08/31/12
The following interview with George Peridas, a scientist at the Natural Resources Defense Council’s Climate Center who specializes in carbon capture and storage, was conducted by GHG Monitor Reporter Tamar Hallerman on the sidelines of the National Energy Technology Laboratory’s Carbon Storage R&D Project Review meeting in Pittsburgh last week.
You gave a keynote address here in which you discuss the death of the Waxman-Markey climate legislation that floundered in the Senate in 2010. You mentioned some $200 billion in benefits that could have gone to the CCS industry if that measure would have passed. In your perspective, do you think the industry will be able to recover some of those benefits without carbon pricing legislation on the books?
I don’t know that we’ll reach the exact same amount of benefits, but there’s one way in which we can get at least some of those sums, and that’s if we utilize enhanced oil recovery. If governments want to incentivize the capture of the CO2 at industrial facilities, there’s a cost gap that still remains to be bridged. EOR will provide for some of that. Our calculations are showing that for a modest amount of incentives from the federal government, it can more than get its money back over a 10-year time period. This is because of the tax revenues from the additional oil that gets produced, even under conservative assumptions. So for a pretty modest incentive over that time period and they will more than recover the costs—it’s actually a revenue earner for the government.
The trouble is that Congressional Budget Office and the Joint Committee on Taxation don’t score legislation that way because that’s how their scoring rules are set up. But this doesn’t mean that EOR is not a sound legislative proposal. There’s money to be made both in the private sector and for the government, so I think that’s the primary pathway that we see today that you’re going to reach immediate deployment of the scale that we were contemplating during Waxman-Markey.
Given the current makeup of Congress and the diversity of members’ attitudes towards climate change and government spending, do you think that passing some sort of carbon pricing scheme is possible?
Yes, I do. I think it’s a bit challenging because we’re in a period of fiscal conservatism and budget cuts, but we’re seeing some marked changes in how elected officials see this. And this doesn’t just focus on Democrats. This involves people from both sides of the aisle, and liberals and conservatives alike. We see this with the National Enhanced Oil Recovery Initiative (NEORI), where a broad group of stakeholders that includes power companies, oil companies, NGOs, labor, think tanks, has come together to make the case for EOR. What we’re seeing through the NEORI outreach in Congress is a pretty receptive audience in both Republicans and Democrats alike. Now, we think that this has the seeds for something to happen in Congress, but you can never be sure. The agenda sometimes is dominated by other things and this probably won’t be at the top of the list regardless of what happens in the election, but this might still have a decent chance.
In recent months we’ve seen the debate over a carbon tax resurface in earnest. How optimistic are you that those discussions could actually lead to something substantive?
These are things that you can never fully predict, but testament to this is that a group of Republicans is coming forward and considering this carbon tax idea, which is not what you would expect. I think we’ll just have to wait and see how the cards fall in the next Congress and what the election spells out, but the issue of fighting global warming is still very much in the minds of the American people. If you look at the polls, there’s support by Independents, by Democrats and by Republicans to do something. I think either candidate, if and when elected, will have to do something about the issue. Obviously, they would likely take different approaches, but the public is expecting something to happen. This could range from a strictly labeled climate bill or it could be a broader energy package. There’s uniform support for things like green energy or renewable energy and also efficiency. So it could take many different forms, but I think probably in the opening few months of the next Congress, there will likely be some movement in that area. Whether it’s going to be an all-out push for carbon caps or cap-and-trade, we don’t know.
Sen. Jay Rockefeller (D-W.Va.) announced earlier this month that he is looking to write comprehensive ‘clean coal’ legislation. What would you like to see in a broad CCS measure?
What we need to keep in mind is that spending public money on CCS is not wise without a driver for the broader commercial deployment of the technology and to limit carbon emissions. That driver can take many forms. It could be, for example, a free standing subsidy based on revenues from enhanced oil recovery, such as the measures in Sen. Dick Lugar’s energy bill. It could come from a clean energy standard where CCS qualifies as an eligible technology. It could come from a performance standard approach where regulations drive or mandate the use of the technology. Or it could come from a comprehensive economy-wide carbon reduction program. These can and even should be used in combination, of course. We should also keep in mind that CCS isn’t just about coal. It can provide substantial benefits applied to a variety of fuels and industrial applications, and a program should be structured in a way to reap those benefits. Sen. Rockefeller has many options here, and a well-written bill could make a real difference in the future of the technology.
Rockefeller introduced similar legislation two years ago, but the proposal didn’t gain very much speed in the shadow of cap-and-trade legislation. What has changed over the last two years that Sen. Rockefeller should be taking into account?
In terms of market conditions, the biggest change has been the huge drop in natural gas prices. There’s been a complete paradigm shift and change in thinking in terms of new power generation and what utilities are planning. New coal is very much out of the picture, with very few exceptions, and right now almost everybody is talking about new gas generation. This is the cheapest, quickest and easiest type of fossil plant to build, and coal just doesn’t make economic sense. Another, I think, unique feature of the last two years is that even though gas prices have plummeted, oil prices are still very high. Usually there’s been some degree of coupling between the two; so when oil goes down, gas goes down and vice versa, but this means is that the enhanced oil recovery idea becomes more viable because fuel prices are low, but recovering more oil has greater economic value.
The third thing that has happened is a shift in people’s perceptions. There’s been a lot of evidence and real world progress on CCS that has taken place in the meantime, and the conference this week is testament to that. You see a lot of the projects nearing completion, some are already injecting significant volumes of CO2 and are “playing” with the results that they are getting. So CCS doesn’t have the aura of being something new and untested as it did a couple of years ago. People’s thinking and perception has matured and they see CCS today as something more real and readily available than they might have thought a couple of years ago.
