The political/regulatory framework for CCS in the USA - Zero

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The political/regulatory framework for CCS in the USA - Zero

The political/regulatory

framework for CCS in the USA

Geir Vollsaeter

Special Advisor

Climate Change and Carbon Management Group

Alston & Bird LLP

©Alston & Bird LLP 2008


Background

• With projected growth in fossil energy usage, the world

can not meet necessary CO2 reductions without Carbon

Capture and Storage (CCS)

• From new coal based power plants, unconventional

oil, coal and gas

• Existing industry, including fossil power and carbon

intensive heavy industry

The specific CO2 intensity of some fossil energy

sources will increasingly determine if CCS will be

required

©Alston & Bird LLP 2008


Increased upstream CO2 intensity

• CO2 emission per bbl

o.e produced on the rise

• “Low hanging fruit”

light oil in decline

• Heavy oil on the rise

• CO2 intensive

unconventional oil in

rapid development

• Some say easy oil is

over, more likely, easy

oil is over for some

Source: Total

©Alston & Bird LLP 2008


In California’s AB 32 regulation, a complete

CO2 intensity review is underway

©Alston & Bird LLP 2008

A Low-Carbon Fuel Standard for California

Part 1: Technical Analysis

May 29, 2007


Power supply in the US

Existing coal

power

generation is

near half of

current net

generation

©Alston & Bird LLP 2008


©Alston & Bird LLP 2008

New capacity build out

- not as fast a most people think


US (NETL) estimated capture costs

Water usage -

increasing concern

CCS costs are significant and

have increased with higher

energy, steel and other

commodity costs

©Alston & Bird LLP 2008


How does the USA address CCS through policy

• Recognizing that CCS demonstrations are needed, costs

per tonne avoided significant and likely higher than the

price in a future domestic or international allowance

market

©Alston & Bird LLP 2008

• Subsidized loans

•Grants

• Regional CCS partnerships

• A welcome but insufficient step in the “bail out”

package

• $20 per metric ton carbon dioxide for storage

• $10 per metric ton carbon dioxide for enhanced oil

recovery


The Carbon Sequestration Partnerships

©Alston & Bird LLP 2008


Allocations in Climate Security Act of 2007

S.2191 (Lieberman Warner - not passed)

• Free and auctioned allowances

• 26.5% auctioned in 2012, rising to 69.5% from 2031- 2050

• Auction proceeds ear marked for

• States: 11% for energy efficiency

• Consumers: 11% to offset end-user economic impacts

CCS: 4% to CCS - 4.5 Bonus allowances per ton declining

over time

• Agriculture/Forestry: 5% domestic; 2.5% for international

tropical deforestation

• Power production: 24% declining to 0 in 2031

• Energy Intensive industries: 10% based on CO2 intensity

and sectors

©Alston & Bird LLP 2008


• S 2191 CCS credits

©Alston & Bird LLP 2008

S 2192 and AB32

• 4% from Allowance Account to owners of projects that

capture and store CO2

• Delivered through bonus allowances

• For up to 10 years

• S 2191 CO2 intensity performance standards requirements

• For non new entrants – 1200 Lb carbon dioxide per/ Mwh

• For new entrants before 2018, 800 Lb carbon dioxide/

Mwh

• All thereafter, 350 lb carbon dioxide/Mwh

• AB32

• 500 gram CO2 per Kwh delivered to the grid (par CCGT)

• Low Carbon Fuel Standard - 97.4 kg of CO2-eq/MMBTU

to 87.7 kg/MMBTU


In sum

• Substantial CCS developments in the US, primarily through

government initiated programs

• CO2 intensity for power and fuel are in some states and federal

bills primary GHG policy driver, where CCS is either heavily

subsidized or left for the market to sort.

• Unresolved, but in progress, CCS issues

• Acceptability (public)

• Storage and liability (regulatory entities - EPA)

• Long term incentives and caps on CO2 emissions (Congress)

©Alston & Bird LLP 2008


Thanks

Geir Vollsaeter

Special Advisor

Climate Change and Carbon Management Group

The Atlantic Building

950 F Street, NW

Washington, DC 20004-1404

USA

E-mail Geir.Vollsaeter@alston.com

Phone: 202-756-3300

Fax: 202-756-3333

Alston & Bird LLP

©Alston & Bird LLP 2008

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