IN INFR FRAS ASTR TRUCTURE UCTURE FOR R CA CARBON RBON CA - - PowerPoint PPT Presentation

IN INFR FRAS ASTR TRUCTURE UCTURE FOR R CA CARBON RBON CA CAPT PTURE: URE: TE TECHNOL CHNOLOG OGY, , PO POLICY LICY, , AN AND D EC ECONOMICS NOMICS

CO2 EOR State Deployment Work Group Presentation to NARUC Webinar May 15, 2017

Overview

• Background on State CO2-EOR Deployment Work

Group

• States’ Carbon Capture Incentive Recommendations
• Federal Tax and Other Incentives
• State Tax Policy Options
• States’ CO2 Pipeline Infrastructure

Recommendations

• Next Steps for the Work Group

Gr Growi wing ng Sta tate e Sup uppo port t for

• r Carbon

bon Capture pture & C & CO2-EOR EOR

■ Governors, legislators and utility commissioners across the U.S. have signaled growing support for federal and state policies to foster commercial deployment of carbon capture and CO2-EOR.

Year ar Organiza anizati tion

• n

Resolut ution ion Highligh ights ts 2015 Western Governor’s Association Recognized economic and environmental benefits of carbon capture and CO2-EOR; called on Congress to extend and strengthen the federal Sec. 45Q tax credit. 2015 South thern ern States Energy ergy Boar ard Emphasized need for federal incentives and state policy measures. 2016 Nati tional

• nal Associa

iati tion

• n of Regulat

ulator

• ry

y Utility ity Commissioner ioners Highlighted economic, energy production and carbon mitigation benefits, and the importance of state and federal action.

Formati

• rmation
• n of Sta

tate e CO2-EOR OR Deplo loym yment ent Wor

• rk

k Group

• up

■ Co-convened by Governors Matt Mead (R-WY) and Steve Bullock (D-MT). ■ Launched in 3Q 2015:

• Officials from 14 states;*
• Leading industry and

NGO stakeholders; and

• CO2–EOR experts.

■ Seven meetings to date to review modeling results, develop and agree on recommendations, and finalize reports, letters and other work products. ■ Funding from the Hewlett Foundation.

*State participation varies and includes governors’ staff, cabinet secretaries, utility commissioners and agency and commission staff. Kansas and New Mexico are not currently represented in the Work Group.

State CO2-EOR Deployment Work Group Objectives

– Help policy-makers and stakeholders better understand states’ potential for CO2-EOR, & evaluate which strategies and state and federal policies can best achieve that potential; – Make recommendations to states and the federal government; – Support state policy-makers in implementing strategies and policies developed through Work Group analysis and deliberations, including multi-state efforts; and – Encourage enactment of federal policies that complement state priorities through coordinated efforts of governors, other state policy- makers and stakeholders.

The Case for Federal, State Support for CO2-EOR

■ CO2-EOR offers extraordinary benefits for our nation ■ Market forces, federal policies and some state policies are driving industry to reduce emissions ■ Carbon capture with CO2-EOR compares cost-effectively with

• ther forms of zero- or low-

emission generation

Increases US Oil Production Captures Carbon & Reduces Carbon Emissions Creates Jobs, Investment & Economic Activity

CO2-EOR enhances our nation’s energy and economic security

The Case for Federal, State Support for CO2-EOR

■ Turns carbon dioxide from a liability into a valuable ble commodi modity ty ■ US has the potential to produce an estimated 28 billion lion ba barrels rels of economic nomically ally recoverab erable le oil with today’s industry best practices ■ Provides fiscal al benefit its at a time when the federal government and many states face budget challenges. ■ Directly supports high-pa paying ying jobs bs across a range of sectors.

Putti ting ng the he Puzzle zzle Toge gether: ther: Stat State e & F Federal deral Policy icy Dri river ers s for Growing America’s Carbon Capture & CO2-EOR EOR Indus ustr try

• Major report released in December.
• Includes detailed modeling analyses, rationale and

recommendations for carbon capture and EOR deployment as a national priority.

• Represents Work Group analysis and deliberations, including

private sector stakeholders and CO2-EOR experts.

Work k Group up Recommends commends a Pac a Package age of Fede deral al Incen centiv tives

■ Project-level financial feasibility modeling shows that a package of federal incentives is needed to mitigate risk and uncertainty in commercial deployment of carbon capture projects. ■ Based on priority and impact on project feasibility, the Work Group urges Congress and the Administration to: 1.

• 1. Exten

end, d, re reform rm and expa pand the existing ting Secti ction

• n 45Q Tax Cre

redit it for Carbon Dioxide Sequestration to increase its value, make it financially certain and provide for greater eligibility and flexibility for project developers; 2.

• 2. Establi

blish sh federa ral l pr price stabil bilizatio ization n contract racts, or c r contr tracts cts for di r differen rences ces, for CO2 sold from capture facilities to EOR operators to eliminate the risk of price volatility that deters private investment in carbon capture projects; and 3.

