EPA’s Proposed Geologic Sequestration Rule

1. EPA’s Proposed Geologic Sequestration Rule Administrator Johnson signed July 15, 2008 120 day comment period Final rule in 2010 or 2011

2. Key Points Regarding SDWA • SDWA UIC – 42 USC § 300h et seq. • Establishes minimum federal standards to protect USDWs • USDW – any aquifer capable of supplying water to a public water system with < 10,000 mg/L TDS • EPA has broad emergency powers under “imminent and substantial endangerment” 42 USC § 300i • contaminant which is present or is likely to enter a USDW (i.e., “endangerment”) • EPA can order shut down of wells, remediation, replacement of water supplies • Violations – administrative orders, civil actions and criminal enforcement • UIC Regulations – 40 CFR Part 144 - 148

3. UIC Program • Collective State/Federal Experience • Over 9B gallons of hazardous waste injected each year • Over 2B gallons of brine from oil & gas every day • Over 1B gallons of municipal wastewater every day • Well Classes • I – deep haz waste/industrial non-haz/municipal (500) • II – oil & gas fluids/brines/hydrocarbon storage (147,500) • III – mineral extraction (17,000) • IV – shallow haz/radioactive wastes (subject to 1984 ban) • V – experimental technology (650,000) • VI – geologic sequestration (NEW)

4. UIC – Delegated State Primacy

5. UIC Progam Elements • Site Characterization • Area of Review and Corrective Action • Well Construction • Well Operation • Site Monitoring • Well Plugging and Post-Injection Site Care • Financial Assurance • Public Participation

6. GS Rule - Overview • EPA considered 4 alternatives: opted for “tailored requirements approach” • Applicable to all U.S. and up to 3 miles offshore • Beyond scope: risks to air, human health, ecosystems • State primacy for Class VI • must promulgate regulations at least as stringent as the final rulemaking • Targeted formations: below lowermost USDW (deep saline, depleted oil/gas, unmineable coal seams, basalt)

7. GS Rule - Overview • Plans required • AoR and Corrective Action • Monitoring and Testing • Emergency and Remedial Response • Post-injection Site Care and Site Closure Plan • Increased frequency of mechanical integrity monitoring from 5 to 1 year • Tracers (odorants) not required but recommended to detect leaks • Multi-barrier, continuous monitoring (confining zone, USDW, surface air, soil gas) with alarms and automatic shut-off valves • State discretion to require monitoring for CO2 in surface air • Raises question whether federally enforceable

8. GS Rule - Overview • Permit issued through post-injection site care (50+ years) • Periodic updates to AoR models and corrective action status • States/Tribes may be more stringent than EPA • Estimated cost of commercial scale GS well • $3.40/t CO2 of which $1.20/t is attributable to new GS rule (compared to $42/t CO2 for capture at IGCC plant)

9. Liability Concerns - RCRA “. . . EPA cannot make a categorical determination as to whether injected CO2 is hazardous under RCRA. . .” • Defined “carbon dioxide stream” to exclude hazardous wastes • CO2 stream composition will depend on flue gas scrubbing technology, additives, CO2 capture technology. • Test as hazardous per 40 CFR 261 (characteristic wastes: reactive, ignitable, corrosive and toxic) • If hazardous, cannot use Class VI

10. Liability Concerns - CERCLA • “. . . whether or not there is a ‘hazardous substance’ that may result in CERCLA liability from a sequestration facility depends entirely on the make-up of the specific CO2 stream and of the environmental media (e.g., soil, groundwater) in which it is stored.” • Impurities in CO2 stream that are hazardous substances, e.g., mercury • Chemical reactions with groundwater that create hazardous substances after injection, e.g., sulfuric acid, carbonic acid • Dissolution of minerals that may liberate heavy metals

11. CERCLA (cont’d) • Potential for case-by-case claim for Natural Resource Damages or response costs – Trustees (U.S., State, Tribes) may pursue • Defense to liability – “federally-permitted release” • Expressly applies to UIC (42 USC 9601(10) and 9707(j)) • courts have construed narrowly – nicknamed “disappearing exemption” N/A if release is (1) not expressly permitted; (2) exceeds the limitations established in the permits; or (3) occurs during a time period when there were no permits.

12. CERCLA (cont’d) “Class VI permits will need to be carefully structured to ensure that they do not ‘authorize’ inappropriate hazardous releases . . . include clarifying if there are potential releases from the well which are outside the scope of the Class VI permit.” What releases and “potential” releases should be included in a permit application and permit? What is an “inappropriate” release?

13. Practical Challenges • Phased corrective action/monitoring wells • Negotiating site access agreements • What happens if access denied? • EPA recommends monitoring groundwater for heavy metals and organics to track plume and pressure front. • How much sampling? • What are the risks? • What happens if contamination is identified unrelated to UIC?

14. Post-Injection Site Care • 50 years (possibly longer) or less time if demonstration of no endangerment (monitoring and modeling in sync) “. . .could be 100 years (or longer) if monitoring and modeling information suggest that the plume may still endanger USDWs. . .” • Deed recordation for the facility property (in perpetuity) - What about other properties below plume? • Financial Assurance • Terminates after completed P-I site care approved and no longer endangerment • Specifies only a “general duty” to obtain financial care (guidance to be provided later) • May allow bi-furcated approach (well plugging v. P-I site care)

15. Long-Term Liability Transfer • “SDWA does not provide EPA with the authority to transfer liability from one entity to another.” • UIC regulations allow permit to be transferred • Trust responsibilities for owner/operator are in perpetuity • EPA says owner/operator may still be held responsible after post-injection site care for unanticipated migration that endangers USDW • although parties may agree to contractually shift liability, such agreements may not be binding on the government