Carbon Dioxide (CO2) Pipelines for Carbon Sequestration: Emerging Policy Issues

Congressional research reportJan 17, 2008

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Order Code RL33971

Carbon Dioxide (CO2) Pipelines for Carbon

Sequestration: Emerging Policy Issues

Updated January 17, 2008

Paul W. Parfomak

Specialist in Energy and Infrastructure Policy

Resources, Science, and Industry Division

Peter Folger

Specialist in Energy and Natural Resources Policy

Resources, Science, and Industry Division

Carbon Dioxide (CO2) Pipelines for Carbon

Sequestration: Emerging Policy Issues

Summary

Congress is examining potential approaches to reducing manmade contributions

to global warming from U.S. sources. One approach is carbon capture and

sequestration (CCS) — capturing CO2 at its source (e.g., a power plant) and storing

it indefinitely (e.g., underground) to avoid its release to the atmosphere. A common

requirement among the various techniques for CCS is a dedicated pipeline network

for transporting CO2 from capture sites to storage sites.

In the 110th Congress, there has been considerable debate on the capture and

sequestration aspects of carbon sequestration, while there has been relatively less

focus on transportation. Nonetheless, there is increasing understanding in Congress

that a national CCS program could require the construction of a substantial network

of interstate CO2 pipelines. S. 2144 and S. 2191 would require the Secretary of

Energy to study the feasibility of constructing and operating such a network of

pipelines. S. 2323 would require carbon sequestration projects to evaluate the most

cost-efficient ways to integrate CO2 sequestration, capture, and transportation. S.

2149 would allow seven-year accelerated depreciation for qualifying CO2 pipelines.

P.L. 110-140, signed by President Bush on December 19, 2007, requires the

Secretary of the Interior to recommend legislation to clarify the issuance of CO2

pipeline rights-of-way on public land.

That CCS and related legislation have been more focused on the capture and

storage of CO2 than on its transportation, reflects a perception that transporting CO2

via pipelines does not present a significant barrier to implementing large-scale CCS.

Notwithstanding this perception, and even though regional CO2 pipeline networks

already operate in the United States for enhanced oil recovery (EOR), developing a

more expansive national CO2 pipeline network for CCS could pose numerous new

regulatory and economic challenges. There are important unanswered questions

about pipeline network requirements, economic regulation, utility cost recovery,

regulatory classification of CO2 itself, and pipeline safety. Furthermore, because CO2

pipelines for EOR are already in use today, policy decisions affecting CO2 pipelines

take on an urgency that is, perhaps, unrecognized by many. Federal classification of

CO2 as both a commodity (by the Bureau of Land Management) and as a pollutant

(by the Environmental Protection Agency) could potentially create an immediate

conflict which may need to be addressed not only for the sake of future CCS

implementation, but also to ensure consistency of future CCS with CO2 pipeline

operations today.

In addition to these issues, Congress may examine how CO2 pipelines fit into

the nation’s overall strategies for energy supply and environmental protection. If

policy makers encourage continued consumption of fossil fuels under CCS, then the

need to foster the other energy options may be diminished — and vice versa. Thus

decisions about CO2 pipeline infrastructure could have consequences for a broader

array of energy and environmental policies.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Carbon Capture and Sequestration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Capture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Sequestration in Geological Formations . . . . . . . . . . . . . . . . . . . . . . . . 4

Existing U.S. CO2 Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Key Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

CO2 Pipeline Requirements for CCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Economic Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Federal Jurisdiction over CO2 Pipelines . . . . . . . . . . . . . . . . . . . . . . . . 8

Potential Issues Related to ICC Jurisdiction . . . . . . . . . . . . . . . . . . . . . 8

Policy Implications for Rate Regulation . . . . . . . . . . . . . . . . . . . . . . . . 9

Siting Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Commodity vs. Pollutant Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Pipeline Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Materials Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

CO2 Pipeline Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Cost Implications for Network Development . . . . . . . . . . . . . . . . . . . 15

CO2 Pipeline Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Criminal and Civil Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

List of Figures

Figure 1. Major CO2 Pipelines in the United States . . . . . . . . . . . . . . . . . . . . . . . . 5

Figure 2. U.S. Prices for Large Diameter Steel Pipe . . . . . . . . . . . . . . . . . . . . . . 13

Carbon Dioxide (CO2) Pipelines for Carbon

Sequestration: Emerging Policy Issues

Introduction

Congress has long been concerned about the impact of global climate change

that may be caused by manmade emissions of carbon dioxide (CO2) and other

greenhouse gases.1 Congress is also debating policies related to global warming and

is examining a range of potential initiatives to reduce manmade contributions to

global warming from U.S. sources.2 One approach to mitigating manmade

greenhouse gas emissions is direct sequestration: capturing CO2 at its source,

transporting it via pipelines, and storing it indefinitely to avoid its release to the

atmosphere.3 This paper explores one component of direct sequestration —

transporting CO2 in pipelines.

Carbon capture and storage (CCS) is of great interest because potentially large

amounts of CO2 emitted from the industrial burning of fossil fuels in the United

States could be suitable for sequestration. Carbon capture technologies can

potentially remove 80%-95% of CO2 emitted from an electric power plant or other

industrial source. Power plants are the most likely initial candidates for CCS because

they are predominantly large, single-point sources, and they contribute approximately

one-third of U.S. CO2 emissions from fossil fuels.

There are many technological approaches to CCS. However, one common

requirement for nearly all large-scale CCS schemes is a system for transporting CO2

from capture sites (e.g., power plants) to storage sites (e.g., underground reservoirs).

Transporting captured CO2 in relatively limited quantities is possible by truck, rail,

and ship, but moving the enormous quantities of CO2 implied by a widespread

implementation of CCS technologies would likely require a dedicated interstate

pipeline network.

This report does not explore the underlying science of climate change, nor the question of

whether action is justified. See CRS Report RL33849, Climate Change: Science and Policy

Implications, by Jane A. Leggett.

For more information on congressional activities related to global warming, see CRS

Report RL31931, Climate Change: Federal Laws and Policies Related to Greenhouse Gas

Reductions, by Brent D. Yacobucci and Larry Parker; and CRS Report RL34067, Climate

Change Legislation in the 110th Congress, by Jonathan L. Ramseur and Brent D.

Yacobucci.

This report does not address indirect sequestration, wherein CO2 is stored in soils, oceans,

or plants through natural processes. For information on the latter, see CRS Report

RL31432, Carbon Sequestration in Forests, by Ross W. Gorte.

CRS-2

In the 110th Congress, there has been considerable debate on the capture and

sequestration aspects of carbon sequestration, while there has been relatively less

focus on transportation. Nonetheless, there is increasing understanding in Congress

that a national CCS program could require the construction of a substantial network

of interstate CO2 pipelines. The Carbon Dioxide Pipeline Study Act of 2007 (S.

