1. CARBON SEQUESTRATION: CHALLENGES AND UNANSWERED QUESTIONS By Theresa Pugh Director, Environmental Services American Public Power Association Presented to: CEO Climate Change Task Force Meeting January 30, 2007

2. 2 WHAT IS APPA? 2000 Municipal, State Utilities Which Are Community Owned Payment In Lieu Of Taxes Returned To General City Revenue For Fire, Police, Library, Schools Money Must Be Spent Wisely: Low Risk Tolerance For Failure Results Must Satisfy Mayors, City Council And Utility General Managers

3. 3 APPA: PERSPECTIVE ON CO 2 CONTROL APPA Supports Voluntary CO 2 -Mitigating Steps Signatory on the President’s Climate Vision Memorandum of Understanding to Reduce –GHG emissions intensity by 18% by 2018 –Power sector GHG by 3-5% below ’02-’03 baseline APPA Tree Power TM Program: –Provide shade, improve photosynthesis, reduce CO 2 –Golden Tree Award: one tree per customer served

4. 4 APPA MEMBERS ACTIVE IN IGCC At Least Two New Public Power IGCC Plants In Progress –Orlando Utilities Commission/Southern Company –Energy Northwest –NYPA? Key Concern: Will Scheduled Outages Be More Frequent? –Many public power communities small –6 weeks per year problematic & costly to buy on market –Energy Northwest: target 92-96% w/spare gasifier

5. 5 APPA RECOGNIZES IGCC OFFERS ENVIRONMENTAL ADVANTAGES Control of Criteria Pollutants –SO2: to 99% –NOx: to < 0.05 lbs/MBtu –Particulate Matter: < 0.010 lbs/MBtu Thermal Efficiency –Present capability: 38-40% –Future potential: to >50% Combustion Byproducts: 1/100 th of Conventional by Volume

6. 6 IGCC vs. ADVANCED PC: COST 1 Basis: Cost of Generating Electricity (Amortized Capital and Production) –CO 2 Control NOT REQUIRED: IGCC > Advanced PC by up to 20% –CO 2 Control REQUIRED: IGCC < Advanced PC by 10-20% Alternative: What is $/MWh Premium for CO 2 Control? –Advanced PC: CO 2 control: 70% premium –IGCC: CO 2 control: 25-35% premium –Includes conveyance cost of 2800 psig pipeline 1. Source: “Coal-Fired Generation: At The Crossroads”, EPRI Journal, Summer, 2005

7. 7 IGCC: GENERALIZATION IGCC Must Be Applicable to All Coals –Current demo mix limited to narrow range –Multi-fuel designs being explored (Energy Northwest) EPRI: Matrix of Gasifier Designs Required –3 types of entrained-flow –2-3 transport-flow –8 SOA Designs Needed (Coalfleet For Tomorrow) APPA Members Have Experienced Limited Coal Choices in Recent Years –Transportation, costs, labor, force majeur, other –Will IGCC make captive rail better or worse for utilities?

8. 8 IGCC: RELIABILITY Most Reliable Demo – Wabash River – 79% Do Public Power Towns Have To Build Two- Gasifier Designs, Or Two Separate Units? Provisions of the National Energy Policy Act of 2005 Testify to Evolving Technology Status: – $1.8 B Clean Coal Power Initiative: 70% to IGCC –APPA supports DOE funding for R&D and pilots –$800 M investment tax credits for IGCC but not eligible for APPA members since not tradable

9. 9 SEQUESTRATION UNKNOWNS Carbon Dioxide Capture and Storage 1 ( Battelle) –“…..CO2 injection can be considered an established technology….” –“….large-scale deployment of CCS systems…….requires the continued development and field demonstration of more advanced drilling and CO2 injection schemes….” IPCC Report 2 (2005) –“…there must be hundreds, and perhaps thousands, of large – scale geologic storage projects…..” –thirteen key questions (page 204) discussed and addressed 1.Carbon Dioxide Capture and Geologic Storage, Global Energy Technology Strategy Program Phase 2, April, 2006. 2.Carbon Dioxide Capture and Storage, Intergovernmental Panel On Climate Change, Final Report, Cambridge University Press, 2005.

