Statements from PEC and EDF on Senate Bill 831: Carbon Capture Legislation

Testimony of the Environmental Defense Fund:

Adam Peltz, Director and Senior Attorney
Before the House Environmental Resources & Energy Committee Harrisburg, Pennsylvania
June 7, 2023

Chair Yaw, Chair Comitta and Members of the Committee, thank you for inviting me to testify today on the Pennsylvania’s approach to managing carbon sequestration. I am Adam Peltz with the Environmental Defense Fund, and I have been working on mitigating environmental impacts from geologic energy management, including in Pennsylvania, since 2011.

EDF welcomes this opportunity to discuss how Pennsylvania can pursue carbon sequestration as a climate mitigation solution while ensuring key climate, environmental, public health and social risks are properly managed.

I. Introduction

Pennsylvania policymakers and industry stakeholders have made it clear that they see carbon sequestration as a meaningful pathway toward decarbonizing Pennsylvania’s economy, especially in light of recent efforts to pursue U.S. Department of Energy funding toward the development of a blue hydrogen hub utilizing CO2 storage.¹

EDF recognizes that economy-wide decarbonization will require CO2 storage at scale across a variety of use cases. In order to ensure that such deployment is constructive for both the climate and communities, CO2 sequestration policies and applications must:

• be technically sound and economically justified as compared to available decarbonization alternatives for the given application;
• meaningfully address community considerations through transparent consultation, collaboration, and proactive mitigation efforts; and
• be deployed under policies, incentives, and regulatory programs designed to ensure the safety and environmental integrity of projects across their life cycle – including capture, transportation, sequestration, and long-term oversight.As Pennsylvania pursues legislation to authorize the Commonwealth to seek primacy for Class VI regulation from the U.S. Environmental Protection Agency and to create a legislative framework for related issues like pore space ownership, liability management and long-term stewardship, EDF offers the following observations and perspectives on particular framework elements:

  II. Liability Management

  The federal regulation governing CO2 sequestration, Class VI of EPA’s Underground Injection Program, provides for financial assurance and insurance requirements for CO2 sequestration projects through their closure to cover potential liabilities that may arise from project operations.

  At the end of a project’s life (i.e., after injection is complete, the injection wells are plugged, the post-injection site care period has elapsed, and the project operator receives a project closure certificate from the regulator), the Class VI rule provides for the return of financial assurances to the operator and relieves the operator of ongoing routine monitoring and maintenance requirements.

  Those are the only two changes in operator responsibility provided by the Class VI rule when closure is approved. Under the federal rule, operators remain liable for problems arising after site closure until statutes of limitation have run, but some states have pursued legislation to relieve operators of any and all post-closure liability and transfer it to the state. Such an unlimited liability transfer creates a moral hazard where operators are not properly incentivized to conduct operations in a protective manner; sends mixed signals to the public about the safety of CO2 sequestration, and runs afoul of the federal rules in a way that threatens the ability of states with such statutes to receive Class VI primacy from EPA.²

  EDF believes that properly selected and managed sites have a very low risk of liability arising in the post-closure period, and that any such remaining risk can be managed through insurance and application of traditional statutes of limitation. Nevertheless, for states determined to grant liability exemptions to operators for the post-closure period, EDF strongly recommends omitting criminal and contract liability from exemption, and applying the following limitations to remaining exemptions in order to avoid moral hazard, public mistrust and primacy problems, reverting liability to the operator in situations where:

  1. (1)  The operator violated a duty imposed on the operator by state law or regulation prior to approval of site closure and any applicable statutes of limitation have not run;
  2. (2)  The regulatory agency determines, after notice and hearing, that the operator provided deficient or erroneous information that was material and relied upon by the regulatory agency to support approval of site closure;
  3. (3)  The regulatory agency determines, after notice and hearing, that there is fluid migration for which the operator is responsible that causes or threatens imminent and substantial endangerment to an Underground Source of Drinking Water; or

  4. On June 2nd, the Louisiana Legislature passed a law that incorporated these exclusions, thus modifying that state’s previously broader liability exemption framework in advance of an EPA hearing later this month that will determine Louisiana’s eligibility for Class VI primacy. To the extent the Pennsylvania Legislature feels obligated to provide some kind of liability exemptions for CO2 storage operators, EDF strongly recommends adhering to the limitations on liability exemption described above.

     III. Long-Term Stewardship

     It is important to observe the distinction between liability and responsibility in the post-closure context – while EDF does not feel that liability exemptions are needed, EDF does recognize the utility of a long-term stewardship program for storage facilities during the post-closure phase, especially in light of the risk of operator bankruptcy.

     To that end, many states have adopted legislation wherein the state takes over routine monitoring and maintenance of the facilities, to be funded by a Carbon Dioxide Storage Trust Fund of some kind – this helps to protect Pennsylvania taxpayers from being burdened with these costs in the future. Such Funds can also be structured to cover costs incurred by the state for overseeing CO2 storage projects during their operational lifetimes.

