SEQUESTRATION: EPA board examines a 'nuclear' option to cover risks of burying CO2 (03/18/2009)

No one wanted to assume responsibility for the first nuclear reactors, either. Like that industry in the late 1950s, geologic carbon sequestration projects could face significant barriers in the absence of new ways to reduce their uncertain risks and liabilities.

As it works to finalize regulations that are the first step for governing carbon sequestration, U.S. EPA has commissioned its Environmental Financial Advisory Board, a diverse set of outside experts, to recommend ways to deal with the problem.

The board's first working paper, presented this week, explores a nuclear option.

Enacted in 1957, the Price-Anderson Act successfully grew the nuclear energy industry from one reactor to more than 100 today by capping the industry's overall liability in the event of a catastrophe, the paper says.

It did so by creating a three-tier payment system that first requires the source of an accident to pay the maximum insured amount, and then taps a limited pool of money collected from the entire industry.

Ultimately, costs above $10 billion today would fall to the federal government, a cap that has allowed the industry to grow while ensuring that the public is covered.

While the risks of carbon capture and sequestration (CCS) aren't considered as scary, the fledgling industry faces early barriers of unclear responsibility and unconstrained financial risks.

In the event that carbon leaks from its deep geologic storage chambers -- either slowly, which would ruin emissions savings, or catastrophically, which, although unlikely, poses safety concerns -- there are unanswered questions about who would be held responsible.

Authority comes from Safe Drinking Water Act

EPA itself got involved through its authority under the Safe Drinking Water Act, because injected carbon could potentially migrate and cause drinking water contamination. The agency proposed a rule last year creating a special class of regulated carbon injection wells and is working to finalize regulations this year.

The paper, presented by advisory board member Jim Tozzi, a budget official during the Reagan administration and today a lobbyist, reviews the Price-Anderson Act's applicability to CCS.

"I am not suggesting we take the contents of the Price-Anderson Act and map them onto CCS," Tozzi said. From reviewing two previous studies and working on the paper, however, he came to the conclusion that it could at least be a useful framework.

One issue, according to the paper, is that if liability is capped, the carbon sequestration industry could be less motivated to review and select the very best sites for its projects.

Also, a carbon sequestration project, unlike a nuclear power plant, proceeds in stages that are each associated with different risks and ownership issues: the actual injection process, closing the site, and long-term monitoring and "stewardship."

Advisory board looking at other regulatory models, including Superfund

As it continues to work throughout the year, the board will also examine other models for distributing long-term risk and ownership issues, such as the National Flood Insurance Program and the Superfund program, or the use of a trust fund.

But the board's overall objectives of both advising on EPA's proposed rulemaking and providing a broader set of principles for governing carbon sequestration underscore the fact that many believe tailored legislation will be necessary to create a coherent set of CCS rules.

Right now, for example, the board will be looking at financial mechanisms under a hazardous waste law, the Resource Conservation and Recovery Act (RCRA), even though the current rules are within the drinking water program.

"At this part of the stage, we will not be inhibited by the organic statutes of EPA, since there is a likelihood that one day there will be new statutory authority," said Tozzi. EPA's proposed rule itself did not rule out that RCRA and Superfund could apply in the event of a sequestration project gone wrong.

Others are on Congress' case. Ian Duncan, an environmental geologist at the University of Texas, Austin, testified to the House Energy and Commerce Committee this month that EPA may not have the legislative mandate for encouraging the identification and use of the most optimal sequestration sites.

"There is no mechanism in EPA rules to identify the best sites for sequestration," he said.

All of this provides a messy framework for those first carbon sequestration projects, which the Obama administration is now trying to jump-start through federal loan-guarantee programs.