Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Congressional research reportNov 2, 2009
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Carbon Capture and Sequestration in
H.R. 2454 and S. 1733
-name redactedSpecialist in Energy and Natural Resources Policy
-name redactedSpecialist in Environmental Policy
-name redactedSpecialist in Energy and Environmental Policy
November 2, 2009
Congressional Research Service
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R40867
CRS Report for Congress
Prepared for Members and Committees of Congress
Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Summary
The carbon capture and sequestration (CCS) provisions in H.R. 2454 and S. 1733 are similar
(some sections are identical), and both bills appear to share the goal of fostering the commercial
development and deployment of CCS projects as an important component of mitigating
greenhouse gas emissions. The bills call for a unified national strategy for addressing the key
legal and regulatory barriers to deployment of commercial-scale CCS. A required report detailing
a national strategy would identify barriers and gaps that could be addressed using existing federal
authority and those that would require legislation, as well as those that would be best addressed at
the state, tribal, or regional level. Both bills would also amend the Clean Air Act (CAA) and Safe
Drinking Water Act (SDWA) to require that the EPA Administrator establish a coordinated
certification and permitting process for geologic sequestration sites, taking into account all
relevant statutory authorities. The amended law would require regulation of geologic
sequestration wells, and promulgation of regulations to protect human health and the environment
by minimizing the risk of atmospheric release of carbon dioxide injected for geologic
sequestration.
Both bills contain identical provisions establishing performance standards for CO2 removal for
new coal-fired power plants. Plants covered by this section include those that have a permit
issued under the CAA, Title V, to derive at least 30% of their annual heat input from coal,
petroleum coke, or any combination of these fuels.
Both bills contain similar provisions that would create a program to accelerate the commercial
availability of CO2 capture and storage technologies and methods by awarding grants, contracts,
and financial assistance to electric utilities, academic institutions, and other eligible entities. The
bills would allow the establishment of a corporation, by referendum among power industry
organizations, that would derive revenue of approximately $1 billion per year via a “wires
charge” on electricity delivered from the combustion of fossil fuels. One possible advantage of
the program, if enacted, would be the creation of a consistent funding stream—exempt from the
annual appropriations process—for development of CCS technology over 10 years.
Both bills would also create a second program that would distribute emission allowances from the
cap-and-trade provisions to qualifying electric generating plants and industrial facilities. Although
the programs in the two bills are similar in construct and scale, S. 1733 would award allowances
to the first 20 gigawatts (Gw) of electricity generation that employs CCS technology via a
formula that provides a significant financial incentive, as much as $106 per ton of CO2 captured
for 90% capture efficiency. In contrast, H.R. 2454 would award only the first 6 Gw via the same
formula, and then employ a reverse auction scheme to allocate the rest, up to a total of 72 Gw.
Thus, S. 1733 allocates allowances to a substantially larger proportion of electricity generating
capacity in the first phase of the program, compared to H.R. 2454, at bonus allowance values that
could be significantly higher than their average market value.
A chairman’s mark to S. 1733, introduced on October 23, 2009, would add an additional incentive
for early deployment of CCS by allowing advanced distribution of emission allowances for CCS.
In contrast to H.R. 2454 and S. 1733 (as introduced), the chairman’s mark would award
allowances before the plant has actually captured any CO2. In contrast, H.R. 2454 and S. 1733 (as
introduced) would only distribute emission allowances based on the total tons of CO2 already
captured and sequestered.
Congressional Research Service
Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Contents
Introduction ................................................................................................................................1
Overview of Key Similarities and Differences .............................................................................2
Summary Comparison of CCS Provisions ...................................................................................4
National Strategy ..................................................................................................................4
H.R. 2454 .......................................................................................................................4
S. 1733 ...........................................................................................................................4
Regulations for Geologic Sequestration Sites ........................................................................4
H.R. 2454 .......................................................................................................................4
S. 1733 ...........................................................................................................................5
Studies and Reports...............................................................................................................5
H.R. 2454 .......................................................................................................................5
S. 1733 ...........................................................................................................................6
Summary of Regulatory and Reporting Requirements ...........................................................6
Carbon Capture and Sequestration Demonstration and Early Deployment Program ...............7
H.R. 2454 .......................................................................................................................7
S. 1733 ...........................................................................................................................9
Performance Standards for Coal-Fueled Power Plants ......................................................... 10
H.R. 2454 ..................................................................................................................... 10
S. 1733 ......................................................................................................................... 11
Commercial Deployment of Carbon Capture and Sequestration Technologies...................... 11
H.R. 2454 ..................................................................................................................... 11
S. 1733 ......................................................................................................................... 13
Chairman’s Mark ................................................................................................................ 15
Tables
Table 1. Comparison of Parallel Sections in H.R. 2454 and S. 1733.............................................2
Table 2. Geologic Sequestration Regulatory and Reporting Requirements ...................................6
Table 3. Rate of Assessment for Coal, Natural Gas, and Oil in H.R. 2454 ....................................8
Contacts
Author Contact Information ...................................................................................................... 16
Congressional Research Service
Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Introduction
This report summarizes and compares provisions for carbon capture and sequestration (CCS)
contained in H.R. 2454 and S. 1733, the two leading cap-and-trade bills aimed at reducing U.S.
emissions of greenhouse gases. CCS receives considerable attention in both bills because of its
potential for substantially reducing carbon dioxide (CO2) emissions from stationary sources, such
as coal-fired power plants, cement plants, and oil refineries, while allowing those industrial
sources to continue to operate even in a carbon-constrained environment. The goal of reduced
emissions and continued operations is particularly important for the coal industry: coal-fired
power plants generate approximately half of all the electricity in the United States, and are
responsible for over 40% of U.S. CO2 emissions from fossil fuels. Many observers consider CCS
to be an integral component of a comprehensive strategy to reduce greenhouse gas emissions
without creating a near-term disruption of the U.S. energy sector.
