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Carbon Dioxide Capture & Storage and S. 1733, The Clean Energy Jobs & American Power Act of 2009

The Clean Energy Jobs and American Power Act of 2009 (CEJAPA) provides a number of provisions that facilitate the demonstration and deployment of carbon dioxide capture and storage (CCS) technologies. This document provides a brief overview of the most important of these. Coal use is responsible for over 40 percent of global carbon dioxide emissions1, and significant, deliberate action will be required to reduce these emissions. The CEJAPA lays a foundation for moving CCS technology to scale by reducing costs and providing funding for demonstrations.

[!]Note:[/!] This summary was originally posted on October 22nd. It was revised to reflect changes in the Chairman's markup.

The provisions for CCS in the CEJAPA include the following:

  • Develops a comprehensive national strategy for deployment. The bill requires Federal agencies, with EPA leadership, to develop a comprehensive strategy for commercial deployment and deliver a report to Congress within one year. The report will identify barriers and regulatory challenges and will recommend regulation, legislation, and other actions to facilitate CCS deployment (Sec. 121).
  • Establishes regulations for geologic storage. Amends the Clean Air Act and Safe Drinking Water Act to establish regulations for geologic storage. Requires EPA to finalize the rules for carbon dioxide geologic sequestration wells, including financial responsibility requirements, within one year. The bill also requires EPA to identify a coordinated process for certifying and permitting geologic storage sites within two years. Standards must include rules on financial responsibility of injected CO2, monitoring, record keeping, public participation and certification rules, among other things. Rules must minimize redundancy between CAA and SDWA authority (Sec. 122 and Sec. 813).
  • Requires emissions reporting for geologic storage sites. Geologic storage sites are regulated sources under the cap and trade program. Mandatory emissions reporting is required beginning in 2011 (Sec. 700 and Sec. 722).
  • Requires a formal report and evaluation of regulatory framework every three years. The bill requires EPA to formally report data on geologic storage sites, evaluate the performance of the geologic storage sites, and reassess the regulatory framework for geologic storage sites to Congress once every three years (Sec. 813).
  • Establishes a task force to design legal frameworks. The bill establishes a task force to provide recommendations to Congress within eighteen months that include a study of the ability of existing laws and insurance mechanisms to manage risks associated with CCS, the implications and considerations for different models for liability assumption, and subsurface property rights. The bill also requires EPA to study the means and circumstances under which existing environmental statute would apply to CCS and to present a formal report to congress within one year (Sec. 123).
  • Promotes R&D and early deployment of CCS. The bill establishes a Carbon Storage Research Corporation to be run by the Electric Power Research Institute (as proposed in HR 1869, introduced by Rep. Boucher). The Corporation would use funds collected through a feed-in tariff to issue grants and financial assistance for commercial-scale CCS demonstrations. Funding is capped at $1.1B per year for no more than 10 years. The bill also includes provisions for governance, government oversight, information sharing and intellectual property for both the Corporation and projects it would undertake. Commercial-scale projects undertaken by private, public, academic and non-profit organizations are eligible for funding, with an emphasis on supporting a diversity of technologies and fuels. Funding will go towards at least 5 commercial-scale integrated CCS projects, with 50% of funds to utilities that have already committed resources towards such projects (Sec.125).
  • Provides bonus allowances for stored carbon dioxide. The bill provides bonus allowances to the first 72 GW of facilities that implement capture and secure geologic storage or convert the carbon dioxide into a stable form. To qualify a project should reduce the facility’s annual carbon dioxide emissions by at least a 50 percent Payment is available for electric generating units fired by coal or petroleum coke at least 50 percent of the time and with a nameplate capacity of 200MW or greater (or retrofit equivalent of 200MW), and to industrial sources that emit more than 50,000 tonnes of carbon dioxide per year and do not produce liquid transportation fuel. Funds will be divided into tranches with the payment on sliding scales with higher payments for greater percentage capture, with a lower bonus provided for projects that combine geologic storage with enhanced oil recovery. Conditions for eligibility and advanced distribution of emissions allowances for these projects are specified. This program provides a mechanism for offsetting the technical risk assumed by early-adopters and a financial incentive to capture and store greater percentages of carbon dioxide than is required under the performance standards. Specifics of the bonus allowance payments are outlined below (Sec. 780):

    Phase I (first 20 GW of treated CCS generating capacity, divided into two tranches):

    First tranche (first 10 GW of treated generating capacity):

    • Units achieving capture and storage of 90% or more of the carbon dioxide that would have otherwise been emitted would receive $96 bonus allowance value for each ton of CO2 captured and sequestered.
    • Bonus allowance payment for lower percentage capture will be determined by the EPA administrator, with a minimum payment of $50 per ton of CO2 captured and sequestered for a 50 percent reduction in carbon dioxide. The payment should vary in direct proportion with increasing rates of capture receiving proportionally larger payments.
    • An extra $10 per tonne bonus allowance is given for early-adopters, or those that begin operating at a 50% capture and storage rate before 2017.
    • Industrial source projects are excluded under the first tranche.

    Second tranche (10-20 GW of treated generating capacity):

    • Units achieving capture and storage of 90% or more of the carbon dioxide that would have otherwise been emitted would receive $85 bonus allowance value for each ton of CO2 captured and sequestered.
    • Bonus allowance payment for lower percentage capture will be determined by the EPA administrator, with a minimum payment of $50 per ton of CO2 captured and sequestered for a 50 percent reduction in carbon dioxide. The payment should vary in direct proportion with increasing rates of capture receiving proportionally larger payments.

    Phase II (20-72 GW):

    • Allowances are distributed through an annual reverse auction (unless otherwise decided by the EPA) with bids based on the desired level of incentive for 10 years of geologic storage.
    • At least two of these reverse auctions will be held, and a separate auction may be held for up to five separate project categories. These categories may be defined based on coal type, capture technology, type of geologic formation and new/retrofit application.
    • The EPA Administrator may prescribe a schedule for providing bonus allowances if it is determined that a reverse auction would not result in efficient and cost-effective deployment. The established bonus allowance values should cover not more than the reasonable incremental capital and operating costs for CCS.
    • Phase II will be divided into tranches of not more than 10 GW.
  • Sets performance standards for new coal-fired power plants. The bill amends the Clean Air Act to require new coal-fired power plants to meet performance standards. The EPA Administrator must review the standards and may tighten them depending on the performance of commercially-available technology (Sec. 812).

    • Standards apply to all plants permitted after January 1, 2009 where 30% or more of their fuel is coal and/or petroleum coke.
    • Plants permitted from 2009-2020 must achieve a 50 percent reduction in annual emissions by 2025 or earlier (if a threshold of 10 GW of commercial deployment is met).
    • Plants permitted from 2020 onward must achieve a 65 percent reduction in annual CO2 emissions from the unit.
    • The onset date may be extended to 2022, if the Secretary of Energy and Administrator find insufficient commercial deployment in 2017 and Congress approves this finding.
    • The standards are reviewed by the Administrator before 2020 and at 5 year intervals afterwards. The maximum carbon dioxide emissions rate for new plants may be reduced (via rulemaking) to reflect the degree of reduction achievable.
  • Establishes allowance allocations for the bonus allowance program. 1.7 percent of allowances are allocated to CCS, beginning in 2014 (Sec. 771):
    • 1.75% of allowances from 2014-2017
    • 4.75% of allowances in 2018 and 2019
    • 5% of allowances from 2020-2050

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