2144), introduced by Senator Coleman and nine cosponsors on October 4, 2007,

would require the Secretary of Energy to study the feasibility of constructing and

operating such a network of CO2 pipelines. The America’s Climate Security Act of

2007 (S. 2191), introduced by Senator Lieberman and nine cosponsors on October

18, 2007, and reported out of the Senate Environment and Public Works Committee

in amended form on December 5, 2007, contains similar provisions (Sec. 8003). The

Carbon Capture and Storage Technology Act of 2007 (S. 2323), introduced by

Senator Kerry and one cosponsor on November 7, 2007, would require carbon

sequestration projects authorized by the act to evaluate the most cost-efficient ways

to integrate CO2 sequestration, capture, and transportation (Sec. 3(b)(5)). The Coal

Fuels and Industrial Gasification Demonstration and Development Act of 2007

(S.2149) introduced by Senator Dorgan on October 4, 2007, would allow accelerated

depreciation for certain new CO2 pipelines. The Energy Independence and Security

Act of 2007 (P.L. 110-140) signed by President Bush, as amended, on December 19,

2007, requires the Secretary of the Interior to recommend legislation to clarify the

appropriate framework for issuing CO2 pipeline rights-of-way on public land (Sec.

714(7)).

Legislative focus on the capture and storage components of direct carbon

sequestration reflects a perception that transporting CO2 via pipelines does not

present a significant barrier to implementing large-scale CCS. Even though regional

CO2 pipeline networks already operate in the United States for enhanced oil recovery

(EOR), developing a more expansive national CO2 pipeline network for CCS could

pose numerous new regulatory and economic challenges. As one analyst has

remarked,

Each of the individual technologies involved in the transport portion of the CCS

process is mature, but integrating and deploying them on a massive scale will be

a complex task. “The question is, how would the necessary pipeline network be

established and evolve?”4

A thorough consideration of potential CCS approaches necessarily involves an

assessment of their overall requirements for CO2 transportation by pipeline, including

the possible federal role in establishing an interstate CO2 pipeline network.

This report introduces key policy issues related to CO2 pipelines which may

require congressional attention. It summarizes the technological requirements for

CO2 pipeline transportation under a comprehensive CCS strategy. It characterizes

these requirements relative to the existing CO2 pipeline infrastructure in the United

States used for EOR. The report summarizes policy issues related to CO2 pipeline

development, including uncertainty about pipeline network requirements, economic

John Douglas, “Expanding Options for CO2 Storage,” EPRI Journal, Electric Power

Research Institute (Spring 2007): 24.

CRS-3

regulation, utility cost recovery, regulatory classification of CO2 itself, and pipeline

safety. The report concludes with perspectives on CO2 pipelines in the context of the

nation’s overall energy and infrastructure requirements.

Background

Carbon sequestration policies are inextricably tied to the function and

availability of the necessary technologies. Consequently, discussion of CCS policy

alternatives benefits from a basic understanding of the physical processes involved,

and relevant experience with existing infrastructure. This section provides a basic

overview of carbon sequestration processes overall, as well as specific U.S.

experience with CO2 pipelines.5

Carbon Capture and Sequestration

Carbon capture and sequestration is essentially a three-part process involving

a CO2 source facility, a long-term CO2 storage site, and an intermediate mode of CO2

transportation.

Capture. The first step in direct sequestration is to produce a concentrated

stream of CO2 for transport and storage. Currently, three main approaches are

available to capture CO2 from large-scale industrial facilities or power plants:

pre-combustion, which separates CO2 from fuels by combining

them with air and/or steam to produce hydrogen for combustion and

CO2 for storage,

post-combustion, which extracts CO2 from flue gases following

combustion of fossil fuels or biomass, and

oxyfuel combustion, which uses oxygen instead of air for

combustion, producing flue gases that consist mostly of CO2 and

water from which the CO2 is separated.6

These approaches vary in terms of process technology and maturity, but all yield a

stream of extracted CO2 which may then be compressed to increase its density and

make it easier (and cheaper) to transport. Although technologies to separate and

compress CO2 are commercially available, they have not been applied to large-scale

CO2 capture from power plants for the purpose of long-term storage.7

More detailed information is available in CRS Report RL33801, Direct Carbon

Sequestration: Capturing and Storing CO2, by Peter Folger.

Intergovernmental Panel on Climate Change, Special Report: Carbon Dioxide Capture and

Storage, 2005 (2005): 22-23. (Hereafter referred to as IPCC 2005.)

H. J. Herzog and D. Golumb, “Carbon Capture and Storage from Fossil Fuel Use,” in C.J.

Cleveland (ed.), Encyclopedia of Energy (New York, NY: Elsevier Science, Inc., 2004):

(continued...)

CRS-4

Transportation. Pipelines are the most common method for transporting

large quantities of CO2 over long distances. CO2 pipelines are operated at ambient

temperature and high pressure, with primary compressor stations located where the

CO2 is injected and booster compressors located as needed further along the

pipeline.8 In overall construction, CO2 pipelines are similar to natural gas pipelines,

requiring the same attention to design, monitoring for leaks, and protection against

overpressure, especially in populated areas.9 Many analysts consider CO2 pipeline

technology to be mature, stemming from its use since the 1970s for EOR and in other

industries.10 Marine transportation may also be feasible when CO2 needs to be

transported over long distances or overseas; however, many manmade CO2 sources

are located far from navigable waterways, so such a scheme would still likely require

pipeline construction between CO2 sources and port terminals. Rail cars and trucks

can also transport CO2, but these modes would be logistically impractical for

large-scale CCS operations.

Sequestration in Geological Formations. In most CCS approaches, CO2

would be transported by pipeline to a porous rock formation that holds (or previously

held) fluids where the CO2 would be injected underground. When CO2 is injected

over 800 meters deep in a typical storage formation, atmospheric pressure induces

the CO2 to become relatively dense and less likely to migrate out of the formation.

Injecting CO2 into such formations uses existing technologies developed primarily

for oil and natural gas production which potentially could be adapted for long-term

storage and monitoring of CO2. Other underground injection applications in practice

today, such as natural gas storage, deep injection of liquid wastes, and subsurface

disposal of oil-field brines, also provide potential technologies and experience for

sequestering CO2.11 Three main types of geological formations are being considered

for carbon sequestration: (1) oil and gas reservoirs, (2) deep saline reservoirs, and (3)

unmineable coal seams. The overall capacity for CO2 storage in such formations is

potentially huge if all the sedimentary basins in the world are considered.12 The

suitability of any particular site, however, depends on many factors, including

proximity to CO2 sources and other reservoir-specific qualities like porosity,

permeability, and potential for leakage.

(...continued)

277-287.

IPCC 2005: 26.

IPCC 2005: 181.

CO2 used in EOR enhances oil production by re-pressurizing geological formations and

reducing oil viscosity, thereby increasing oil movement to the surface. CO2 is used

industrially as a chemical feedstock, to carbonate beverages, for refrigeration and food

processing, to treat water, and for other uses.

IPCC 2005: 31.