Currently, no coal-fired power plants, cement plants, oil refineries, or other large industrial
sources of CO2 in the United States are capturing and sequestering large quantities of CO2 solely
for the purpose of greenhouse gas mitigation. The CCS provisions in H.R. 2454 and S. 1733 are
likely intended to spur commercial deployment of CCS at a scale that would greatly surpass the
degree of deployment in the absence of additional federal incentives and requirements.1 Without
these incentives, some analyses have projected that low emission allowance prices combined with
high costs for installing CCS systems would preclude most additional CCS deployment.2
Many questions remain, however, about the possible consequences of accelerated CCS
development: financial, legal, regulatory, infrastructure, environmental, and public acceptance.3
Both bills attempt to some degree to address these questions, largely in parallel and similar
fashion, albeit with some important differences. Table 1 provides a snapshot comparison of the
parallel sections in H.R. 2454 and S. 1733, and the body of the report summarizes and discusses
each section in sequence.
1
Current incentives include $3.4 billion in funding for CCS research and development provided in P.L. 111-5, the
American Recovery and Reinvestment Act, existing loan guarantees and tax incentives, and the U.S. Department of
Energy (DOE) CCS research and development program. For more details on CCS funding, see CRS Report RL33801,
Carbon Capture and Sequestration (CCS), by (name redacted).
2
See, for example, U.S. Environmental Protection Agency, EPA Analysis of the American Clean Energy and Security
Act of 2009: H.R. 2454 in the 111th Congress, June 23, 2009, appendix, p. 86; or Pew Center on Global Climate
Change, In-Brief, What the Waxman-Markey Bill Does for Coal, August 2009, fig. 3, at http://www.pewclimate.org/
federal/what-waxman-markey-does-for-coal.
3
For more in-depth discussions of these topics, see CRS Report RL34621, Capturing CO2 from Coal-Fired Power
Plants: Challenges for a Comprehensive Strategy, by (name redacted) and (name redacted); CRS Report R40103,
Carbon
Control in the U.S. Electricity Sector: Key Implementation Uncertainties, by (name redacted); and CRS Report
RL34307, Regulation of Carbon Dioxide (CO2) Sequestration Pipelines: Jurisdictional Issues, by (name redacted) and
(name redacted).
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Table 1. Comparison of Parallel Sections in H.R. 2454 and S. 1733
H.R. 2454
S. 1733
Comments
Title I, Subtitle B
Division A, Title I, Subtitle B
Sec. 111, National Strategy
Sec. 121, National Strategy
A comprehensive strategy to address
key legal, regulatory, and other
barriers to CCS.
Sec. 112, Regulations for Geologic
Sequestration Sites
Sec. 122, Regulations for Geologic
Sequestration Sites
Regulations under the Clean Air Act
minimizing the risk of escape of CO2
to the atmosphere; regulations under
the Safe Drinking Water Act for CO2
geologic sequestration wells.
Sec. 113, Studies and Reports
Sec. 123, Studies and Reports
A study of federal and state
environmental laws and state common
law applicable to sequestration sites.
Sec. 114, Carbon Capture and
Sequestration Demonstration and
Early Deployment Program
Sec. 125, Carbon Capture and
Sequestration Demonstration and
Early Deployment Program
A “wires charge” program that would
collect approximately $1 billion
annually to foster early deployment of
CCS technology.
Sec. 116, Performance Standards
for Coal-Fueled Power Plants
Sec. 124, Performance Standards for
Coal-Fueled Power Plants
Performance standards under the
Clean Air Act for CO2 removal for
new coal-fired power plants.
Division B, Title 1, Subtitle B
Sec. 115, Commercial
Deployment of Carbon Capture
and Sequestration Technologies
Sec. 111, Disposition of Allowances
for Global Warming Pollution
Reduction Program
A program for distributing emission
allowances to spur the commercial
development of CCS technology.
Source: CRS.
Overview of Key Similarities and Differences
The CCS provisions in H.R. 2454 and S. 1733 are very similar (some sections are identical), and
both bills appear to share the goal of fostering the commercial development and deployment of
CCS projects as an important component of mitigating greenhouse gas emissions. S. 1733 even
specifies—which H.R. 2454 does not—that Congress finds it is in the public interest to achieve
widespread commercial deployment of CCS in the United States and throughout Asia before
January 1, 2030.
Both bills would require the Environmental Protection Agency (EPA) to regulate geologic
sequestration of CO2 under both the Safe Drinking Water Act and the Clean Air Act, and would
also require that the EPA Administrator establish a coordinated certification and permitting
process for geological sequestration sites. Recognizing that these statutes do not provide for
comprehensive management of geologic sequestration issues (such as long-term liability and pore
space ownership), the House and Senate bills would direct the EPA Administrator to establish a
task force to examine broadly the federal and state legal framework for geologic sequestration
sites and activities, and to report to Congress within 18 months.
Both bills would create two separate programs that would provide financial incentives to develop
and deploy commercial-scale CCS. The “wires charge” program, which is nearly identical in both
bills and very similar to H.R. 1689, the Carbon Capture and Storage Early Deployment Act
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
introduced by Representative Boucher, would create an annual funding stream of approximately
$1 billion to be awarded by a private corporation to eligible projects. The allocation of
development and deployment grants and contracts would be largely independent of federal
control, once the corporation is established, leaving the program to the discretion of the electricity
generating industry for the most part.
The second program would distribute emission allowances from the cap-and-trade portions of
both bills to qualifying electric generating plants and industrial facilities. Although the programs
in the two bills are similar in construct and scale, S. 1733 would award allowances to the first 20
gigawatts (Gw) of electricity generation that employs CCS technology via a formula that provides
a significant financial incentive, as much as $106 per ton of CO2 captured for 90% capture
efficiency. In contrast, H.R. 2454 would award only the first 6 Gw via the same formula, and then
employ a reverse auction scheme to allocate the rest, up to a total of 72 Gw. Arguably the reverse
auction process would provide an allowance price closer to its true market value, and thus reflect
how the market values CCS versus other emissions reduction options, such as fuel-switching,
offsets, and others.4 If so, then S. 1733 hedges in favor of CCS as a preferred technology by
allocating allowances to a substantially larger proportion of electricity generating capacity in the
first phase of the program, at bonus allowance values that could be significantly higher than their
average market value.
