1. Carbon Capture and Storage State Legislation Kathy G. Beckett Midwest Ozone Group January 22-23, 2009

2. Basic Outline Legislative findings –prudent to allow CO2 geologic storage –CO2 should be regulated as a commodity –feasible to store CO2 for long periods of time –authorize implementation of Safe Drinking Water Act –liability issues must be addressed

3. Jurisdiction Environmental agency permitting Utility agency (certificate of need; operators deemed public utilities, rate regulation for commercial operators, pipeline safety, possible ALJ role in eminent domain) preempt local controls exempt enhanced oil and gas recovery and gas storage

4. Definitions “Carbon dioxide” means anthropogenically sourced carbon dioxide including its derivatives and all mixtures, combinations and phases thereof.

5. Utility Regulation Certificate of need for storage facilities or transmission line (the key to eminent domain authority) Approval criteria include need and competence Require deference to environmental agency on environmental issues

6. Environmental Regulation permit required for storage facilities (but not pipelines) phase-in for existing facilities authority to regulate withdrawal must satisfy oil and gas regulatory program for drilling, etc.

7. Permitting Criteria That an applicant has obtained or applied for a certificate of public convenience and necessity from the public utility agency: That (a) the formation has characteristics suitable for or which can be made suitable for the storing of carbon dioxide through fracturing or other demonstrated techniques, (b) the boundaries of the storage facility can be established with reasonable certainty and (c) the storage facility is otherwise suitable and feasible for the injection, storage and, if proposed, withdrawal of carbon dioxide; That the use of the storage facility for the storage of carbon dioxide will not contaminate other formations containing fresh water or oil, gas (including stored natural gas), coal, coalbed methane, or other mineral;

8. Permitting Criteria That the storage facility will not be used to inject carbon dioxide into that part of a formation that is within the certificated boundaries (including the protective area) of an existing natural gas storage field certificated by the federal energy regulatory commission or the public utility agency; That the storage facility will not be used to inject carbon dioxide into a formation bearing oil, gas, coal, coalbed methane, or other mineral in commercially-producible quantities utilizing then-current production techniques or technologies in the region, unless the proposed storage operator demonstrates that it is the owner in fee of the oil, gas, coal, coalbed methane, and other mineral in such formation within the proposed boundaries of the storage facilities;

9. Permitting Criteria That the storage facility will be operated in such a manner as to protect human health and the environment; and That the quality of the carbon dioxide to be managed will not compromise the safety or structural integrity of the storage facility.

10. Eminent Domain Alternate 1: eminent domain authorized with environmental and utility approval Alternate 2: eminent domain authorized only by existing law Alternate 1: –other powers of eminent domain preserved –file directly with court or –file with utility agency (with later appeal to court) –property owners determined by review of tax records and response to newspaper notice

11. Storage Facility Trust Fund fee to be set to pay for long-term monitoring, care-taking, insurance premiums, public liability claims not to be used for any other purpose amount of fee not yet determined; $5 million initial contribution per storage facility operator Option: Have a private corporation manage.

12. Administrative Trust Fund a separate fee to fund administration of program not to be used for any other purpose amount of fee not yet determined

13. Transfer of Ownership certificate of completion 10 years after cessation of operations Option: upon issuance of certificate, ownership transfers to state

14. Liability Release Alternative 1: –release of liability upon issuance of certificate of closure –exception in the event of an intentional misrepresentation Alternative 2: –Provide for funding of liability through insurances and designated fund, rather than issue a release state to procure insurance, if available state retains sovereign immunity, except where insured or payable from trust fund

15. Limits on Liability If permitted by state law: –limits on noneconomic loss, punitive damages, joint and –several liability, collateral sources, medical monitoring, third party bad faith two year statute of limitations (10 year maximum) except for intentional misrepresentation

16. Reciprocal agreements Provide for authority to enter into reciprocal agreements with other governments or government entities for the purpose of regulating carbon dioxide storage projects that extend beyond state regulatory authority. Reciprocal agreement to provide that a state’s authorization for a project may be used for purposes of exercising eminent domain in an adjacent state.

17. Ownership of Pore Space conveyance of surface ownership is conveyance of reservoir and pore space unless previously severed, explicitly excluded or surface ownership restricted or limited conveyance of “surface only” does not convey reservoir and pore space

18. Penalties and Injunctive Relief civil penalties of $1000 per violation; $5000 for false statements/misrepresentations criminal penalties of $1000 per violation; $5000 for false statements/misrepresentations and/or 6 months jail time Environmental agency can seek injunctive relief

19. Other Provisions Annual report to legislature.