new and unexpected functions that may be required in future years.
California has outlined major ambitions for CCS deployment in order to achieve its climate goals. To go from currently no operating projects to a scale of 100 Mt of CO2 being captured, transported and stored in only 22 years requires significant policy and investment shifts. SB 905 was an important step forward in this respect, but as highlighted there are a number of opportunities to clarify and improve this law. In addition, many issues will require thoughtful stakeholder engagement during the proceedings.
We hope this blog post can help stakeholders get up to speed on key CCS issues and support a strong level of feedback to CARB and the other state agencies in the upcoming proceedings as we collectively help to shape California’s clean energy future.
For more information, please contact Sam Uden (email@example.com) or Amanda DeMarco (firstname.lastname@example.org).