Both the “wires charge” program and the emission allowance scheme focus on the CO2 capture
stage of CCS and generally presume that the technical and regulatory requirements for the
transportation and sequestration stages would be in place by the time capture technology is
installed and operational. Three nearly identical sections in H.R. 2454 and S. 1733 attempt to
address those requirements, through amendments to the Clean Air Act and Safe Drinking Water
Act, as well as through studies and reports to construct a national strategy for CCS and identify
gaps and barriers that could require additional legislation. Despite these provisions, it is not yet
clear whether all of the challenges to transportation and sequestration aspects of CCS can or will
be met in concert with the technological and financial challenges of building capture technology
that works at large power plants and other industrial sources of CO2. The promise of CCS in some
part depends on the promulgation of a CCS regulatory structure, a sufficient transportation
capacity, resolution of liability concerns about long-term CO2 storage, and public acceptance of
CCS, as well as other requirements prior to or in conjunction with the deployment of capture
technology at large commercial facilities. Given these present uncertainties, how well the
provisions in H.R. 2454 and S. 1733 would advance widespread deployment of CCS still remains
an open question.
4
What true market value means in this situation is not straightforward; nevertheless, a reverse auction would reflect
what buyers would be willing to accept as the price of an emission allowance through a competitive process, reflecting
to some degree a market-oriented notion of price.
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Summary Comparison of CCS Provisions
National Strategy
H.R. 2454
Title I, § 111, of H.R. 2454 would require the Administrator of the Environmental Protection
Agency (EPA) to submit to Congress, within one year of enactment, a report detailing a unified
national strategy for addressing the key legal and regulatory barriers to deployment of
commercial-scale carbon capture and sequestration. The report is to identify barriers and gaps that
could be addressed using existing federal authority and those that would require new federal
legislation, as well as barriers and gaps that would be best addressed at the state, tribal, or
regional level. Additionally, the report is to include regulatory, legislative, or other
recommendations to address the gaps and barriers.
S. 1733
Division A, subsections 121(a) and (b) contain the same provisions as § 111 of H.R. 2454, calling
for development of a national strategy and related report to Congress. The Senate bill includes an
additional provision, subsection 121(c), which states that Congress finds that it is in the public
interest that commercial-scale CCS achieve wide deployment in the United States and throughout
Asia before 2030.
Regulations for Geologic Sequestration Sites
H.R. 2454
Section 112 of the House bill would require the EPA Administrator to promulgate regulations to
manage the geologic sequestration of CO2 under both the Clean Air Act (CAA) and the Safe
Drinking Water Act (SDWA).
Section 112(a) would amend Title VIII of CAA, adding a new § 813 to require the EPA
Administrator to establish a coordinated certification and permitting process for geologic
sequestration sites, taking into account all relevant statutory authorities. This provision would
direct the Administrator to reduce redundancy with SDWA requirements (including the current
rulemaking for geologic sequestration wells) and, to the extent practical, reduce the regulatory
burden imposed on certified sequestration entities and implementing authorities.
Within two years of enactment, the Administrator would be required to promulgate CAA
regulations to protect human health and the environment by minimizing the risk of atmospheric
release of carbon dioxide injected for geologic sequestration. The scope of the regulations would
include enhanced oil and gas recovery combined with geologic sequestration. The regulations
would have to include a process to obtain certification for geologic sequestration; requirements
for monitoring, record keeping, and reporting for injected and escaped emissions (taking into
account any requirements under § 713 regarding a greenhouse gas registry); and requirements for
public participation.
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Section 112(a) further would require that, within two years of promulgation of the regulations and
every three years thereafter, the EPA Administrator report to the House Committee on Energy and
Commerce and the Senate Committee on Environment and Public Works on geologic
sequestration in the United States and elsewhere in North America. The report would include data
on injection and any emissions to the atmosphere, an evaluation of active and closed
sequestration sites, and an evaluation of the performance of federal environmental regulations and
programs for sequestration as well as recommendations for their improvement.
This provision broadens the scope of geologic sequestration regulatory authority beyond
protecting ground water under SDWA, to protecting against atmospheric releases of CO2 under
the CAA. Currently, EPA’s proposed geologic sequestration rulemaking is limited to establishing
requirements related to the protection of underground sources of drinking water under SDWA’s
underground injection control provisions (42 U.S.C. 300h et seq.).5
H.R. 2454, § 112(b), would amend SDWA by adding a new § 1421(e) to require regulation of
geologic sequestration wells. This subsection would direct the EPA Administrator to promulgate,
within one year of enactment, regulations for the development, operation, and closure of CO2
sequestration wells. The regulations would include financial responsibility requirements for
emergency and remedial response, well plugging, site closure, and post-injection care. The Safe
Drinking Water Act currently does not include explicit financial responsibility provisions, thus
limiting EPA’s ability to address this issue in its proposed rule.6
The section of SDWA that the bill would amend, § 1421, directs the EPA Administrator to
promulgate regulations for state underground injection control programs. Thus, H.R. 2454
envisions that EPA would delegate primary oversight and enforcement authority for geologic
sequestration wells to interested and qualified states.
S. 1733
Division A, §122, contains the same provisions.
Studies and Reports
H.R. 2454
Section 113(a) would direct the EPA Administrator to establish, within six months, a task force to
conduct a study examining the legal framework for geologic sequestration sites. The bill specifies
5
EPA has proposed a new class of well, Class VI, within the Underground Injection Control Program for wells used for
injection of CO2 for the purposes of CCS.