Sedimentary basins are large depressions in the Earth’s surface filled with sediments and

fluids.

CRS-5

Existing U.S. CO2 Pipelines

The oldest long-distance CO2 pipeline in the United States is the 225 kilometer

Canyon Reef Carriers Pipeline (in Texas), which began service in 1972 for EOR in

regional oil fields.13 Other large CO2 pipelines constructed since then, mostly in the

Western United States, have expanded the CO2 pipeline network for EOR. These

pipelines carry CO2 from naturally occurring underground reservoirs, natural gas

processing facilities, ammonia manufacturing plants, and a large coal gasification

project to oil fields. Additional pipelines may carry CO2 from other manmade

sources to supply a range of industrial applications. Altogether, approximately 5,800

kilometers (3,600 miles) of CO2 pipeline operate today in the United States.14

Figure 1. Major CO2 Pipelines in the United States

Sources: Denbury Resources Inc., “EOR: The Economic Alternative for

CCS,” Slide presentation (October 2007). [http://www.gasification.org/

Docs/2007_Papers/25EVAN.pdf]; U.S. Dept. of Transportation,

National Pipeline Mapping System, Official use only. (June 2005).

[https://www.npms.phmsa.dot.gov]

The locations of the major U.S. CO2 pipelines are shown in Figure 1. By

comparison, nearly 800,000 kilometers (500,000 miles) of natural gas and hazardous

liquid transmission pipelines crisscross the United States.15

Kinder Morgan CO2 Company, “Canyon Reef Carriers Pipeline (CRC),” web page (2007).

[http://www.kindermorgan.com/business/co2/transport_canyon_reef.cfm]

U.S. Dept. of Transportation, National Pipeline Mapping System database (June 2005).

[https://www.npms.phmsa.dot.gov]

Bureau of Transportation Statistics (BTS), National Transportation Statistics 2005 (Dec.

2005), Table 1-10. In this report oil includes petroleum and other hazardous liquids such

as gasoline, jet fuel, diesel fuel, and propane, unless otherwise noted.

CRS-6

Key Issues for Congress

Congressional consideration of potential CCS policies is still evolving, but so

far initiatives have focused more on developing capture and sequestration

technologies than on transportation. Specific legislative proposals in the 110th

Congress reflect the current perception that CO2 capture probably represents the

largest technological hurdle to implementing widespread CCS, and that CO2

transportation by pipelines does not present as significant a barrier. While these

perceptions may be accurate, industry and regulatory analysts have begun to identify

important policy issues related specifically to CO2 pipelines which may require

congressional attention.

CO2 Pipeline Requirements for CCS

Although any widespread CCS scheme in the United States would likely require

dedicated CO2 pipelines, there is considerable uncertainty about the size and

configuration of the pipeline network required. This uncertainty stems, in part, from

uncertainty about the suitability of geological formations to sequester captured CO2

and the proximity of suitable formations to specific sources. One recent analysis

concludes that 77% of the total annual CO2 captured from the major North American

sources may be stored in reservoirs directly underlying these sources, and that an

additional 18% may be stored within 100 miles of additional sources.16 If this were

the case, the need for new CO2 pipelines would be limited to onsite transportation

and a relatively small number of long-distance pipelines (only a subset of which

might need to be interstate pipelines).

Other analysts suggest that captured CO2 may need to be sequestered, at least

initially, in more centralized reservoirs to reduce potential risks associated with CO2

leaks.17 They suggest that, given current uncertainty about the suitability of various

on-site geological formations for long-term CO2 storage, certain specific types of

formations (e.g., salt caverns) may be preferred as CO2 repositories because they have

adequate capacity and are most likely to retain sequestered CO2 indefinitely. As

geologic formations are characterized in more detail and suitable repositories

identified, CO2 sources can be mapped against storage sites with increasing certainty.

The current uncertainty over proximity of sources to storage sites, however, implies

a wide range of possible pipeline configurations and a wide range of possible costs.

Whether CCS policies ultimately lead to centralized or decentralized storage

configurations remains to be seen; however, pipeline requirements and storage

R.T. Dahowski, J.J. Dooley, C.L. Davidson, S. Bachu, N. Gupta, and J. Gale, “A North

American CO2 Storage Supply Curve: Key Findings and Implications for the Cost of CCS

Deployment,” Proceedings of the Fourth Annual Conference on Carbon Capture and

Sequestration ( Alexandria, VA: May 2-5, 2005). The study addresses CO2 capture at 2,082

North American facilities including power plants, natural gas processing plants, refineries,

cement kilns, and other industrial plants.

Jennie C. Stevens and Bob Van Der Zwaan, “The Case for Carbon Capture and Storage,”

Issues in Science and Technology, vol. XXII, no. 1 (Fall 2005): 69-76. (See page 15 of this

report for a discussion of safety issues.)

CRS-7

configurations are closely related. A 2007 study at the Massachusetts Institute of

Technology (MIT) concluded that “the majority of coal-fired power plants are

situated in regions where there are high expectations of having CO2 sequestration

sites nearby.”18 In these cases, the MIT study estimated the cost of CO2 transport and

injection to be less than 20% of total CCS costs. However, the study also stated that

the costs of CO2 pipelines are highly non-linear with respect to the quantity

transported, and highly variable due to “physical ... and political considerations.”19

Another 2007 study, at Duke University, concluded that “geologic sequestration is

not economically or technically feasible within North Carolina,” but “may be viable

if the captured CO2 is piped out of North Carolina and stored elsewhere.”20 There

are also significant scale economies for large, integrated CO2 pipeline networks that

link many sources together rather than single, dedicated pipelines between individual

sources and storage reservoirs.21 As Congress considers CCS policies, it may

examine the relationship between CO2 reservoir sites and pipeline requirements.

Economic Regulation

Economic regulation of interstate pipelines by the federal government is

generally intended to ensure pipelines fulfill common carrier obligations by charging

reasonable rates; providing rates and services to all upon reasonable request; not

unfairly discriminating among shippers; establishing reasonable classifications, rules,

and practices; and interchanging traffic with other pipelines or transportation

modes.22 If interstate CO2 pipelines for carbon sequestration are ultimately to be

developed, it will raise important regulatory questions in this context because federal

jurisdiction over hypothetical interstate CO2 pipeline siting and rate decisions is not

clear. Based on their current regulatory roles, two of the more likely candidates for

jurisdiction over interstate pipelines transporting CO2 for purposes of CCS are the

Federal Energy Regulatory Commission (FERC) and the Surface Transportation

Board (STB).23 However, both agencies have at some point expressed a position that

interstate CO2 pipelines are not within their purview, as summarized below.24

John Deutch, Ernest J. Moniz, et al., The Future of Coal. (Cambridge, MA: Massachusetts

Institute of Technology: 2007): 58. (Hereafter referred to as MIT 2007.)

MIT 2007: 58.