     Should Pennsylvania take that approach, EDF recommends instituting a system where operator contributions toward the life-of-project portion of the Fund be split with 50% go immediately to the Fund and 50% go to an escrow account, and operator contributions toward post-closure monitoring and maintenance are 100% allocated to an escrow account. Then, on approval of closure, funds in the escrow account that the regulator deems necessary to cover monitoring and maintenance in the post-closure period should the transferred to the Fund, with any remainder reverting to the operator. Meanwhile, the regulators should set the fee, usually on a per-ton basis, at a level sufficient to cover expected costs.

     This structure is designed to ensure that sufficient funds are available for each project as it reaches closure for any post-closure monitoring and maintenance, and to protect the funds against raiding by the Legislature for alternative purposes, which could create a shortfall in the regulator’s ability to adequately oversee the program.

     IV. Regulatory Capacity

     Regulating Class VI CO2 storage facilities is complex, computationally intensive, and relatively new to most regulators. Agency costs, between staffing, independent contractors, and modeling software, are generally expected to be high. Regulators will require comprehensive training in: permit-relevant properties and characteristics of CO2; assessing the sufficiency of storage site characterization (description and static model); evaluating the fluid-flow modeling and assessing the proposed areas of review; reviewing site-specific risk analysis; assessing and reviewing a monitoring plan prior to execution; pre-injection testing and characterization during well construction; evaluation of monitoring and testing results reported during the injection operation, injection modification, changes in AOR and remediation plans; injection modification, changes in AOR, corrective action and remediation plans, closure and post-injection site care (PISC); and financial assurance.

     For Pennsylvania, most of these functions will be especially new as Commonwealth does not currently have primacy for any classes of the Underground Injection Control program. The amount of time and effort needed merely to put together an application for Class VI primacy, let alone actually oversee an operational program, are considerable and must not be underestimated. The EPA and the public will be watching closely to see if Pennsylvania’s preparations are sufficient to adequately and safely oversee Class VI regulations as part of an application for primacy consideration.

     V. Induced Seismicity

     Almost any injection of fluids into the subsurface will induce a measurable degree of seismicity. Sequestration of carbon dioxide is no exception, and is a particular risk in Appalachia geology. However, with proper safeguards, induced seismicity can be managed to levels below those that cause damage or constitute a public nuisance.

     Because the Underground Injection Control program is predicated around groundwater protection, the Class VI rules themselves only contemplate management of induced seismicity of sufficient magnitude to compromise containment and threaten Underground Sources of Drinking Water. Nevertheless, without additional safeguards, there is a risk of induced seismicity from CO2 injection below a threat to drinking water level but above a public nuisance level –enough to knock bricks off chimneys and otherwise disconcert communities in proximity to injection activity.

     To that end, comprehensive legislation on CO2 sequestration in Pennsylvania should include a charge to the regulator to adopt rules meant to detect and mitigate against induced seismicity of problematic magnitudes – e.g., 2.7 as in California. EDF provides a possible legislative formulation:

     “The Department must determine a seismicity threshold low enough to avoid public concern, require monitoring designed to determine whether the risk of seismic activity above that threshold is significantly increased by a project’s injection, develop a reporting procedure for operators to provide seismic activity data to the Department, and require mitigation if seismic activity exceeds thresholds. The seismic array can be deployed at the surface, in the subsurface, or both, and should be designed to determine the presence or absence, magnitude and hypocenter location to the best of the operator’s ability of seismic activity within the vicinity of the storage complex at least two orders of magnitude smaller than the acceptable seismicity threshold.”

     VI. Community Impacts and Environmental Justice

     Geologic sequestration of CO2 is merely the end stage of technical carbon management, which starts with CO2 capture at an industrial facility or directly from the air, and is followed by CO2 transport (usually through pipelines) to the sequestration site. Each stage of the value chain has its own overseeing agencies, regulatory frameworks, and potential risks for communities in proximity to the activity. While these comments are primarily oriented around the CO2 sequestration portion for which Pennsylvania is contemplating seeking primacy from EPA, the Commonwealth must ultimately address risk mitigation across the entire value chain in a thoughtful and coordinated manner. As this new industry develops, Pennsylvania has the opportunity to avoid repeating past approaches that have led to undue and unjust burdens for communities that live, work, and recreate near industrial facilities.

     With respect to community impacts and environmental justice related to CO2 sequestration sites, the EPA is requiring states seeking primacy to “identify and address any particular impacts on minority and low-income populations.”³ It is worth including in full the requirements that EPA has proposed for Louisiana as part of its Class VI primacy application:

     The state will work within its legal authority to support communities through a variety of approaches, including:

     Implementing an Inclusive Public Participation Process. The state will fully incorporate robust and ongoing opportunities for public participation, especially for lower- income people, communities of color and those experiencing a disproportionate burden of pollution and environmental hazards, as described in the Program Description. For example, the state will provide notice of proposed Class VI wells and tailor public participation to specific community needs and interests. Tailored public participation activities may include scheduling public meetings at times convenient for residents with appropriate translation services where needed, enabling face-to-face or written feedback on permit applications early in the review process, convening local stakeholders and community groups for safety planning, or supporting the development of community benefits agreements.