6
U.S. Environmental Protection Agency, “Federal Requirements Under the Underground Injection Control (UIC)
Program for Carbon Dioxide (CO2) Geologic Sequestration (GS) Wells; Proposed Rule,” 73 Federal Register 43520,
July 25, 2008. EPA explains in the discussion of the proposed rule that, that although the SDWA does not have explicit
provisions for financial responsibility, “EPA believes that the general authorities provided under the SDWA authority
to prevent endangerment of USDWs [underground sources of drinking water] include the authority to set standards for
financial responsibility to prevent endangerment of USDWs from improper plugging, remediation, and management of
wells after site closure. The SDWA authority does not extend to financial responsibility for activities unrelated to
protection of USDWs (e.g., risks to air, ecosystems, or public health unrelated to USDW endangerment). It also does
not cover transfer of owner or operator financial responsibility to other entities, or creation of a third party financial
mechanism where EPA is the trustee.”
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a range of experts, public and private sector representatives, and other participants to be included
on the task force. The study would evaluate (1) existing federal environmental statutes, state
environmental statutes, and state common law that would apply to CO2 storage sites; (2) existing
state and federal laws that apply to harm and damage to public health or the environment at
closed sites where CO2 injection has been used for enhanced oil and gas recovery; (3) the
statutory framework, implementation issues, and financial implications for various liability
models regarding closed sequestration sites; (4) private sector mechanisms that may be available
to manage risks from closed sites; and (5) subsurface mineral rights, water rights, and property
rights issues associated with geologic sequestration. EPA would be required to report to Congress
within 18 months of enactment.
Section 113(b) would direct the EPA Administrator to establish a task force to conduct a study
examining how, and under what circumstances, the environmental statutes for which EPA has
responsibility would apply to CO2 injection and geologic sequestration activities. EPA would be
required to report to Congress within 12 months of enactment.
S. 1733
Division A, § 123, contains the same provisions for studies and reports.
Summary of Regulatory and Reporting Requirements
Table 2 identifies the schedules for completing reports and regulations required in the above
provisions.
Table 2. Geologic Sequestration Regulatory and Reporting Requirements
(summary of parallel provisions in H.R. 2454 and S. 1733)
Action Item
Description
Deadline
National Strategy: Report to
Congress
EPA, in consultation with other
federal agencies, must develop unified,
comprehensive strategy to address
key legal, regulatory, and other
barriers to commercial-scale
deployment of CCS.
1 year after enactment
Clean Air Act (CAA) Regulations
EPA must promulgate regulations to
protect human health and the
environment by minimizing the risk of
escape to the atmosphere of CO2
injected for geologic sequestration.
2 years after enactment
Geologic Sequestration Activities:
Report to Congress
EPA must deliver to the House
Committee on Energy and Commerce
and the Senate Committee on
Environment and Public Works a
report on geologic sequestration in
the United States and, as relevant,
elsewhere in North America.
2 years after promulgation of CAA
regulations (i.e., 4 years from
enactment) and every 3 years
thereafter
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Action Item
Description
Deadline
Safe Drinking Water Act
Regulations
EPA must promulgate regulations for
CO2 geologic sequestration wells that
include financial responsibility
requirements.
1 year after enactment
Study of Legal Framework for
Geologic Sequestration Sites:
Report to Congress
EPA must establish a task force to
conduct a study of federal and state
environmental laws and state common
law applicable to sequestration sites
regarding risk management; federal
and state laws that apply to harm and
damage to the environment or public
health at closed sites; statutory
framework and issues for private or
public assumption of liabilities and
financial responsibilities; and mineral,
water, and property rights issues.
18 months after enactment
Environmental Statutes Study:
Report to Congress
EPA must conduct a study of how
EPA-administered statutes would
apply to CO2 injection and geologic
sequestration activities.
1 year after enactment
Source: CRS.
Carbon Capture and Sequestration Demonstration and Early
Deployment Program
H.R. 2454
Section 114 of H.R. 2454 allows for the creation of a Carbon Storage Research Corporation that
would establish and administer a program to accelerate the commercial availability of CO2
capture and storage technologies and methods by awarding grants, contracts, and financial
assistance to electric utilities, academic institutions, and other eligible entities. 7
The section would establish the corporation by a referendum among “qualified industry
organizations,” which would include the Edison Electric Institute, the American Public Power
Association, the National Rural Electric Cooperative Association, their successors, or a group of
owners or operators of distribution utilities delivering fossil fuel-based electricity who
collectively represent at least 20% of the volume of all fossil fuel-based electricity delivered by
distribution utilities to U.S. consumers. Voting rights would be based on the quantity of fossil
fuel-based electricity delivered to the consumer in the previous year or other representative
period. The corporation would be established if persons representing two-thirds of the total
quantity of fuel-based electricity delivered to retail consumers vote for approval. However, if
40% or more of state regulatory authorities submit written notices of opposition to the creation of
the corporation, it would not be established.
7
Section 114 is nearly identical to H.R. 1689, the Carbon Capture and Storage Early Deployment Act, introduced by
Rep. Boucher on March 24, 2009.
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If established, the corporation would award grants, contracts, and assistance to support
commercial-scale demonstration of carbon capture or storage technology projects that encompass
coal and other fossil fuels, and are suitable for either new or retrofitted plants. The corporation
would seek to support at least five commercial-scale demonstration projects over the lifetime of
the corporation. Pilot-scale and other small-scale projects would not be eligible under the
program.
Under § 114, several entities would be eligible to receive grants, contracts, or assistance from the
corporation: distribution utilities, electric utilities and other private entities, academic institutions,
national laboratories, federal research agencies, state and tribal research agencies, nonprofit
organizations, or a consortium of two or more eligible entities. In addition, § 114 would favor
“early movers” by providing, in the form of grants, 50% of the funds raised to electric utilities
that had already committed resources to deploy large-scale electricity generation units integrated
with CCS. The section would provide grant funds to defray costs already incurred for at least five
“early movers.”
