CHAPTER 10 CARBON DIOXIDE INFRASTRUCTURE: PIPELINE TRANSPORT ISSUES AND REGULATORY CONCERNS--PAST, PRESENT, AND FUTURE
| Jurisdiction | United States |
(May 2015)
CARBON DIOXIDE INFRASTRUCTURE: PIPELINE TRANSPORT ISSUES AND REGULATORY CONCERNS--PAST, PRESENT, AND FUTURE
Philip M. Marston
Patricia A. Moore
Executive Director - Government Relations
Denbury Onshore LLC
Piano, Texas
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J. GREG SCHNACKE is Executive Director, Governmental Relations for Denbury Resources Inc. Headquartered in Piano, Texas, Schnacke coordinates government affairs activities for Denbury's executive team at the federal, state, and local level. Prior to joining Denbury, Schnacke was an energy consultant and served as the Chief Executive of the Colorado Oil & Gas Association from 1994-2007 directing strategic, political, and communications activities for the state's largest industry. From 1985-1994, Schnacke served on the senior staff of former U.S. Senate Majority Leader Bob Dole (R-KS), both in Kansas and in Washington, D.C., holding several positions including Legislative Director and Deputy Administrative Assistant. Schnacke is a graduate of the University of Kansas where he holds BS and BA degrees and is also a graduate of the University of Tulsa, College of Law with a JD in Energy Law.
I. Introduction
The first long-line, high capacity pipelines for the transportation of carbon dioxide (CO2) went into service in the United States in the early 1980s, delivering naturally occurring CO2 from source fields in Colorado and New Mexico to oil fields in West Texas for use in CO2-based enhanced oil recovery operations (or simply "CO2-EOR"). In 1989 when the Federal Government decided for the first time to cover the regulation of safety in CO2 pipelines, there were over two thousand miles of CO2 pipes with approximately a dozen covering over 100-mile distances. Today there are over five thousand miles of pipelines in the U.S. transporting both naturally-occurring CO2 and anthropogenic CO2 extracted or captured from plant sources. The primary use for this transported CO2 remains CO2-EOR.
In the oil fields, the injected CO2 is "inherently stored"1 in the oil field as an "intrinsic part"2 of the CO2-EOR process, as explained below. At the end of an EOR operation, "effectively all" of the injected CO2 is ultimately retained in the closed loop EOR
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system.3 Today, there are over 100 CO2-EOR projects in the US with over 8,000 active CO2 injection wells, with projects located in multiple states, including Colorado, Louisiana, Michigan, Mississippi, Montana, New Mexico, Texas (accounting for the single largest number of projects), Oklahoma, Utah and Wyoming.4 A few CO2-EOR operations have been developed in Canada, Hungary and Brazil and are now under consideration in other parts of the world.5
The vast majority of the CO2 supply utilized in EOR operations is transported by pipelines that have been constructed and dedicated to deliver the CO2 to serve these projects. The "midstream" CO2 pipeline infrastructure is thus intimately interconnected with both the "upstream" CO2 supply segment (both naturally-occurring and captured from anthropogenic sources) and the "downstream" CO2-EOR oil field operations, in effect forming a single industry, regardless of ownership of the various asset components. The interdependent nature of these assets and the attendant operations of these asset components require those engaged in project planning, development and operations, as well as those involved in making legislative and regulatory policy to be aware of and address the resultant implications.
The business purpose of CO2-EOR operations is entirely focused on the extraction of a valuable hydrocarbon commodity as regulated under mature state natural resource laws that focus on the conservation of such state resources. In recent years, however, awareness of and the potential for this concurrent geologic storage of large quantities of a greenhouse gas that occurs during CO2-EOR operations has caught the attention of governments worldwide in the context of seeking policies intended to reduce atmospheric emissions of CO2 and other greenhouse gases.6 As a result, the long-established legal and regulatory framework that governs the construction, siting and operation of the associated
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CO2 pipelines is increasingly and materially affected by new and still-evolving policies intended to govern atmospheric emissions of carbon dioxide.