Eric Williams, Nora Greenglass, and Rebecca Ryals, “Carbon Capture, Pipeline and

Storage: A Viable Option for North Carolina Utilities?” Working paper prepared by the

Nicholas Institute for Environmental Policy Solutions and The Center on Global Change,

Duke University (Durham, NC: March 8, 2007): 4.

MIT 2007: 58.

General Accounting Office (now Government Accountability Office), Surface

Transportation: Issues Associated With Pipeline Regulation by the Surface Transportation

Board, RCED-98-99 (Washington, DC: April 21, 1998):3; and 49 U.S.C. § 155.

The STB is the successor agency to the Interstate Commerce Commission (ICC) under the

Interstate Commerce Commission Termination Act of 1995 (P.L. 104-88).

For a more comprehensive discussion of CO2 pipeline regulatory jurisdiction, see CRS

Report RL34307, Regulation of Carbon Dioxide (CO2) Sequestration Pipelines:

(continued...)

CRS-8

Federal Jurisdiction over CO2 Pipelines. The Natural Gas Act of 1938

(NGA) vests in FERC the authority to issue “certificates of public convenience and

necessity” for the construction and operation of interstate natural gas pipeline

facilities.25 FERC is also charged with extensive regulatory authority over the siting

of natural gas import and export facilities, as well as rates for transportation of

natural gas and other elements of transportation service. FERC also has jurisdiction

over regulation of oil pipelines pursuant to the Interstate Commerce Act (ICA).26

Although FERC is not involved in the oil pipeline siting process, as with natural gas,

FERC does regulate transportation rates and capacity allocation for oil pipelines.27

Jurisdiction over rate regulation for pipelines “other” than “water, gas or oil”

pipelines resides with the STB, a decisionally independent regulatory agency

affiliated with the Department of Transportation.28 The STB acts as a forum for

resolution of disputes related to pipelines within its jurisdiction. Parties who wish

to challenge a rate or another aspect of a pipeline’s common carrier service must

petition the STB for a hearing, however; there is no ongoing regulatory oversight.

Although CO2 pipelines are not explicitly excluded from FERC jurisdiction by

statute, FERC ruled in 1979 that they are not subject to the Commission’s

jurisdiction because they do not transport natural gas for heating purposes.29

Likewise, the ICC in 1980 concluded that Congress intended to exclude all types of

gas, including CO2, from ICC regulation. After making the initial decision that it

likely did not have jurisdiction over CO2 pipelines, the ICC did conclude that the

issue was “important enough to institute a proceeding and accept comments on the

petition and our view on it.”30 After the comment period the ICC confirmed its view

that CO2 pipelines were excluded from the ICC’s (and, therefore, the STB’s)

jurisdiction.31 Thus, the two federal regulatory agencies that, generally speaking,

have jurisdiction over interstate pipeline rate and capacity allocation matters appear

to have rejected explicitly jurisdiction over CO2 siting and rates, and there is no

legislative or judicial history to suggest that their rejections were improper at the

time. Absent federal authority, CO2 pipelines are regulated to varying degrees by the

states.

Potential Issues Related to ICC Jurisdiction. Notwithstanding the ICC’s

1980 disclaimer of jurisdiction over CO2 pipelines, other evidence indirectly suggests

(...continued)

Jurisdictional Issues, by Adam Vann and Paul W. Parfomak.

15 U.S.C. 717f(c).

49 App. U.S.C.§1.

Section 1801 of the Energy Policy Act of 1992 directed FERC to “promulgate regulations

establishing a simplified and generally applicable ratemaking methodology” for oil pipeline

transportation.

49 U.S.C. § 1-501(a)(1)(c).

Cortez Pipeline Company, 7 FERC ¶ 61,024 (1979).

Id.

Cortez Pipeline Company — Petition for Declaratory Order — Commission Jurisdiction

Over Transportation of Carbon Dioxide by Pipeline, 46 Fed. Reg. 18805 (March 26, 1981).

CRS-9

the possibility that interstate CO2 pipelines could still be considered subject to STB

jurisdiction. For example, an April 1998 report by the General Accounting Office

(GAO)32 stated that interstate CO2 pipelines, as well as pipelines transporting other

gases are subject to the board’s oversight authority. The STB reviewed the GAO’s

analysis and, apparently, did not object to this jurisdictional classification.33

Furthermore, although the STB is the successor to the now-defunct ICC, the STB

conceivably could determine that its jurisdiction is not governed by the ICC’s

decision in the CO2 matter. Indeed, the Supreme Court has ruled that federal

agencies are not precluded from changing their positions on the issue of regulatory

jurisdiction. According to the Court, “an initial agency interpretation is not instantly

carved in stone. On the contrary, the agency, to engage in informed rulemaking, must

consider varying interpretations and the wisdom of its policy on a continuing basis.”34

Accordingly, regulation of CO2 pipelines for CCS purposes by the STB (or by FERC,

for that matter) under existing statutes remains a possibility.

Policy Implications for Rate Regulation. If CCS technology develops to

the point where interstate CO2 pipelines become more common, and if FERC and the

STB continue to disclaim jurisdiction over CO2 pipelines, then the absence of federal

regulation described above may pose policy challenges. In particular, with many

more pipeline users and interconnections than exist today, complex common carrier

issues might arise.35 One potential concern, for example, is whether rates should be

set separately for existing pipelines carrying CO2 as a valuable commercial

commodity (e.g., for EOR), versus new pipelines carrying CO2 as industrial pollution

for disposal. Furthermore, if rates are not reviewed prior to pipeline construction, it

might be difficult for regulators to ensure the reasonableness of CO2 pipeline rates

until after the pipelines were already in service. If CO2 pipeline connections become

mandatory under future regulations, such arrangements might expose pipeline users

to abuses of potential market power in CO2 pipeline services, at least until rate cases

could be heard. Presiding over a large number of CO2 rate cases of varying

complexity in a relatively short time frame might also be administratively

overwhelming for state agencies, which may have limited resources available for

pipeline regulatory activities.

Now known as the Government Accountability Office.

Surface Transportation Board (STB), Personal communication, (December 2007). The

STB Office of Governmental and Public Affairs informed CRS that the board recognizes

the conflict between this GAO report and the ICC decision (as well as the wording of 49

C.F.R. § 15301 governing STB jurisdiction over pipelines other than those transporting

“water, gas or oil”). However the office did not want to state an opinion as to the current

extent of STB jurisdiction over CO2 pipelines and suggested that the STB would likely not

act to resolve this conflict unless a CO2 pipeline dispute comes before it.

Chevron U.S.A. v. Nat. Res. Def. Council, 467 U.S. 837, at 863-64 (1984).