The corporation would raise funding for its program by collecting an assessment on distribution
utilities for all fossil fuel-based electricity delivered to retail customers. The assessments would
reflect the relative CO2 emission rates of different fossil fuels used to generate electricity, as
shown in Table 3.
Table 3. Rate of Assessment for Coal, Natural Gas, and Oil in H.R. 2454
Fuel Type
Rate of Assessment per
kilowatt hour
Coal
$0.00043
Natural Gas
$0.00022
Oil
$0.00032
Source: H.R. 2454.
The corporation would be authorized to adjust the assessments so that they generate not less than
$1.0 billion and not more than $1.1 billion per year. The authority to collect assessments would
be authorized for a 10-year period, beginning six months after enactment. The corporation would
dissolve 15 years after enactment unless extended by Congress. If assessments are collected as
specified in the legislation, the corporation would accumulate approximately $10 billion to be
awarded over 15 years.
Section 114 allows for cost recovery. The legislation would allow a distribution utility whose
transmission, delivery, or sale of electric energy are subject to any form of rate regulation the
opportunity to recover the full amount of “the prudently incurred costs” associated with
complying with § 114, consistent with state or federal laws.
Section 114 also allows for ratepayer rebates. If the corporation does not disburse or dedicate at
least 75% of the funds in a calendar year8 due to absence of qualified projects or similar
circumstances, then the corporation must reimburse the balance to the distribution utilities. In this
8
Beginning seven or more years after the corporation is established.
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case, the regulatory authority that gave its approval for cost recovery could also order rebates to
ratepayers from the reimbursed pool of funds.
Section 114 also provides specific provisions for the Electric Reliability Council of Texas
(ERCOT), so that the program can work for ERCOT as well as for other regions of the country.
Within five years, the Comptroller General of the United States must prepare an analysis and
report to Congress assessing the corporation’s activities, including project selection and methods
of disbursement of assessed fees, impacts on the prospects for commercialization of carbon
capture and storage technologies, and adequacy of funding.
S. 1733
Division A, § 125, of S. 1733 is very similar to § 114 of H.R. 2454 with a few exceptions. Under
both bills, the corporation to be established would operate as a division or affiliate of the Electric
Power Research Institute (EPRI), and be managed by a board consisting of no more than 15
members drawn from the following groups:
•
investor-owned utilities;
•
utilities owned by a state agency, municipality, or Indian tribe;
•
rural electric cooperatives;
•
fossil fuel producers;
•
nonprofit environmental organizations;
•
independent generators or wholesale power providers; and
•
consumer groups.
S. 1733 adds two additional groups to the board that were not included in H.R. 2454: (1) the
National Energy Technology Laboratory of the Department of Energy, and (2) the Environmental
Protection Agency.
The entities eligible to receive grants, contracts, or assistance under the program are identical for
both bills; however, S. 1733 also requires that projects shall meet the eligibility requirements of §
780(b) of the Clean Air Act. Section 780 would be an amendment to Title VII of the Clean Air
Act, added under S. 1733, and would provide for the commercial deployment of carbon capture
and sequestration technologies. 9 Apart from these relatively minor differences, this “wires
charge” program created under S. 1733 and H.R. 2454 would be nearly identical.
One possible advantage of the program, if enacted, would be the creation of a consistent funding
stream—exempt from the annual appropriations process—for development of CCS technology
over 10 years. In contrast, funding for CCS technology from DOE, which is subject to
appropriations, has changed significantly over the past decade or more. It has increased from
approximately $1 million in FY1997 to $581 million in FY2009. Further, the American Recovery
and Reinvestment Act (ARRA, P.L. 111-5) allocated $3.4 billion to CCS to be committed by the
9
H.R. 2454 also amends Title VII of the Clean Air Act. See discussion below for a comparison.
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end of FY2010, a dramatic increase over current funding levels. 10 Concerns could be raised over
the relative effectiveness of a sharp but short-lived increase in funding—provided by ARRA, for
example—versus a consistent stream of funding over a longer time period, for the purposes of
technology development.
Performance Standards for Coal-Fueled Power Plants
H.R. 2454
Title I, §116, of H.R. 2454 would amend Title VIII of the Clean Air Act by adding performance
standards for CO2 removal for new coal-fired power plants. Plants covered by this section include
those that have a permit issued under CAA Title V to derive at least 30% of their annual heat
input from coal, petroleum coke, or any combination of these fuels. The performance standards
are as follows:
•
A covered unit that is “initially permitted” on or after January 1, 2020, shall
reduce carbon dioxide emissions by 65%. The 65% reduction would result in a
level of emissions roughly equivalent to the CO2 released by a natural gas-fired
plant of modern design (a “combined cycle” plant) using no carbon controls.
However, to achieve a 65% reduction (or the 50% reduction for older plants; see
immediately below) a coal plant would have to install carbon removal
technology.
•
A covered unit that is initially permitted after January 1, 2009, and before
January 1, 2020, must achieve a 50% reduction in CO2 emissions by a
compliance date that will be determined by future developments. Specifically, the
compliance date will be the earliest of (1) four years after the date in which the
equivalent of 4 gigawatts (Gw)11 of generating capacity with commercial CCS
technology are operating in the United States and sequestering at least 12 million
tons of CO2 annually (equivalent to roughly eight medium-sized coal plants);12 or
(2) January 1, 2025 (which can be extended by the EPA Administrator by up to
18 months on a case-by-case basis).
•
Not later than 2025 and at five-year intervals thereafter, the Administrator is to
review the standards for new covered units under this section and shall reduce the
maximum CO2 emission rate for new covered units to a rate that reflects the
degree of emission limitation achievable through the application of the best
system of emission reduction that the Administrator determines has been
adequately demonstrated. The Administrator is also to publish biennial reports on
the amount of capacity with commercial CCS technology in the United States.
10
See CRS Report RL33801, Carbon Capture and Sequestration (CCS), by (name redacted), for more details on CCS
funding.