10. 10 SEQUESTRATION: WHAT’S INVOLVED? Reference: 1 GW Generates 30,000 tons CO 2 /d Inject as “Supercritical” Fluid (Acts Like Both a Liquid and Gas) To 1/2 Mile or Deeper to Minimize Volume CO 2 Once Injected is: –less dense than encased fluids, and under pressure –Will migrate both laterally and up –Can diffuse, adsorb, mineralize, and solubilize –Can we predict the ultimate fate? 1 GW Plume: Spreads to 100 km 2 (100 m Thick)

11. Source: Batelle CCS Report, p. 17 11 CANDIDATE CO 2 RESERVOIRS ReservoirFeaturesTrappingGlobal/US Capacity,GT Deep Saline Formations Sandstone, carbonate w/voids Hyrodynamic, dissolution, mineralization 9,500/ 3,630 Depleted natural gas Similar to above “700/35 Depleted oilPores from extracted oil “120/12 Deep unmineable coal seams CH 4 attached to coal Chemisorption displacing CH 4 140/30 Deep saline-filled basalt formations Porous zones rich in Fe Hyrodynamic, dissolution, mineralization Unknown/240

12. Source: IPCC Report, Fig. 5-25 12

13. Source: Wilson and de Figueiredo, 2006 13 RISKS FROM GEOLOGIC CARBON SEQUESTRATION CO 2 in Atmosphere or Shallow Subsurface -suffocation of humans or animals -ecosystem impacts (tree roots, burrowing animals) CO 2 Dissolved in Subsurfaces -mobilization of metals, other contaminants -Contamination of potable water -Interference with deep -subsurface ecosystems Quantity-Based -ground heave induced seismicity -Contamination of drinking water by displaced brines -Damage to hydrocarbon production Local CO 2 RISKS Global Release of CO 2 to the atmosphere

14. Source: Wilson and de Figueiredo, 2006 14 CARBON SEQUESTRATION: SEND IN THE LAWYERS ProposalSummary FutureGen Final Request for Proposal (3/2006) “The offerer agrees to take title to the injected CO2 and indemnify the FutureGen Industrial Alliance and its members from any potential liability associated with CO2”. Adequate indemnification? Texas House Bill 149 (5/2006) “Texas Railroad Commission “shall acquire title to CO2 captured” by a FutureGen project. Does this cover utilities and property damage claims? [Failed] Costello amendment to HR 5656 (6/2006) U.S. Department of Energy indemnifies FutureGen consortium and companies for “any legal liability arising out of, or resulting from, the storage, or intentional release, of sequestered emissions”, up to $500 M per incident. Citizen suits?

15. Source: Wilson and de Figueiredo, 2006 15 LIABILITIES: SITING IssueResponsibilityPrecedent Create large, legal single “units” or fields State legislature, courts; state oil and gas offices TX: All parties must agree to unitization. Characterize geophysics of field State oil and gas officeTX: Rich precedent from which to draw. CA: None. Long-term risksUnsureTX, CA: Uncertainty in determining responsible party.

16. Source: Wilson and de Figueiredo, 2006 16 LIABILITIES: OPERATIONAL “THINK HOOKER CHEMICAL’S LOVE CANAL” IssueResponsibilityPrecedent Damage to human health, environment OSHA, EPA state underground injection controls TX, CA: Strong precedent for consumer, health protection. Damage to groundwater EPA, state underground injection controls TX, CA: Responsibilities unclear. Geologic hazards OSHA, EPA state underground injection controls TX, CA: Have regulated injection pressures; no defining case law. Damage to hydrocarbons State oil and gas officeMineral owners compensated in CA but not TX.

17. 17 LEARN FROM THE PAST? Per Battelle 1 and IPCC 2, Catastrophic Failure and Damages “Unlikely”; However: Lake Nyos, Nigeria: Fatal Release of CO 2 Resulting in 1,700 Deaths (1987) Mammoth Mountain CO 2 Leaks of 1200 Tons/d Varied with Seismic Activity (1990-1995), Damaged Trees Other Unintended Consequences: Underground Storage Tanks, MTBE DOD Injections Of Wastes In Colorado In 1970s And Seismic Activities 1.Carbon Dioxide Capture and Geologic Storage, Global Energy Technology Strategy Program Phase 2, April, 2006. 2.Carbon Dioxide Capture and Storage, Intergovernmental Panel On Climate Change, Final Report, Cambridge University Press, 2005.

18. 18 SUMMARY APPA Supports Demo of IGCC, Sequestration: Broad Technology Array Required Taxpayers Money: Always Requires Caution Geologic Sequestration at EOR Site Not Same As Utility Geologic Sequestration at Utility Sites is Highly Uncertain: Caution Should Be Exercised –Unknown consequences severe? –Long time constants: advise slow and steady Learn From The Past:  CERCLA APPA Supports IGCC Where Units Provide Collateral Environmental, Economic Benefits