Beard Company 2000 annual report (10-k) filed with the U.S. Securities and Exchange

Commission states that the company (with other plaintiffs) filed a lawsuit in 1996 against

CO2 pipeline owner Shell Oil Company and other defendants alleging, among other things,

that the defendants “controlled and depressed the price of CO2” from a field partially

owned by Beard and “reduc[ed] the delivered price of CO2 while ... simultaneously inflating

the cost of transportation.” [http://www.secinfo.com/dRxzp.424.htm#1fmr]

CRS-10

Siting Authority. A company seeking to construct a CO2 pipeline must secure

siting approval from the relevant regulatory authorities and must subsequently secure

rights of way from landowners along the pipeline right by purchasing easements or

by eminent domain. However, since federal agencies claim no regulatory authority

with respect to CO2 pipeline construction, potential builders of new CO2 pipelines do

not require, and could not obtain, federal approval to construct new pipelines.

Likewise, federal regulators claim no eminent domain authority for pipeline

construction, and so cannot ensure that pipeline companies can secure rights of way

to construct new pipelines. By contrast, companies seeking to build interstate natural

gas pipelines must first obtain certificates of public convenience and necessity from

FERC under the Natural Gas Act (15 U.S.C. §§ 717, et seq.). Such certification may

include safety and security provisions with respect to pipeline routing, safety

standards and other factors.36 A certificate of public convenience and necessity

granted by FERC (15 U.S.C. § 717f(h)) confers eminent domain authority.

The state-by-state siting approval process for CO2 pipelines may be complex and

protracted, and may face public opposition, especially in populated or

environmentally sensitive areas. As the National Commission on Energy Policy

(NCEP) states in its 2006 report:37

Recent developments notwithstanding, most new energy projects are still

regulated primarily at the state level and public opposition remains inextricably

intertwined with local concerns, including environmental and ecosystem impacts

as well as, in some cases, complex issues of property rights and competing land

uses.... In some cases, upstream or downstream infrastructure requirements —

such as the need for ... underground carbon sequestration sites ... may generate

as much if not more opposition than the energy facilities they support. At the

same time — and despite recent moves toward consolidated oversight by FERC

or other regulatory authorities — fragmented permitting processes, nonstandard

permitting requirements, and interagency redundancy often still compound siting

challenges.

Securing rights of way along existing easements for other infrastructure (e.g.,

natural gas pipelines, electric transmission lines) may be one way to facilitate the

siting of new CO2 pipelines. However, existing easements may be ambiguous as to

the right of the easement holder to install and operate CO2 pipelines. Questions may

also arise as to compensation for landowners or easement holders for use of such

easements, and as to whether existing easements can be sold or leased to CO2

pipeline companies.38 A related issue is whether state condemnation laws, which are

often used to secure sites for infrastructure deemed to be in the public interest, allow

for CO2 pipelines to be treated as public utilities or common carriers. This issue also

arises on federal lands managed by the Bureau of Land Management (BLM). New

18 C.F.R. § 157.

National Commission on Energy Policy, Siting Critical Energy Infrastructure: An

Overview of Needs and Challenges. (Washington, DC: June 2006): 9. (Hereafter referred

to as NCEP 2006.)

Partha S. Chaudhuri, Michael Murphy, and Robert E. Burns, “Commissioner Primer:

Carbon Dioxide Capture and Storage” (National Regulatory Research Institute, Ohio State

Univ., Columbus, OH: Mar. 2006): 17.

CRS-11

CO2 pipelines through BLM lands potentially may be sited under right of way

provisions in either the Federal Land Policy and Management Act (FLPMA; 43

U.S.C. § 35) or the Mineral Leasing Act (MLA; 30 U.S.C. § 185). However, the

MLA imposes a common carrier requirement while the FLPMA does not. Although

the agency currently permits CO2 pipelines for EOR under the MLA,39 CO2 pipeline

companies seeking to avoid common carrier requirements under CCS schemes may

litigate to secure rights of way under FLPMA.40 Provisions in P.L. 110-140 require

the Secretary of the Interior to recommend legislation to clarify the appropriate

framework for issuing CO2 pipeline rights-of-way on federal land (Sec. 714(7)).

Another complicating factor in the siting of CO2 pipelines for CCS is the types

of locations of existing CO2 sources. Although a network of long-distance CO2

pipelines exists in the United States today for EOR, these pipelines are sited mostly

in remote areas accustomed to the presence of large energy infrastructure. However,

many potential sources of CO2, such as power plants, are located in populated

regions, many with a history of public resistance to the siting of energy infrastructure.

If a widespread CO2 pipeline network is required to support CCS, the ability to site

pipelines to serve such facilities may become an issue requiring congressional

attention. As the NCEP concluded, “In sum, it seems probable that the siting of

critical infrastructure will continue to present a major challenge for policymakers.”41

Commodity vs. Pollutant Classification

Under a comprehensive CCS policy, captured CO2 arguably could be classified

as either a commodity or as a pollutant. CO2 used in EOR is considered to be a

commodity, and is regulated as such by the states. Because captured CO2 may be

sold as a valuable commodity for EOR, and may have further economic potential for

enhanced recovery of coal bed methane (ECBM), some argue that all CO2 under a

CCS scheme should be classified as a commodity.42 However, it is unlikely that the

quantities of CO2 captured under a widely implemented CCS policy could all be

absorbed in EOR or ECBM applications. In the long run, significant quantities of

captured CO2 will have to be disposed as industrial pollution, with negative

economic value.43 Furthermore, on April 2, 2007, the U.S. Supreme Court held that

the Clean Air Act gives the U.S. Environmental Protection Agency (EPA) the

authority to regulate greenhouse gas emissions, including CO2, from new motor

vehicles.44 The court also held that EPA cannot interpose policy considerations to

U.S. Dept. of the Interior, Bureau of Land Management, Environmental Assessment for

Anadarko E&P Company L.P. Monell CO2 Pipeline Project, EA #WY-040-03-035 (Feb.

2003): 71.

Chaudhuri et al: 17.

NCEP 2006: 9.

IOGCC 2005: 41.

S.M. Frailey, R.J. Finlay, and T.S. Hickman, “CO2 Sequestration: Storage Capacity

Guideline Needed,” Oil & Gas Journal (Aug. 14, 2006): 44.

Massachusetts v. EPA; at [http://www.supremecourtus.gov/opinions/06pdf/05-1120.pdf].

(continued...)

CRS-12

refuse to exercise this authority. While the specifics of EPA regulation under this

ruling might be subject to agency discretion, it has implications for the regulation of

CO2 emissions from stationary sources, such as power plants.

Separately, EPA has also concluded that geologic sequestration of captured CO2

through well injection meets the definition of “underground injection” in §

1421(d)(1) of the Safe Drinking Water Act (SDWA).45 EPA anticipates protecting

underground sources of drinking water, through its authority under the SDWA, from

“potential endangerment” as a result of underground injection of CO2 in anticipated

CCS pilot projects. EPA’s assertion of authority under SDWA for underground

injection of CO2 during CCS pilot studies may contribute to uncertainty over future

classification of CO2 as a commodity or a pollutant.