11
A gigawatt is equivalent to 1,000 megawatts or 1 million kilowatts of generating capacity. By way of comparison,
total electric generating capacity in the United States is about 1,000 gigawatts.
12
This 4 Gw of capacity must include at least 3 Gw of electric generating units, may include up to 1 Gw of industrial
applications that are capturing and sequestering at least 3 million tons of CO2 annually, and must include at least two
operating 250 megawatt (Mw) or larger generating units that sequester captured CO2 in geologic formations other than
oil and gas fields.
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
The use of the term “initially permitted” is important in the implementation of this section. A new
power plant that has received a permit that is still subject to administrative or legal review is
considered to be “initially permitted.” If a proposed new coal plant has been “initially permitted”
prior to January 1, 2009, it will not fall under the requirements of this section to eventually install
carbon controls.
S. 1733
Division A, Section 124, of S. 1733 contains a nearly identical provision. Probably the most
important change relates to units that are initially permitted after January 1, 2009, and before
January 1, 2020. In H.R. 2454, this class of plants must achieve a 50% reduction in carbon
dioxide emissions by a compliance date that can be triggered by market developments, but
normally is no later than January 1, 2025. In S. 1733 this date is January 1, 2020.
As noted above, the compliance deadline date can be earlier than 2020 if certain market
developments occur. In H.R. 2454 these criteria include installation of the equivalent of at least 4
Gw of generating capacity with carbon capture and sequestration equipment. In the chairman’s
mark of S. 1733 this is put at 10 Gw, but the breakdown of the target between power plants and
industrial plants still adds to 4 Gw. The chairman’s mark also clarifies that in determining
whether the target has been met, only the treated capacity of retrofitted power plants should be
counted toward the target.
Commercial Deployment of Carbon Capture and Sequestration
Technologies
H.R. 2454
Section 115 of H.R. 2454 would amend Title VII of the Clean Air Act (and create § 786) to
require that not later than two years after the date of enactment, the EPA Administrator is to
promulgate regulations providing for the distribution of emission allowances to support the
commercial deployment of carbon capture and sequestration technologies in both electric power
generation and industrial operations. Eligibility for emission allowances requires an owner or
operator to implement carbon capture and sequestration technology at:
•
an electric generating unit that has a nameplate capacity of 200 megawatts or
more, and derives at least 50% of its annual fuel input from coal, petroleum coke,
or any combination of these two fuels, and which will achieve at least a 50%
reduction in carbon dioxide emissions annually produced by the unit; and
•
an industrial source that, absent carbon capture and sequestration, would emit
more than 50,000 tons per year of CO2, and upon implementation will achieve at
least a 50% reduction in annual CO2 emissions from an emission point.13
13
During markup of H.R. 2454, an amendment was successfully offered to replace the word “source” with the words
“emission point” regarding eligibility for emission allowances at an industrial facility. The change in wording could
affect the eligibility for industrial sources that employ CCS technology at some but not all emission points in the
facility.
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Eligibility for emission allowances requires that the owner or operator geologically sequester
captured CO2 or convert it to a stable form that can be safely and permanently sequestered.
Section 115 would distribute emission allowances to electric generating units in two phases.
Phase I applies to the first 6 Gw of electric generating units, measured in cumulative generating
capacity of such units. Under Phase I, eligible projects would receive allowances equal to the
number of tons of carbon dioxide captured and sequestered, multiplied by a bonus allowance
value, divided by the average fair market value of an emission allowance in the prior year.14 The
Administrator would establish a bonus allowance value for each rate of carbon capture and
sequestration—compared to how much would otherwise be emitted—from a minimum of $50 per
ton for a 50% rate to a maximum of $90 per ton for an 85% rate.15 This section provides an
incentive for “early movers.” Under Phase I distribution to electric generating units, the bonus
allowance value is increased by $10—of the otherwise applicable bonus value—if the generating
unit achieves a 50% capture rate before January 1, 2017.
Allowances would be distributed under Phase II after the 6 Gw threshold is achieved. Phase II
would distribute emission allowances by reverse auction. At each reverse auction, the EPA
Administrator would select bids from eligible projects—each bid submitted would include the
total quantity of CO2 to be sequestered over 10 years and the desired CO2 sequestration incentive
per ton—and begin with the project proposing the lowest level of CO2 incentive per ton.16
If the Administrator determines that reverse auctions are not efficient or cost-effective for
deploying commercial-scale capture and sequestration technologies, the Administrator may
prescribe an alternative distribution method. In an alternative distribution method, the
Administrator would divide emission allowances into multiple “tranches,” each supporting the
deployment of a specified quantity of cumulative electric generating capacity utilizing CCS
technology. Each tranche would support no more than 6 Gw of electric generating capacity, and
would be distributed on a first-come, first-serve basis. For each tranche, the Administrator would
establish a sliding scale that would provide higher bonus allowance values for projects achieving
higher rates of capture and sequestration. For each successive tranche, the Administrator would
establish a bonus allowance value that is lower than the rate established for the previous tranche.
Limitations
Under both Phase I and Phase II, the EPA Administrator would reduce or adjust the bonus
allowance values for projects that sequester CO2 in geological formations for the purposes of
enhanced hydrocarbon recovery.17 By reducing the bonus allowance value for these projects, the
14
Or, expressed as a formula: Allowances = (# tons of CO2 captured and sequestered) x (bonus allowance value) /
(average fair market value for an allowance in prior calendar year).
15
For example, if an eligible facility could capture 1 million tons of CO2 per year at a 85% capture rate, then it could
receive 1 million allowances if the fair market value was $90 per ton in the prior year; 2 million allowances if the fair
market value was $45 per ton in the prior year; or 6 million allowances if the fair market value was $15 per ton in the
prior year.
16
For example, if two eligible projects submitted bids to sequester 10 million tons of CO2 over 10 years, and project A
proposed a $50 per ton incentive, while project B proposed a $40 per ton incentive, the Administrator would
presumably first select project B, if each project was otherwise equally qualified.