In effect there are now two regulatory paradigms for dealing with the transport and use of CO2. The first is the traditional infrastructure-based paradigm focused on construction of the assets needed to move a valuable CO2 commodity to EOR and other markets. The second is a waste-disposal paradigm in which the CO2 commodity in question is itself (1) deemed a waste that is (2) to be transported for disposal. The intersection of these two regulatory paradigms is creating a variety of legal issues that must be recognized and addressed by practitioners who will need to be familiar with the obligations of both legal frameworks. As explained below, for example, proposed regulatory rules for the capture of an industrial or power generator's atmospheric emissions of CO2 for emissions reduction purposes must be analyzed from the standpoint of both the potential CO2 pipeline transporter (that may be expected to commingle that captured CO2 with other CO2 supplies) as well as the potential CO2-EOR purchaser that would be willing to acquire the captured CO2 solely for the purpose of enhanced oil recovery operations. In summary, both the practitioner and the policymaker need to understand the interdependent nature of the CO2-EOR industry involving supply, transport, and utilization of CO2 in the oil field. This paper seeks to advance that understanding.
II. The CO2-EOR Process
A. Characteristics of dense-phase CO2
CO2-EOR is one of a variety of oil production techniques generally referred to as "tertiary" recovery techniques, i.e. those that are generally used after primary and secondary (e.g. water flooding) operations.7 At standard temperature and pressure, CO2 is a gas. Like many other substances at the requisite combination of temperature and pressure, CO2 can also exist as a solid (commonly called "dry ice") or as a liquid.8 Of relevance here, however, CO2 is among those substances that -- at particular combinations of temperature and pressure -- may also exist as what is termed a "dense-phase gas" (also termed a "dense vapor" or a "supercritical fluid"). Once the temperature and pressure pass a defined phase-change boundary (the "critical point"), the CO2 assumes a physical state that is indeterminate: it is neither a solid, nor a liquid nor a gas. Rather it exhibits simultaneously certain physical characteristics of both a gas and a liquid. For example, dense-phase CO2 is highly compressible, like a gas; it is sometimes termed "spongy". A given volume of CO2 in this state is much denser than gaseous CO2, making it more economical for long-distance transport by pipeline. Maintaining the CO2 in the dense phase generally requires pipeline pressures that range from 1,200 to 2,700
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psi,9 which is somewhat higher than pressures typically used for long-line natural gas pipelines.10
Capacity planning and designs for CO2 pipelines thus differ from those for natural gas pipelines. In addition, dense-phase CO2 flows as a fluid, which means that a long-distance pipeline will use pumps, not compressors, to move the product to markets. In this respect, CO2 pipelines are more analogous to liquid pipelines than to natural gas pipelines. In the subsurface however, dense-phase CO2 retains the capacity to diffuse like a gas through the pore spaces of a solid -- such as the oil-bearing rock in a hydrocarbon formation. This ability to diffuse through rock is critical for a successful EOR operation.
As explained below, the regulations governing CO2 pipelines in the United States have been specifically crafted to reflect the distinctive characteristics of CO2 pipelines and the product they carry.
B. CO2 injections in EOR operations
Primary production typically extracts in the range of 10 to 20 percent of the Original Oil in Place (OOIP); waterflooding and other secondary techniques may then recover a similar quantity, still typically leaving more than half of the original oil remaining in the formation.11 Indeed, one study prepared for the US Department of Energy estimated that primary and secondary recovery techniques nationwide recover only about 32 percent of the original oil in place.12 Although EOR recovery factors vary by field, EOR operations may recover in the range of 5 to 15 percent of the original oil in place,13 with some operators experiencing even higher recovery factors.
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This remaining oil exists as tiny droplets that are trapped in the pores of the formation. These trapped oil droplets are the target of tertiary operations. Hence, CO2-EOR techniques are typically applied following decades of production operations using primary and secondary techniques.14 What this means is that the pressure in the oil-bearing formation has normally been reduced significantly below the original reservoir pressure before CO2 injections ever begin, as illustrated in Figure 1.15 Initially, CO2 is injected to restore the formation near to, or possibly slightly above, the original reservoir pressure, again as shown in Figure 1, in preparation for oil production.
Figure 1 Illustrative Reservoir Pressure Profile for CO2-Enhanced Oil Recovery16
State permitting and regulation -- as well as the requirements of prudent and economical operation -- generally restrict an operator from exceeding the estimated subsurface fracture pressure. In some cases, the requirement may be stated as a numerical threshold (e.g. 85 percent of the estimated fracture pressure of the confining formation), while in other cases it may be...
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