Conflicting classification of captured CO2 as either a commodity or pollutant

has important implications for CO2 pipeline development. For example, classifying

all CO2 as a pollutant not only would contradict current state and BLM treatment of

CO2 for EOR, but might also undermine an interstate commerce rationale for FERC

regulation of CO2 pipelines. On the other hand, classifying all CO2 as a commodity

would create other policy contradictions, for example, in regions like New England

where EOR may be impracticable. Under either scenario, legislative and regulatory

ambiguities would arise — especially for an integrated, interstate CO2 pipeline

network carrying a mixture of “commodity” CO2 and “pollutant” CO2. Resolving

these ambiguities to establish a consistent and workable CCS policy could likely be

an issue for Congress.

Pipeline Costs

If an extensive network of pipelines is required for CO2 transportation, pipeline

costs may be a major consideration in CCS policy. MIT estimated overall annualized

pipeline transportation (and storage) costs of approximately $5 per metric ton of

CO2.46 If CO2 sequestration rates in the United States were on the order of 1 billion

metric tons per year at mid-century, as some analysts propose, annualized pipeline

costs would run into the billions of dollars. Furthermore, because most pipeline costs

are initial capital costs, up-front capital outlays for a new CO2 pipeline network

would be enormous. The 2007 Duke study, for example, estimated it would cost

approximately $5 billion to construct a CO2 trunk line along existing pipeline rights

of way to transport captured CO2 from North Carolina to potential sequestration sites

in the Gulf states and Appalachia.47 Within the context of overall CO2 pipeline costs,

several specific cost-related issues may warrant further examination by Congress.

(...continued)

For further information see CRS Report RL33776, Clean Air Issues in the 110th Congress:

Climate Change, Air Quality Standards, and Oversight, by James E. McCarthy.

U.S. Environmental Protection Agency, memorandum (July 5, 2006). Available at

[http://www.epa.gov/OGWDW/uic/pdfs/memo_wells_sequestration_7-5-06.pdf].

MIT 2007: xi.

Eric Williams et al. (2007): 20.

CRS-13

Materials Costs. Analysts commonly develop cost estimates for CO2

pipelines based on comparable construction costs for natural gas pipelines, and to a

lesser extent, petroleum product pipelines. In most cases, these comparisons appear

appropriate since CO2 pipelines are similar in design and operation to other pipelines,

especially natural gas pipelines. A University of California (UC) study analyzing the

costs of U.S. transmission pipelines constructed between 1991 and 2003 found that,

on average, labor accounted for approximately 45% of the total construction costs.

Materials, rights of way, and miscellaneous costs accounted for 26%, 22%, and 7%

of total costs, respectively.48 Materials cost was most closely dependent upon

pipeline size, accounting for an increasing fraction of the total cost with increasing

pipeline size, from 15% to 35% of total costs. The MIT study estimated that

transportation of captured CO2 from a 1 gigawatt coal-fired power plant would

require a pipe diameter of 16 inches.49 According to the UC analysis, total

construction costs for such a pipe between 1991 and 2003 averaged around $800,000

per mile (in 2002 dollars), although the study stated that costs for any individual

pipeline could vary by a factor of five depending its location.50

Figure 2. U.S. Prices for Large Diameter Steel Pipe

$1,600

Price per Ton

$1,400

$1,200

$1,000

$800

$600

$400

$200

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07

Source: Preston Pipe & Tube Report. Pipe prices represent average transaction price (by

weighted average value) for double-submerged arc-welded pipe > 24” diameter,

combining domestic and import shipments. Prices are reported through October 2007.

Since pipeline materials make up a significant portion of CO2 pipeline

construction costs, analysts have called attention to rising pipeline materials costs,

N. Parker, “Using Natural Gas Transmission Pipeline Costs to Estimate Hydrogen

Pipeline Costs,” UCD-ITS-RR-04-35, Inst. of Transportation Studies, Univ. of California

(Davis, CA: 2004): 1. [http://hydrogen.its.ucdavis.edu/people/ncparker/papers/pipelines];

see, also, G. Heddle, H. Herzog, and M. Klett, “The Economics of CO2 Storage,” MIT LFEE

2003-003 RP (Laboratory for Energy and the Environment, MIT, Cambridge, MA: Aug.

2003). [http://lfee.mit.edu/public/LFEE_2003-003_RP.pdf]

MIT 2007: 58.

N. Parker (2004): Fig. 23.

CRS-14

especially steel costs, as a concern for policymakers.51 Following a period of low

steel prices and company bankruptcies earlier in the decade, the North American steel

industry has returned to profitability and enjoys strong domestic and global demand.52

Now, higher prices resulting from both strong demand and increased production costs

for carbon steel plate, used in making large-diameter pipe, may alter the basic

economics of CO2 pipeline projects and CCS schemes overall. As Figure 2 shows,

the price of large-diameter pipe was generally around $600 per ton in late 2001 and

early 2002. By late 2007, the price of pipe was approaching $1,400 per ton. Analysts

forecast carbon steel prices to decline over the next two years, but only gradually, and

to a level still more than double the price early in the decade.53

If some form of CCS is effectively mandated in the future, a surge in demand

for new CO2 pipe, in competition with demand for natural gas and oil pipelines, may

exacerbate the trend of rising prices for pipeline materials, and could even lead to

shortages of pipe steel from North American sources. As a consequence, the

availability and cost of pipeline steel to build such a CO2 pipeline network for CCS

may be a limiting factor for widespread CCS implementation.

Cost Recovery.

In states where traditional rate regulation exists,

construction and operation of CO2 pipelines for CCS could raise questions about cost

recovery for electric utilities under state utility regulation. If, for example, a CO2

pipeline is constructed for the exclusive use of a single power plant for on-site (or

nearby) CO2 sequestration, and is owned by the power plant owners, it logically

could be considered an extension of the plant itself. In such cases, the CO2 pipelines

could be eligible for regulated returns on the invested capital and their costs could be

recovered by utilities in electricity rates. Alternatively such a CO2 pipeline could be

owned by third parties and considered a non-plant asset providing a transportation

service for a fee. In the latter case, the costs could still be recovered by the utility in

its rates as an operating cost.

Two complications arise with respect to pipeline cost recovery. First, because

utility regulation varies from state to state (e.g., some states allow for competition in

electricity generation, others do not),54 differences among states in the economic

regulation of CO2 pipelines could create economic inefficiencies and affect the

attractiveness of CO2 pipelines for capital investment. Second, if CO2 transportation

infrastructure is intended to evolve from shorter, stand-alone, intrastate pipelines into

a network of interconnected interstate pipelines, pipeline operators wishing to link

CO2 pipelines across state lines may face a regulatory environment of daunting

complexity. Without a coherent system of economic regulation for CO2 pipelines,

whether as a commodity, pollutant, or some other classification, developers of

IPCC 2005: 27.

See CRS Report RL32333, Steel: Price and Policy Issues, by Stephen Cooney.

Michael Cowden, “A Profusion of New Pipeline Projects and Profits... for Now,”

American Metal Market (January 2008): 18; Global Insight, Steel Industry Review (2nd Qtr.