17
Enhanced hydrocarbon recovery, also known as enhanced oil recovery (EOR), is a technique whereby CO2 in
injected into the subsurface to improve the recovery of oil (or gas) that might otherwise not be recoverable using
conventional oilfield techniques.
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
Administrator would take into account the lower net costs for an enhanced hydrocarbon recovery
project. The lower net costs would presumably result from income to the project provided via sale
of the recovered hydrocarbons.
Section 115 of H.R. 2454 also contains several provisions that limit the number of allowances and
the total cumulative electric generating capacity eligible for allowances. Under § 115, no more
than 72 Gw of total cumulative generating capacity may receive allowances, including industrial
applications measured under an equivalent metric determined by the EPA Administrator. In
addition, a qualifying project, either an electricity generating plant or industrial facility, would be
eligible to receive allowances only for the first 10 years of operation. H.R. 2454 also limits the
total percentage of emission allowances made available under the bill for CCS to 1.75% for years
2014 through 2017, 4.75% for years 2018 through 2019, and 5% for years 2020 through 2050.
These annual allocation percentages are established in § 782(f) of the Clean Air Act, as amended
by H.R. 2454.
Section 115 would allocate the bulk of emission allowances to electricity generating units and
limit the amount of emission allowances available to industrial sources. The Administrator would
not distribute more than 15% of the allocated allowances under § 782(f) to eligible industrial
sources.18 The allowances may be distributed to eligible industrial sources using a reverse auction
method or an incentive schedule, similar to the Phase II methods described for electric generating
units. Industrial facilities are specifically excluded if they produce a liquid transportation fuel
from a solid fossil-based feedstock, such as coal.
S. 1733
Under Subtitle B of Division B of S. 1733, § 111 allows for the disposition of emission
allowances for the global warming pollution reduction program. Similar to § 115 of H.R. 2454,
this section of S. 1733 would amend Title VII of the Clean Air Act and add § 780 (equivalent to
§ 786 created in H.R. 2454), which would distribute emission allowances to electricity generating
plants and industrial facilities to foster the deployment of CCS technologies. The goal, scope, and
structure of the program in Division B, § 111, of S. 1733 are very similar to those of the program
created under § 115 of H.R. 2454, with several important distinctions.
As with H.R. 2454, S. 1733 would distribute allowances for the first 72 Gw of total cumulative
generating capacity to employ CCS, including industrial applications, and would distribute them
as a similar percentage of the total pool of available allowances: 1.75% for years 2014 through
2017, 4.75% for years 2018 through 2019, and 5% for years 2020 through 2050.19 S. 1733 would
also distribute allowances in two phases; however, it would distribute allowances to the first 20
Gw of generating capacity in Phase I, instead of 6 Gw as proposed in Phase I of H.R. 2454.
Phase I of S. 1733 would distribute allowances in two 10-Gw tranches according to the same
formula20 described in H.R. 2454:
18
For example, industrial sources would be eligible to receive 15% of 1.75% of total allowances in years 2014 through
2017, or 0.26% of the total allowances under § 782(f) of the Clean Air Act, as amended by H.R. 2454.
19
These annual allocation percentages are established in § 721(a) of the Clean Air Act as amended by S. 1733;
equivalent to §782(f) of the Clean Air Act as amended by H.R. 2454.
20
Allowances = (# tons of CO2 captured and sequestered) x (bonus allowance value) / (average fair market value for an
allowance in prior calendar year).
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
•
First tranche—10 Gw for eligible projects achieving 50% or more reduction in
CO2 emissions through the use of CCS technology, with bonus allowance values
ranging from $50 per ton for 50% capture to $96 per ton for 90% capture (versus
$90 per ton for 85% capture in H.R. 2454).
•
Second tranche—10 Gw for eligible projects achieving 50% or more reduction in
CO2 emissions with a maximum bonus allowance value of $85 per ton for 90%
capture.
Similar to H.R. 2454, “early mover” projects would receive an additional $10 per ton if they
commenced operations by January 1, 2017, which would apply to all 20 Gw of Phase I in S.
1733. In contrast, the “early mover” bonus would apply to only 6 Gw in H.R. 2454.
As in H.R. 2454, allowances would be distributed under Phase II by reverse auction. In S. 1733,
similar to H.R. 2454, the EPA Administrator may establish reverse auctions for no more than five
different project categories, defined based on (1) coal type, (2) capture technology, (3) geological
formation type, (4) new versus retrofit, and (5) other factors or any combination of categories 1-4.
In S. 1733, the Administrator would establish a separate reverse auction, to be held annually, for
projects at industrial sources. Industrial sources would not be allowed to participate in other
auctions. A requirement to segregate industrial sources from electricity generating sources is not
specified in H.R. 2454.
In parallel to H.R. 2454, the Administrator may prescribe an alternative distribution method under
S. 1733 if it is determined that reverse auctions are not efficient or cost-effective. Under both
H.R. 2454 and S. 1733, the Administrator would divide the emission allowances into a series of
multiple tranches, each supporting the deployment of a specific quantity of cumulative electricity
generating capacity. Under S. 1733, each tranche would support 10 Gw of generation capacity. In
contrast, under H.R. 2454 each tranche would support 6 Gw.
Limitations
As with H.R. 2454, no more than 15% of the total emission allowances allocated for CCS in S.
1733 would be distributed to eligible industrial sources in any vintage year. In addition, S. 1733
prohibits the distribution of allowances to industrial sources under the first tranche of Phase 1
(i.e., the first 10 gigawatts of generating capacity), but does allow industrial projects to receive
allowances under the second tranche of Phase I and thereafter. Under H.R. 2454, projects at
industrial sources would be eligible to receive allowances in Phase II, after the allowances for the
first 6 gigawatts of generating capacity have been distributed.