     Considering Environmental Justice & Civil Rights Impacts on Communities. As described in the Program Description, the state will include environmental justice as a core element in implementing their Class VI programs. For example, in their review of permit applications, the state will evaluate whether the siting of a Class VI project at the proposed location will create any new risks or exacerbate any existing impacts on lower- income people and communities of color. Such evaluations will consider the presence of existing environmental hazards, cumulative impacts, potential exposure pathways, and susceptible sub-populations, as well as the likely distribution of any environmental and public health benefits from the proposed Class VI project in affected communities. EPA’s EJScreen will be employed to identify environmental and social stressors in specific communities, as described in the Program Description. EPA encourages the use of other tools to calculate impacts to communities, including but not limited to the most up-to-date versions of EPA-published EJ guidance documents.

     Enforcing Class VI Regulatory Protections. The Safe Drinking Water Act UIC program Class VI regulations include strong protections for communities to prevent contamination of underground drinking water sources. These regulatory protections include a variety of measures, including proper site characterization and strict construction, operating, and monitoring requirements to ensure well and formation integrity, proper plugging of wells, and long-term project management and post-injection site care to ensure leakage prevention. The state will properly implement and enforce these requirements to protect communities from potential harms associated with injection wells. The state will post regular reports of enforcement activities in a manner accessible to the public.

     Incorporating Other Mitigation Measures. The state will proactively work within its legal authority to prevent and/or reduce any adverse impacts to underground sources of drinking water from well construction and operational activities. While the UIC program is designed to protect underground sources of drinking water, there are a range of mitigation measures that the state may incorporate to ensure Class VI projects do not increase environmental impacts and public health risks in already overburdened communities. Measures designed to protect residential areas could include carbon dioxide monitoring and release notification networks, and installation of enhanced pollution controls. Additionally, the state could encourage the adoption of other measures to offset impacts by improving other environmental amenities for the communities identified within the delineated area and providing resources for clean-up of previously degraded public areas.

     Advocates in Louisiana argue that this approach is nevertheless insufficient to protect communities because they do not require the regulator to make modifications or deny permits where needed to protect overburdened communities from impacts, nor do they address potential impacts from CO2 pipelines or from capture facilities (which are arguably greater than the impacts from the sequestration sites themselves).

     The Pennsylvania Legislature and the Shapiro Administration should work collaboratively with stakeholders to determine how best to address community impacts from the technical carbon management value chain. EDF does not purport to speak for impacted communities, but offers the following thoughts as Pennsylvania embarks on this journey:

     • Consider how best to incorporate the principles encapsulated in the EPA MOA with Louisiana
     • Consider how to enable the regulator to modify or deny permits where the proposed project would have disproportionate impacts on overburdened communities
     • Consider how to coordinate across the value chain between the regulators overseeing capture, the regulators overseeing transport, and the regulators overseeing storage to provide for a seamless and consistent experiences for communities impacted by these interrelated projects
     • Consider how to address cumulative impacts from multiple facilities in close proximity to each other, with respect to both surface and subsurface management(4)  The regulatory agency determines neither a Carbon Dioxide Storage Trust Fund, nor any amounts held in escrow, are sufficient to cover costs arising from geologic storage facilities and associated carbon dioxide injection wells after site closure.

     *                      *                    *

     As Pennsylvania works toward frameworks to govern geologic sequestration of CO2 andsupporting activities, it is critical that the Commonwealth get the rules right and be prepared to enforce those rules competently and robustly. EDF hopes these considerations are helpful, and looks forward to working with the Pennsylvania Legislature as it develops these key oversight frameworks.

     For additional technical considerations, please see the linked paper, “Strategies for Attaining CO2 Sequestration with Environmental Integrity,” SPE-210911-MS, attached as an appendix to these comments:

     EDF testimony for PA Senate ERE hearing 6-7-23

     References:

     1. Team PA Submits Hydrogen Hub Application For Decarbonization Network Of Appalachia (DNA) (19 April 2023), available at https://teampa.com/2023/04/team-pa-submits-hydrogen-hub-application-for- decarbonization-network-of-appalachia-dna/.2. See, e.g., EDF Says Louisiana Liability Statute Should Block CCS Permit “Primacy” (9 May 2023) InsideEPA, available at https://insideepa.com/daily-news/edf-says-louisiana-liability-statute-should-block- ccs-permit-primacy.3. “MEMORANDUM OF AGREEMENT ADDENDUM 3 Between The State of Louisiana And The United States Environmental Protection Agency Region 6 For the Class VI UIC Program” at 4 (4 May 2023), Rulemaking Docket ID No. EPA-HQ-OW-2023-0073, available athttps://www.regulations.gov/document/EPA-HQ-OW-2023-0073-0007.