2006), tabs. 1.11-1.12; and American Metal Market, “West Sees More Steel Plate But Prices

Holding Ground” (Aug. 31, 2006).

In market-based states, cost recovery may affect electricity markets.

CRS-15

interstate CO2 pipelines may need to negotiate or litigate repeatedly issues such as

siting, pipeline access, terms of service, and rate “pancaking” (the accumulation of

transportation charges assessed by contiguous pipeline operators along a particular

transportation route). It is just these kinds of issues which have complicated and

impeded the integration of individual utility electric transmission systems into larger

regional transmission networks.55

CO2 Pipeline Incentives. Oil industry representatives frequently point to

EOR as offering a market-based model for profitable CO2 transportation via pipeline.

It should be noted, however, that much of the existing CO2 pipeline network in the

United States for EOR has been established with the benefit of federal tax incentives.

Although current federal tax law provides no special or targeted tax benefits

specifically to CO2 pipelines, investments in CO2 pipelines do benefit from tax

provisions targeted for EOR. They also benefit from accelerated depreciation rules,

which apply generally to any capital investment including petroleum and natural gas

(non-CO2) pipelines. For example, the Internal Revenue Code provides for a 15%

income tax credit for the costs of recovering domestic oil by one of nine qualified

EOR methods, including CO2 injection (I.R.C. § 43).56 Also, extraction of naturally

occurring CO2 may qualify for percentage depletion allowance under I.R.C. §

613(b)(7). Prior federal law, both tax and nontax, also provided various types of

incentives for EOR which stimulated investment in CO2 pipelines. In particular, oil

produced from EOR projects was exempt from oil price controls in the 1970s.

Development of CO2 pipeline infrastructure in the 1980s benefitted from tax

advantages to EOR oil under the crude oil windfall profits tax law, which was in

effect from March 1980 to August 1988.

Although there were never incentives explicitly for CO2 pipelines under federal

tax and price control regulation in the 1970s and 1980s, it is clear that CO2 pipeline

infrastructure development benefitted from these regulations. In a CCS environment

where some captured CO2 is a valuable commodity, but the remainder is not,

establishing similar regulatory incentives for CO2 pipelines becomes complex. One

initial proposal in S. 2149 would allow seven-year accelerated depreciation for

qualifying CO2 pipelines constructed after enactment (Sec. 4). As debate continues

about the economics of CO2 capture and sequestration generally, and how the federal

government can encourage CCS infrastructure investment, Congress may seek to

understand the implications of CCS incentives specifically on CO2 pipeline

development.

Cost Implications for Network Development. In light of the overall costs

associated with CO2 pipelines, including the uncertainty about future materials costs

and cost recovery, some analysts anticipate that a CO2 network for CCS will begin

with shorter pipelines from CO2 sources located close to sequestration sites. Larger

CO2 trunk lines are expected to emerge to capture substantial scale economies in

For further information of electric transmission regulation, see CRS Report RL33875,

Electric Transmission: Approaches for Energizing a Sagging Industry, by Amy Abel.

Unfortunately for EOR investors, while this tax credit is part of current federal tax law,

its phaseout provisions mean that presently it is not available — the credit is zero — due to

high crude oil prices.

CRS-16

long-distance pipeline transportation. According to the 2007 MIT report, “it is

anticipated that the first CCS projects will involve plants that are very close to a

sequestration site or an existing CO2 pipeline. As the number of projects grow,

regional pipeline networks will likely evolve.”57 It is debatable, however, whether

piecemeal growth of a CO2 pipeline network in this way, presumably by individual

facility operators seeking to minimize their own costs, would ultimately yield an

economically efficient and publically acceptable CO2 pipeline network for CCS.

Weaknesses and failures in the North American electric power transmission grid,

which was developed in this manner, may be one example of how piecemeal,

uncoordinated network development may fail to satisfy key economic and operating

objectives.

As an alternative to piecemeal CO2 pipeline development, some analysts suggest

that it may be more cost effective in the long run to build large trunk pipelines when

the first sites with CO2 capture come on line with the expectation that subsequent

users could fill the spare capacity in the trunk line. In addition to lower per-unit

transport costs for CO2, such an arrangement would smooth out potentially

intermittent CO2 flows from individual capture sites (especially discontinuously

operated power plants), provide a greater buffer for overall CO2 supply fluctuations,

and generally allow for more operational flexibility in the system.58 Planning and

financing such a CO2 trunk line system would present its own challenges, however.

As another analysis points out, “implementation of a ‘backbone’ transport structure

may facilitate access to large remote storage reservoirs, but infrastructure of this kind

will require large initial upfront investment decisions.”59 How a CO2 network for

CCS would be configured, and who would configure it, may be issues for Congress.60

CO2 Pipeline Safety

CO2 occurs naturally in the atmosphere, and is produced by the human body

during ordinary respiration, so it is commonly perceived by the general public to be

a relatively harmless gas. However, at concentrations above 10% by volume, CO2

may cause adverse health effects and at concentrations above 25% poses a significant

asphyxiation hazard. Because CO2 is colorless, odorless, and heavier than air, an

uncontrolled release may accumulate and remain undetected near the ground in lowlying outdoor areas, and in confined spaces such as caverns, tunnels, and basements.61

Exposure to CO2 gas, as for other asphyxiates, may cause rapid “circulatory

Ibid., MIT. (2007): 59.

John Gale and John Davidson, “Transmission of CO2 — Safety and Economic

Considerations,” Energy, Vol. 29, Nos. 9-10 (July-August 2004): 1326.

IPCC 2005: 190.

For further discussion see CRS Report RL34316, Pipelines for Carbon Dioxide (CO2)

Control: Network Needs and Cost Uncertainties, by Paul W. Parfomak and Peter Folger.

J. Barrie, K. Brown, P.R. Hatcher, and H.U. Schellhase, “Carbon Dioxide Pipelines: A

Preliminary Review of Design and Risks,” Proceedings of the 7th International Conference

on Greenhouse Gas Control Technologies (Vancouver, Canada: Sept. 5-9, 2004): 2.

CRS-17

insufficiency,” coma, and death.62 Such an event occurred in 1986 in Cameroon,

when a cloud of naturally-occurring CO2 spontaneously released from Lake Nyos

killed 1,800 people in nearby villages.63

The Secretary of Transportation has primary authority to regulate interstate CO2

pipeline safety under the Hazardous Liquid Pipeline Act of 1979 as amended (49

U.S.C. § 601). Under the act, the Department of Transportation (DOT) regulates the

design, construction, operation and maintenance, and spill response planning for CO2

pipelines (49 C.F.R. § 190, 195-199). The DOT administers pipeline regulations

through the Office of Pipeline Safety (OPS) within the Pipelines and Hazardous

Materials Safety Administration (PHMSA).64 Although CO2 is listed as a Class 2.2

(non-flammable gas) hazardous material under DOT regulations (49 C.F.R. §

172.101), the agency applies nearly the same safety requirements to CO2 pipelines

as it does to pipelines carrying hazardous liquids such as crude oil, gasoline, and

anhydrous ammonia (49 C.F.R. § 195).