• 3. Mak

ake car arbon

• n captu

apture re eligibl gible for

• r tax

ax-exempt pr privat ate e ac activ ivity ity bon

• nds an

and master er limit ited d pa partnership ships s to provide debt and equity, respectively, on favorable terms.

Work rk Group

• up Recomm

commends ends th that at Stat tates es Optimize timize Tax Policies licies to Encour courag age e Carbon bon Capture pture and d EOR R Deplo ployme yment nt

■ In conjunction with improved federal incentives, states can positively affect project feasibility by optimizing taxes common to oil and gas-producing states. ■ The Work Group reviewed:

• Sales taxes on equipment purchased to build a carbon capture facility;
• Property taxes on the carbon capture facility;
• Sales taxes on equipment acquired to adapt an oilfield to CO2-EOR
• perations; and
• Oil and gas taxes, such as production and severance taxes.

■ Based on life-of-project modeling of carbon capture and EOR portions of integrated projects, certain tain targ rgeted ed reductions ductions in n stat ate e taxes es can n bene neficiall cially y impact pact project ject econ

• nomics
• mics equiv

ival alen ent t to r

• rou
• ugh

ghly y an $8 n $8 per r barrel rrel inc ncrea rease se in n the price ice of

• f oi
• il, which is significant compared to existing federal incentives.

Work rk Gr Group up Ca Calls s for a B a Bal alanced, anced, Co Cost st-Ef Effectiv ective e App pproach

• ach to Ca

Carbon

• n Em

Emis issi sions

• ns Reduct

ductions ions

■ Carbon capture merit its s federal l and state policy y suppo port t to accelerat rate commercial cial deployme yment nt, , as has been done successful sfully y for r oth

• ther

r energy techno nolo logies ies. . ■ As policies and markets drive industry to reduce emissions, carbon captur ure deserves es equival alen ent suppo port t as a cri ritical tical componen ent of a broade der, , cost-effectiv ective portfolio io of carbon mitigatio igation n optio ions. ns. ■ Based on cost per ton of CO2 emissions avoided, power plant capture with EOR already compares cost-effectively with other options, especially at higher reduction levels. Retrofitting an existing coal plant is in the middle of the cost curve for low- and zero- carbon generation options.

15 30 34 46 66 95 240 432 50 100 150 200 250 300 350 400 450 500

Cost per Ton of CO2 Reductions

New Solar vs. New CCGT Best Wind vs. CCGT Turn-down Solar vs. Coal Turn-down NGCC-CCS 80% CF Coal Retrofit 90% OR Solar vs. CCGT Turn-down Solar w/ 50% Overgeneration Solar w/ 50% Battery

Wor

• rk

k Group

• up Ex

Expanding panding Focus cus to Incl clude ude CO2 Pi Pipeline eline Infrastru frastructure cture

■ In February, Work Group released 21 21st

st Ce

Centur tury y Ener ergy gy Infras rastr tructure: ucture: Po Policy Reco ecommendation mmendations for Devel elopment

• pment of Ame

meri rican can CO CO2 Pi Pipeline ne Netw twork

• rks:
• Calls on Trump Administration and Congress to make CO2 pipelines a

priority component of a broader national infrastructure agenda (in addition to enacting federal carbon capture incentives);

• Recommends federal role to supplement private capital in financing

increased capacity for large-volume, long-distance trunk CO2 pipelines (“super-sizing” trunk pipelines achieves enormous economies of scale and enables future carbon capture and EOR project deployment); and

• Urges Congress and Administration, in consultation with states, tribal

governments and stakeholders, to identify and foster development of priority pipelines, including planning, streamlined permitting, and financing.

Five Major r CO CO2

2 Pi

Pipe pelin line e Co Corr rridor dors s Co Could d Enable le a Na National

• nal Energy

rgy Pr Production duction and d Ca Carb rbon

• n Managemen

agement t Infras rastru tructure cture

Ben enef efits its of f Proposed posed Nat Nation ional al CO CO2 Pip ipel elin ine e Bui uildo dout ut

■ Work Group recommends five major CO2 pipeline corridors equivalent to scale and volume of Cortez pipeline, world’s largest (30” diameter = 30 million tpy). ■ Such an expansion could create a national infrastructure and supply up to an additional 150 million tons of CO2 annually for EOR and storage, resulting in:

• Tripling of domestic EOR production, or 375 million barrels of oil per year;
• 1/5th reduction in U.S. oil imports from current levels, valued at $30

billion;

• Capture of over four percent of current U.S. stationary source emissions

from power plants and industrial facilities;

• $75 billion of capital investment in carbon capture, CO2 pipeline

construction, and EOR equipment; and

• $30 billion of annual economic activity.

St Stat ate e CO CO2-EOR EOR De Depl ployment yment Work rk Gr Group up Ne Next St Step eps

■ Recommend a menu of federal CO2 pipeline financing options to help inform federal infrastructure legislation in Congress. ■ White paper on regional RTO/ISO wholesale market design and policies to ensure parity and equitable treatment for carbon capture facilities with other low and zero-carbon generation resources. ■ Expand efforts to communicate Work Group priorities and recommendations to federal and state policymakers, stakeholders and the media nationally and in key states.

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