|
CCUS gets 1st hearing
Governor’s proposal for revenue from carbon storage heard in House Resources
Kristen Nelson Petroleum News
Alaska Gov. Mike Dunleavey’s proposal for the state to generate revenue from carbon capture, utilization and storage, CCUS, got its first hearing in the House Resources Committee Feb. 10. House Bill 50 also has a referral to House Finance. The Senate version, Senate Bill 49, has the same committee referrals in that body, but had not yet been scheduled for its first Senate hearing when this issue of Petroleum News went to press.
Among its provisions, the bill would allow the Department of Natural Resources to lease pore space for the storage of carbon dioxide, CO2, and allow the Alaska Oil and Gas Conservation Commission to apply for primacy in permitting CO2 injection wells, classified by the Environmental Protection Agency as Class VI wells. AOGCC already has primary for Class II wells, used for injection for enhanced oil recovery.
DNR Commissioner-designee John Boyle told the committee the CCUS proposal allows the state to diversify its revenue stream and monetize resources never before monetized - empty pore space. Pore space is considered a mineral resource, he said, and the state’s broad ownership of that resource sets it apart from other states and allows it to be a one-stop shop.
CCUS CCUS captures carbon dioxide from industrial processes or directly from the atmosphere, Aaron O’Quinn, leasing section manager in DNR’s Division of Oil and Gas, told the committee.
By acting now, he said, the state can benefit from a rapidly expanding CCUS market and from federal grants and tax incentives, taking advantage of the geologic potential for storage in Alaska, which exists in depleted oil and gas fields, saline aquifers and deep coal seams.
Alaska has competitive advantages, O’Quinn said, including ownership of the pore space and knowledge of the reservoirs.
CO2 is stored at depths of 2,600 to 3,000 feet or deeper where pressure is enough to keep it in supercritical state.
David LePain, director of DNR’s Division of Geological and Geophysical Surveys, said at pressure of 1,100 psi, CO2 becomes supercritical - midway between a gas and a liquid - taking on the properties of a liquid although still a gas.
Benefits to Alaska O’Quinn said CCUS would booster development of the state’s oil and gas and take advantage of federal incentives which are driving investment in peer states, allowing companies to meet environmental, social and governance concerns with carbon management options.
He mentioned greenhouse gas issues that projects have faced in seeking approval under the National Environmental Protection Act and said carbon storage in Alaska would allow companies an option for mitigating carbon emissions.
Getting started is important, O’Quinn said, because CCUS projects are estimated to take 5 years or more to start construction - from screening of prospects and feasibility studies, through design and permitting of the project, regulatory review and then investment and construction.
The federal tax credit program for CCUS projects requires construction to begin by January 2033.
What state needs to do The bill provides that the state would use an exploration license process, which requires a best interest finding. A carbon facility storage permit would be required from AOGCC. Both processes would have to be established by regulations.
The bill also allows AOGCC to seek Class VI well primacy from the EPA - Class VI wells are CO2 injection wells. The agency already has primary for Class II injection wells, used for enhanced oil recovery. There is federal money available to help states stand up Class VI primary, O’Quinn said, and industry has indicated it wants to work with states that have that primacy because state timelines are considered more dependable than EPA timelines.
Properties of CO2 LePain discussed the characteristics of CO2.
Its physical state varies with temperature and pressure, and pressure increases with depth. More CO2 can be stored when in its supercritical state, he said.
When injected, CO2 displaces pore fluids.
He used the sandstone in the Tyonek formation in Cook Inlet to illustrate requirements for CO2 storage, which include:
*Porosity - void space.
*Permeability - interconnected voids.
*A trap.
*A seal.
*Depth greater than 2,600 feet.
The seal above the sandstone needs to be impervious, LePain said, as CO2 will want to rise. In Cook Inlet, that seal is impenetrable mudstone and there are typically stacked sandstones separated by impenetrable mudstones - so multiple reservoirs and multiple mudstone seals.
Storage options Depleted oil and gas fields are one type of storage options.
These, LePain said, have proven reservoirs, trap and seal; extensive data exists on the properties of such reservoirs - temperature, pressure and water salinities; their sandstone geometries and pore volumes are well characterized; original oil in place is known; and there is existing infrastructure.
In declining oil fields, CO2 is used for enhanced oil recovery.
Saline formations can be used for storage, he said, but data on those is not as well known as data for depleted oil fields.
There is also a lot of coal buried too deeply for mining and CO2 has a strong affinity to coal particles where it remains immobile for the geologic future.
In Cook Inlet there are thousands of feet of interbedded sandstone, mudstone and coal, he said. There are proven reservoirs and traps in 10 oil fields and 38 gas fields, and a large volume of pore space potentially available for CO2. There is seismic activity, but hydrocarbons have remained trapped for millions of years.
On the North Slope, LePain said, there are thousands of feet of interbedded sandstone and mudstone, with more than 70 oil accumulations and several gas accumulations. There are proven reservoirs and traps and many large fields in decline, with EOR potential.
He said the U.S. Geological Survey has estimated mean total CO2 storage potential on the North Slope at 270 billion metric tons and there is also a potential for CO2 storage in unmineable coat seams estimated at 5.83 billion tons.
There are also Interior sedimentary basins, but those are data poor, LePain said.
Development of legislation O’Quinn said the legislation was developed through a review of peer state legislation with a focus on states with ongoing projects, coordination with other state agencies and a statewide CCUS stakeholder workgroup.
The working group met through the summer, he said, followed by a full day workshop and publication of a stakeholder white paper which summarizes the questions and answers from the process.
In addition to state agencies, the group included oil and gas operators, Native landowners and storage operators in other jurisdictions.
North Dakota and Wyoming have already been awarded Class VI primacy, he said, and Louisiana has applied, with West Virginia, Texas and Arizona in the pre-application phase.
He said HB 50 enables CO2 storage by:
*Providing for the use of public lands for CCUS.
*Accounting for amalgamation of property interests and protection of correlative rights.
*Outlining relationship between other commercial minerals and reservoirs to be used for storage.
*Enabling permitting of CO2 pipelines.
*Defining ownership of CO2 and ascribing liability.
*Addressing authority for Class VI well primacy.
Who does what Fiscal notes attached to HB 50 describe some agency responsibilities.
AOGCC would create regulations for CCUS as well as pursuing primacy for Class VI wells from EPA.
A carbon storage closure trust fund is created in the bill to pay for post-closure maintenance and monitoring of CO2 storage facilities by the state.
The Division of Oil and Gas would issue regulations for evaluation of applications for CO2 storage licenses and leases and establish a competitive bidding process for competing license applications.
| 