The Environmental Protection Agency’s proposed greenhouse gas emissions performance standards for new fossil fuel-fired plants have been an issue of contention on Capitol Hill in recent months. While the Obama Administration has said that the rulemaking will provide a pathway forward for coal and CCS, critics have argued that it would do the opposite, prompting power generators to shift to natural gas. What are your thoughts on the rulemaking?
I think the argument that EPA’s rules will spell the demise of coal is nonsense. What’s spelling the demise of coal right now is the market and the very low natural gas prices. Coal is not being forced out because of regulations. Coal is being forced out because there’s something cleaner, cheaper and quicker, and that’s the natural gas. So it’s not EPA’s doing, it’s the marketplace.
I also don’t think that it’s EPA’s job to pick technologies, and they are not doing that. What EPA did in the new source performance standard proposal was to stay technology neutral and to set a performance standard that’s meetable by a whole range of fuels and technologies—gas could qualify and coal could also qualify. CCS isn’t something that the proposed rule mandates, but it’s a compliance option which people may choose, and I think that’s the way to go.
Do you realistically think any power producers would choose CCS, though, under the standard given the cheap price in gas and the state of CCS technology at this point?
No, I think right now it doesn’t make sense, and that has nothing to do with EPA. It has to do with how cheap gas is. But gas prices in general are cyclical. It’s unwise at any given point in time to treat today as the future because we simply don’t know what the future will hold. I think that now what EPA needs to do and what EPA is doing is to cater to a range of scenarios and to not limit compliance options for any fuel, and that’s exactly what they did. And while some are expecting the new source performance standards to incentivize a whole new wave of CCS for coal, that’s not what its job should be.
Over the last year we’ve seen a very clear shift within the Department of Energy’s Office of Fossil Energy toward CO2 utilization as the mantra for CCS development, particularly given the absence of climate legislation. Some individuals have criticized that shift as one that is moving too far from what they say should be the primary driver, reducing CO2 emissions to help mitigate climate change. As someone who works for an environmental NGO, what do you make of this philosophical shift? Is it acceptable as long as CCS is commercialized at the end of the day?
The rationale behind this change in thinking is sound. The bulk of the large projects presenting here at the conference, with some exceptions, are mostly linked to enhanced oil recovery. There’s a very strong reason for that. Oil is profitable right now and it makes sense to be able to get some of it out while sequestering CO2 in the ground. So I don’t think there’s any fundamental problem with that kind of thinking. The logic is sound and if we’re going to see immediate term involvement of the U.S. in the field of CCS then enhanced recovery is going to have to play a prominent role. Ultimately, if CO2 goes in the ground and gets permanently sequestered, then it doesn’t matter which argument you make. I think right now for DOE to carry on doing what it’s doing and for the private sector to maintain its involvement in the area, EOR is the more convincing and compelling case. Longer term, if you look at the U.S.’ necessary emission reduction and climate goals, then EOR is not going to get you all the way.
It’s about making a beginning, and this can be a substantial and strong beginning. It’s fair to focus on that right now, and I don’t think that we should be purists and jeopardize the immediate term prospects of the technology. Ultimately we will need to focus on saving this planet, and I’m not detracting from that at all. The drive for sequestration in deep saline formations should therefore be maintained, but EOR helps with short-term economics. What absolutely needs to happen, however, is for sequestration in EOR projects to be as safe, credible and effective as in saline projects, and we need rules to ensure that.
You were among the first to respond earlier this summer after a pair of papers linked CCS with induced seismic events. The papers, particularly one written by Mark Zoback and Steven Gorelick at Stanford, got some attention in the media and in Congress, but overall the issue died out fairly quickly in the public. Do you think the industry dodged a bullet?
Induced seismicity is an issue that the industry, regulators and stakeholders should be taking very seriously. What I’m also saying, though, is that this is not a showstopper for the prospects of CCS, or at least there’s no evidence to show that this is a showstopper. In fact, there’s a lot of evidence that points in the opposite direction. What happened is that someone with strong opinions tried to publish a piece that was essentially promoting the use of natural gas above all else, and at the same time bashing CCS; the peer-review processes stripped the natural gas promotion piece and we were left with the CCS bashing piece. I think the opinion piece was very weak on science, and researchers did point that out fairly quickly.
But in terms of how the industry handled this, the right things were said, but they weren’t necessarily said by all the right people. We are aware that the public looks at NRDC for information, so we did our best to provide scientifically rigorous and accurate replies to some of Zoback’s allegations, but I think ultimately it might take an academic figure of a similar standing to come forward and provide the counterpoint. And that hasn’t happened for a number of reasons: people don’t necessarily have the time, academics tend to write in the affirmative or not in response to something negative that someone else published. There’s also an unwritten rule among academics of ‘I won’t poke your eye if you don’t poke mine.’ The Stanford paper broke the rules, but people are reluctant to fight back.
Using the example of Weyburn, when there were broad allegations of leakage in the field, there was definitely a lot of intense press coverage across the world for a few weeks. Then the issue went into the freezer until two independent entities went to the site and carried out research, both concluding in similar fashion that the detected CO2 was not coming from the field, but that it was naturally occurring in the prairie soils, and the record was set straight. I’m not aware of any long-term fallback from that story in Canada that affected prospective CCS project deployment on the ground.
Will the concerns about induced seismicity have an effect on the siting of individual projects in the U.S.? We don’t know. I think these could be things that are brought up in a future hearing in Congress. That’s perhaps a more likely mechanism for a story like this to have a material effect rather than the siting of a project on the ground. But that remains to be seen. In the meantime, what people need to do is provide good science to answer what was said in that opinion piece.