To date, CO2 pipelines in the United States have experienced few serious

accidents. According to OPS statistics, there were 12 leaks from CO2 pipelines

reported from 1986 through 2006 — none resulting in injuries to people. By

contrast, there were 5,610 accidents causing 107 fatalities and 520 injuries related to

natural gas and hazardous liquids (excluding CO2) pipelines during the same period.65

It is difficult to draw firm conclusions from these accident data, because CO2

pipelines account for less than 1% of total natural gas and hazardous liquids

pipelines, and CO2 pipelines currently run primarily through remote areas. Based on

the limited sample of CO2 incidents, analysts conclude that, mile-for-mile, CO2

pipelines appear to be safer than the other types of pipeline regulated by OPS.66

Additional measures, such as adding gas odorants to CO2 to aid in leak detection,

may further mitigate CO2 pipeline hazards. Nonetheless, as the number of CO2

pipelines expands, analysts suggest that “statistically, the number of incidents

involving CO2 should be similar to those for natural gas transmission.”67 If the

nation’s CO2 pipeline network expands significantly to support CCS, and if this

expansion includes more pipelines near populated areas, more CO2 pipeline accidents

are likely in the future.68

Airco, Inc., “Carbon Dioxide Gas,” Material Safety Data Sheet (Aug. 4, 1989).

[http://www2.siri.org/msds/f2/byd/bydjl.html]

Kevin Krajick, “Defusing Africa’s Killer Lakes,” Smithsonian, v. 34, n. 6. (2003): 46 —

55.

PHMSA succeeds the Research and Special Programs Administration (RSPA),

reorganized under P.L. 108-246, which was signed by the President on Nov. 30, 2004.

Office of Pipeline Safety (OPS), “Distribution, Transmission, and Liquid Accident and

Incident Data,” (2007). OPS has not yet released 2007 incident statistics. Data files

available at [http://ops.dot.gov/stats/IA98.htm].

John Gale and John Davidson. (2004): 1322.

Barrie et al. (2004): 2.

Gale and Davidson (2004): 1321.

CRS-18

Criminal and Civil Liability. There are no special provisions in U.S. law

protecting the CO2 pipeline industry from criminal or civil liability. In January 2003,

the Justice Department announced over $100 million in civil and criminal penalties

against Olympic Pipeline and Shell Pipeline resolving claims from a fatal gasoline

pipeline fire in Bellingham, WA, in 1999.69 In March 2003, emphasizing the

environmental aspects of homeland security, Attorney General John Ashcroft

reportedly announced a crackdown on companies failing to protect against possible

terrorist attacks on storage tanks, transportation networks, industrial plants, and

pipelines.70

Even if no federal or state regulations are violated, CO2 pipeline operators could

still face civil liability for personal injury or wrongful death in the event of an

accident. In the Bellingham accident, the pipeline owner and associated defendants

reportedly agreed to pay a $75 million settlement to the families of two children

killed in the accident.71 In 2002, El Paso Corporation settled wrongful death and

personal injury lawsuits stemming from a natural gas pipeline explosion near

Carlsbad, NM, which killed 12 campers.72 Although the terms of those settlements

were not disclosed, two additional lawsuits sought a total of $171 million in

damages.73 The MIT study concluded that operational liability for CO2 pipelines, as

part of an integrated CCS infrastructure, “can be managed within the framework that

has been successfully used for decades by the oil and gas industries.”74 Nonetheless,

as CCS policy evolves, Congress may seek to ensure that liability provisions for CO2

pipelines are adequate and consistent with liability provisions in place for other CO2

infrastructure.

Other Issues

In addition to the issues discussed above, additional policy issues related to CO2

pipelines may arise as CCS policy evolves. These may include addressing technical

transportation problems related to the presence of other pollutants, such as sulfuric

and carbonic acid, in CO2 pipelines. Some have also suggested the use or conversion

of existing non-CO2 pipelines, such as natural gas pipelines, to transport CO2.75

“Shell, Olympic Socked for Pipeline Accident,” Energy Daily (Jan. 22, 2003).

John Heilprin, “Ashcroft Promises Increased Enforcement of Environmental Laws for

Homeland Security,” Assoc. Press, Washington dateline (Mar. 11, 2003).

Business Editors, “Olympic Pipe Line, Others Pay Out Record $75 Million in Pipeline

Explosion Wrongful Death Settlement,” Business Wire (April 10, 2002).

National Transportation Safety Board, Pipeline Accident Report, PAR-03-01. (Feb. 11,

2003).

El Paso Corp., Quarterly Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934, Form 10-Q, Period ending June 30, 2002. (Houston, TX: 2002). The

impact of these lawsuits on the company’s business is unclear, however; the report states

that “our costs and legal exposure ... will be fully covered by insurance.”

MIT 2007: 58.

An example is the Gwinville, MS-Lake St. John, LA natural gas pipeline purchased by

(continued...)

CRS-19

Coordination of U.S. CO2 pipeline policies with Canada, with whom the United

States shares its existing pipeline infrastructure, may also become a consideration.

Finally, the potential impacts of CO2 pipeline development overseas on the global

availability of construction skills and materials may arise as a key factor in CCS

economics and implementation.

Conclusion

Policy debate about the mitigation of climate change through some scheme of

carbon capture and sequestration is expanding quickly. To date, debate among

legislators has been focused mostly on CO2 sources and storage sites, but CO2

pipelines are a vital connection between the two. Although CO2 transportation by

pipeline is in some respects a mature technology, there are many important

unanswered questions about the socially optimal configuration, regulation, and costs

of a CO2 pipeline network for CCS. Furthermore, because CO2 pipelines for EOR

are already in use today, policy decisions affecting CO2 pipelines take on an urgency

that is, perhaps, unrecognized by many. It appears, for example, that federal

classification of CO2 as both a commodity (by the BLM) and as a pollutant (by the

EPA) potentially could create an immediate conflict which may need to be addressed

not only for the sake of future CCS implementation, but also to ensure consistency

between future CCS and today’s CO2 pipeline operations.

In addition to these issues, Congress may examine how CO2 pipelines fit into

the nation’s overall strategies for energy supply and environmental protection. The

need for CO2 pipelines ultimately derives from the nation’s consumption of fossil

fuels. Policies affecting the latter, such as energy conservation, and the development

of new renewable, nuclear, or hydrogen energy resources, could substantially affect

the need for and configuration of CO2 pipelines. If policy makers encourage

continued consumption of fossil fuels under CCS, then the need to foster the other

energy options may be diminished — and vice versa. Thus decisions about CO2

pipeline infrastructure could have consequences for a broader array of energy and

environmental policies.

(...continued)

Denbury Resources, Inc. in 2006 and converted to CO2 transportation for EOR in 2007.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.