1. 1 Carbon Capture and Storage (CCS) in the United States: The Challenges Ahead Carbon Capture and Storage (CCS) in the United States: The Challenges Ahead Presentation to North American Energy Standards Board Houston, Texas June 23, 2010 Robert W. Gee, President Gee Strategies Group, LLC

2. 2 What is Carbon Capture and Storage (CCS) a.k.a. Carbon Sequestration CO 2 Capture (Separation & pressurization) CO 2 Capture (Separation & pressurization) CO 2 Transport (If necessary) CO 2 Transport (If necessary) CO 2 Storage Purpose: Reduce CO 2 emissions to avoid climate change.

3. 3 Capture Source: CO2CRC Natural Gas Separation Capture From Industrial Processes Post-Combustion Capture Oxyfiring Pre-combustion Capture

4. 4 Transport Source: United States Department of Transportation Current U.S. Carbon Dioxide Pipelines

5. 5 Storage EOR Source: CO2CRC

6. 6 Can CCS become commercial in the United States? Yes, provided that challenges can be overcome: Well-Recognized Challenges CO 2 emissions reductions have value with reasonable certainty Costs are below the value of the reductions Storage is proven in a range of geologies An adequate legal-regulatory framework is in place The public supports CCS A Less-Understood Challenge Viable business models must be implemented for the full value chain CaptureTransportStorage

7. 7 Who are the players? Power Companies Financial Institutions Equipment Vendors Oil and Gas Industry Pipeline Companies Process Industries Challenge: Integrating Diverse Industries Oilfield Services Engineering/ Service Coal Industry

8. 8 First commercial scale demos are being planned in the United States and elsewhere. 8 Source: Global Carbon Capture and Storage Institute

9. 9 How can the CCS value chain be assembled? CaptureCaptureTransportTransportStorageStorage - Oxygen - Gasification - Power Generation - Industrial Process - Separation - Compression - Point-to-Point - Network -Site Selection -Site Characterization -Injection Operation -MVA -Remediation -Closure Value of Emissions Reduction Financial Incentives How are value, cost and risk allocated? What should be the role, if any, of economic regulation across the value chain? regulation across the value chain?

10. 10 Bluewave Resources/ Gee Strategies Group Current Project Objectives and Process Objectives Create a roadmap that points to opportunities and solutions. Consider how CCS-related business models mesh or clash; and Identify critical business issues that cut across the industries. Ongoing Process Individual Interviews Facilitated Group Discussions Supporting Analyses

11. 11 Participants Trade Associations Electric Power Process Industry Oil and Gas Majors Independent Oil and Gas Pipeline Companies Equipment/Engineering/Service Coal Producers Financial Services Utility RegulatorsSponsors

12. 12 Priority Issues for CCS Businesses RankQuestion 1How do we move from RD&D incentives to commercial investment? 2Would a commercial entity be willing to do storage? 2How do we address public acceptance? 4What should be the role, if any, of economic regulation across value chain? 5Can we learn from similar experiences in other industries or countries? 6Should we move from individual projects to networks? 7EOR or saline formations: Where should the emphasis be? 8Would a commercial entity be willing to do transportation?

13. 13 Various industry structures have been proposed. These include several types of stand-alone project and network structures. Companies along value chain are evaluating business models for prospective industry structures. –How do these mesh or clash? Much is as yet uncertain. –Timing and value of CO 2 reduction requirements –Evolution of the technology –Role of economic regulation Industry structure will vary by region and change over time.

14. 14 From RD&D incentives to commercial investment… The Theory Source: Bluewave Resources, LLC and CO2CRC Commercial Investment

15. 15 From RD&D incentives to commercial investment… Todays State of Play Transitional Incentives EOR Commercial Investment First mover advantage or disadvantage? ? ?

16. 16 Would a commercial entity be willing to do storage? With apologies to Thomas Nast. Can a viable business model be created?

17. 17 How do we address public acceptance? Cover of Dutch Magazine NWT, April 2009 http://www.natutech.nl/00/nt/nl/47_58/artikel/order/200904/4_2009.html CCS projects cancelled or in trouble due to public opposition: Barechdrecht, Netherlands Carson, California Greenville, Ohio Neutrebbin, Germany Stadum/Hörup, Germany

18. 18 Locational Differences in Storage Opportunities Distant Storage Abundant Local Storage

19. 19 Should we move from individual projects to networks? Initial CCS projects will have: - One source, - One storage reservoir - A dedicated pipeline. As CCS expands, there may be advantages to sharing resources to develop regional networks. Fleet A Fleet B

20. 20 Regional CCS Networks Under Development Source: ICO2N Source: Rotterdam Climate Initiative Source: SenterNovem Rotterdam, Netherlands Northern Netherlands Alberta, Canada Yorkshire and Humber, England Source: Yorkshire Forward

21. 21 Would a commercial entity be willing to transport CO 2 ? Is there a viable business model to incentivize capital formation? - How will this be financed? Who should perform this service? How will it be regulated? - By Whom? New infrastructure is required for CO 2 transport: How real is this as a near-term business opportunity? Source: NETL

22. 22 EOR or saline formations: Where should the emphasis be? Enhanced Oil Recovery vs. Saline Formations Revenues offset costs Limited Capacity Abundant Capacity Just Costs

23. 23 Two types of industry structures are viable today. Low-Hanging Fruit Public-Private Partnership (PPP) Government/industry share costs & risks Produces information, not profits Government sets the rules Information is shared Benefit: Early access to technology High-Concentration CO 2 Source Short Distance Transport EOR FutureGen Model Co-Investment Model Best with existing assets Profits, but a small niche. Participant Consortium Host Facility Projects Not sustainable long term

24. 24 CCS will need to meet many standards for… Safe operation of capture, transport and storage facilities. Storage capacity estimates Risk assessment Site selection and permitting Monitoring, Verification and Accounting (MVA). –Monitoring of the injection and storage –Verification of performance –Accounting for CO 2 emissions reduction incentives (e.g., cap-and-trade) CO 2 quality for pipeline transport and injection into storage Site closure and post-closure stewardship These standards and who will set them has mostly yet to be decided... Could it be NAESB?

25. 25 Needed: business & technical interface standards. CaptureCaptureTransportTransportStorageStorage - Oxygen - Gasification - Power Generation - Industrial Process - Separation - Compression - Point-to-Point - Network -Site Selection -Site Characterization -Injection Operation -MVA -Remediation -Closure Value of EmissionsReduction

26. 26 Questions?

27. 27 Robert W. Gee President Gee Strategies Group LLC 7609 Brittany Parc Court Falls Church, VA 22304 U.S.A. 703.593.0116 703.698.2033 (fax) rwgee@geestrategies.com www.geestrategies.com