S. 1733 also contains a provision for certification of qualifying projects that is not included in
H.R. 2454. Under S. 1733, qualifying projects that are eligible to receive allowances under either
Phase I (the first 20 Gw) or the alternative distribution method of Phase II may request a
certification from the EPA Administrator that the project is eligible to receive emission
allowances. A project that successfully bids under the reverse auction method of Phase II does not
have an option; it would be required to request a certification from the Administrator. The process
of obtaining a certification is apparently a more formal requirement for eligibility that leads to a
reservation of a portion of emission allowances allocated for the deployment of CCS technology.
In addition to applying for a certification, a qualifying project would need to document several
items in order for the Administrator to make a determination of eligibility:
Congressional Research Service
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
•
technical information regarding CCS technology to be used, coal type, geological
formation type, and other relevant design criteria;
•
the annual CO2 reductions projected for the first 10 years of commercial
operation; and
•
a demonstration by the owner and operator that they are committed to
constructing and operating the project along a timeline of reasonable capture and
sequestration milestones.
In addition to documenting this information, the qualifying project must demonstrate its
commitment to the project by taking at least one of three qualifying actions:
•
execution of a commitment by lenders or other appropriate entities to finance the
project;
•
commitment of the owner or operator to execute a surety bond; or
•
an authorization by a state regulatory authority to allow cost recovery from the
retail customers for the costs of the project.
For projects that elect not to request certification (Phase I or alternative distribution projects
under Phase II are not required to, although they may), the Administrator would make a separate
determination of whether the project satisfies eligibility requirements. That determination would
occur at a time when the emission allowances are actually distributed. As with H.R. 2454,
emission allowances under S. 1733 would be distributed on an annual basis, based on the total
tons of CO2 the project actually captures and sequesters in each of the first 10 years of operation.
Although emission allowances may be reserved in advance, based on the issuance of a
certification or other determination of eligibility, they would not be actually distributed until after
the CO2 has been already captured and sequestered.
Chairman’s Mark
On October 23, 2009, Senator Boxer released the chairman’s mark to S. 1733, which contained a
new provision to the emission allowance distribution program for CCS.21 The new provision
would allow for advanced distribution of allowances under Phase I of the program, thus providing
an opportunity for fossil fuel fired electricity plants and industrial facilities to receive allowances
before the plants have actually captured and sequestered any CO2. This approach differs from the
allowance distribution scheme in H.R. 2454 and S. 1733 (as introduced), which would distribute
emission allowances based on the total tons of CO2 actually captured and sequestered. Similar to
H.R. 2454 and S. 1733 (as introduced), the chairman’s mark would require that plants have at
least a 50% capture rate before they would qualify for allowances.
Under the new provision, 70% of the number of emission allowances reserved under the first
tranche of Phase I would be eligible for advanced distribution, and 50% of the second tranche
would also be eligible. The amount of allowances eligible for advanced distribution would total
12 Gw of the 20 Gw of generating capacity, or 60% of the total, available under Phase I of S.
1733. By comparison, H.R. 2454 would provide only half that amount (6 Gw) in total for Phase I,
21
Available on the Senate Environment and Public Works Committee website at http://epw.senate.gov/public/
index.cfm?FuseAction=Files.View&FileStore_id=ee5c67bb-a5a7-453d-a4e0-4c8f2908c0cf.
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Carbon Capture and Sequestration in H.R. 2454 and S. 1733
and would require that the plants have commenced operations and actually be capturing CO2
before receiving any allowances. The provision in the chairman’s mark of S. 1733 could be seen
as an additional incentive to “early movers” to build CCS-ready facilities or retrofit existing
plants. The requirements for when to provide the advanced distribution are somewhat vague,
however, allowing the EPA Administrator discretion to pick a time prior to the plant’s operational
phase that would “ensure expeditious deployment” of CCS technology.
Some may view the new provision as providing access to emission allowances before the plant
owner or operator has made an iron-clad commitment to building and operating a CCS unit. In
part, the chairman’s mark addresses that concern by specifying that advanced allowances would
be limited to only cover costs for retrofitting an existing plant for CCS and to cover the difference
in costs between building a new electric generating unit with CCS versus a new plant without
CCS. The bill assigns responsibility for the necessary cost estimates—for both the retrofit and the
new plant costs—to the organization requesting the advanced appropriations. The advanced
allowances would be distributed using the cost estimates provided by the requesting organization.
In addition, certification would be required for a plant to receive advanced allowances. As one of
the criteria for obtaining certification, the chairman’s mark adds an additional qualifying action to
the list of qualifying actions in S. 1733 that would demonstrate a commitment to construct and
operate a CCS project: an authorization from a state legislature to allow cost recovery for the
CCS project. Thus, a project could receive authorization either from a state regulatory authority
for cost recovery, or from a state legislature, as one necessary step to obtaining certification.
The advanced allowance scheme provides a new incentive for power plants and industrial
facilities to make a commitment to building CCS that is not present in H.R. 2454 or in S. 1733 (as
introduced). It is likely to accelerate early deployment of CCS by making up to 12 Gw eligible for
advanced allowances, compared to H.R. 2454, which provides for only 6 Gw in Phase I. How
much more electricity generating capacity will employ CCS as a result of the advanced allowance
provision is difficult to predict, and would depend, in part, on other factors such as the ratio of the
value of bonus allowances established in legislation versus the market price of allowances. The
long-term deployment of CCS would also depend on how well the hoped-for “learning-by-doing”
gains in efficiency and knowledge accrue from demonstration projects and the experience gained
through early deployment at a commercial scale.
Author Contact Information
(name redacted)
Specialist in Energy and Natural Resources Policy
[redacted]@crs.loc.gov, 7-....
(name redacted)
Specialist in Energy and Environmental Policy
[redacted]@crs.loc.gov, 7-....
(name redacted)
Specialist in Environmental Policy
[redacted]@crs.loc.gov, 7-....
Congressional Research Service
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