Judi Greenwald - C2ES

1. KEYNOTE PRESENTATIONS
CCS PROGRESS IN CANADA: Dr Carmen Dybwad – IPAC-CO2
CCUS IN THE UNITED STATES: Judi Greenwald – C2ES
CCS IN AUSTRALIA: Dick Wells – National CCS Council

2. A Diverse Coalition Recommends Incentives to
Accelerate Commercial Deployment of EOR Using
Captured CO2
Judi Greenwald
Vice President for Technology and Innovation, C2ES
GCCSI International Members Meeting
October 11, 2012

3. Overview of presentation
• Why CO2-EOR is so important?
• What is National EOR Initiative?
• What we all need to do

4. Background on CO2-EOR
Commercial CO2 use to enhance oil recovery is happening now,
and it’s bigger than most people realize.
• The CO2-EOR industry has 40
years of commercial
operational experience (began
at significant scale in West
Texas in 1972).
• Today, CO2-EOR produces
nearly 300,000 barrels of oil
per day (100 million barrels
annually), or about 6 percent
of U.S. domestic production.

5. Why is CO2-EOR so important?
• Energy Security
o Can at least double U.S. reserves (20 billion barrels)
o 27 to 62 billion barrels with existing technology, 67 to 137
billion barrels with next generation techniques
• Economic Opportunity
o Job creation, increase tax revenues, reduce U.S. trade deficit
(cumulatively) by $600 billion by 2030
• Environmental Protection
o Reduce U.S. GHG emissions by 10-20 billion tons
o Drive innovation in carbon capture and storage technology
o Produce oil with less environmental impact

6. Map of Current U.S. CO2-EOR Activity
6
Source: NETL, 2010

7. So why aren’t we doing more of
it?
Problem: There’s Not Enough CO2
We have some ideas about where CO2 might be found…

8. NEORI’s Three-Part Agenda
1. Recommend and advocate for incentives and other
policies to support commercial CO2-EOR deployment
that are self-financing through revenues from
additional incremental oil production.
2. Prepare key analyses to inform and support incentive
policies for anthropogenic CO2-EOR
3. Increase policy-maker, media and public awareness
of CO2-EOR, its benefits and the need for deployment
incentives.

9. Project Participants & Observers
Coal and Coal-Based Generation Labor
• Arch Coal • AFL-CIO
• Basin Electric Power Cooperative • United Transportation Union
• Summit Power Group
• Tenaska Energy State Officials
• Illinois, Indiana, Michigan, Mississippi, Montana, New
Industrial Suppliers of CO2/Technology Vendors Mexico, Texas and West Virginia
• Air Products
• Alstom Academic Institutions
• Archer Daniels Midland • Enhanced Oil Recovery Institute (University of WY)
• C12
• GE Energy Observers
• Jupiter Oxygen • Oil and Gas
• Linde – Chaparral Energy
• Praxair – Core Energy
• Associations
Environmental NGOs – Interstate Oil and Gas Compact Commission
• Clean Air Task Force – North American Carbon Capture and Storage
• Natural Resources Defense Council Association
• Ohio Environmental Council • Project Developers
• Wyoming Outdoor Council – Leucadia Energy

10. Consensus recommendations
released February 2012
• Incentives to use captured CO2 in enhanced oil
recovery
o Federal
• Reform of existing Section 45Q tax credit
• New production tax credit
o State
• Model state incentives

11. Bipartisan Congressional
Support
The following Members of Congress provided statements of
support welcoming the NEORI recommendations
• Senator Kent Conrad (D-ND) Participated in NEORI
media event to release
• Congressman Mike Conaway (R-TX) recommendations
• Senator Max Baucus (D-MT)
• Congressman Rick Berg (R-ND)
• Senator John Hoeven (R-ND)
• Senator Richard Lugar (R-IN)
This bipartisan interest has translated into…

12. Conrad-Enzi-Rockefeller bill (S. 3581)
just introduced on 45Q Reform
– Introduced 9/20/2012
– Incorporates NEORI 45Q recommendations
– Improves functionality and transparency of existing program
• Clarifies eligibility for this existing tax credit
• Establishes a clear process for projects to “reserve” credits in
advance
– Incentive valuable in and of itself; certainty of incentive helpful
for obtaining private financing
• Establishes transferability of tax credit along CO2 value chain
• Clarifies that future regulatory changes do not affect prior crediting
– Little or no fiscal implications
– 45Q would incentivize the capture of 75 million tons of CO2

13. NEORI also recommends a new
production tax credit
• Bridge the cost gap between what CO2-EOR operators are willing to pay
and the cost of capture
• Credit goes to those who capture, but only once the CO2 is used for EOR
• More than pays for itself because captured CO2 ->incremental oil
production->profit->tax revenue
• No change in existing tax treatment for oil
• Combine federal incentive with CO2 market price

14. Production tax credit provisions
• 10-year PTC
• Two design objectives
– Minimize costs
– Drive innovation
• Competitive bidding/reverse auction
• Divided into tranches and subtranches for
different CO2 sources

15. New Production tax credit
• Tranches and sub-tranches
– Pioneer (first mover)
• Power
• Industrial
– Power
– Industrial
• Low cost industrial
• High cost industrial

16. More anthropogenic CO2 can become available at higher prices . . .
(Illustration with EIA 2011 data, prices differ from previous slide)
Power plant CO2
supply potentially
larger
16

17. Incentives are needed: For the largest CO2 supply sources,
high oil prices will not be enough . . .
CO2 Market Price Representative EOR
Core Scenario + (*Starting 2013, Incentive (for
Transp. Costs Willingness To Pay) illustration purpose)
(A) (B) (A-B)
Power Plant Tranche ($/tonne) ($/tonne) ($/tonne)
Pioneer - First of a Kind Projects $70 $33 $37
Projects #2-#5 $60 $33 $27
Nth of a Kind (Projects #6-onward) $55 $33 $22
Industrial - Low Cost Tranche ($/tonne) ($/tonne) ($/tonne)
Pioneer- First of a Kind Projects $38 $33 $5
Projects #2-#5 $38 $33 $5
Nth of a Kind (Projects #6-onward) $38 $33 $5
Industrial - High Cost Tranche ($/tonne) ($/tonne) ($/tonne)
Pioneer- First of a Kind Projects $65 $33 $32
Projects #2-#5 $55 $33 $22
Nth of a Kind (Projects #6-onward) $45 $33 $12 17

18. Analytical Study
• “Cost gap” analysis
– Determine difference between willingness to pay by EOR
operators and cost of carbon capture, storage and transportation
• “Revenue neutrality” analysis
– Compare cost of new CO2-EOR incentives with new federal
revenues directly resulting from incremental new CO2-EOR
production in the form of royalties on Federal lands plus
severance and corporate income taxes.
Analysis suggests “revenue neutrality” within 10-year window
and significant net positive revenues over long term

19. Program revenues
greatly exceed costs over time…

20. State-level Recommendations
Model complementary policies to federal incentives
• Severance tax reduction and/or extension of existing
severance tax reduction for oil produced with CO2 from
anthropogenic sources.
• Cost recovery approval for regulated entities.
• Off-take agreements.
• Tax credits, exemptions, or abatements for CO2 capture
• State-level bonding of CO2 pipeline projects and/or capture
and compression facilities.
• Inclusion of CCS with EOR in electricity portfolio standards.
See full report to see examples from specific states

21. PHASE II Activities
Analysis:
• Demonstrate benefits; evaluate the implications of
alternative policies
• Incorporate new data
Education and Outreach:
• Expand NEORI and coordinate participant efforts
• Expand, tailor and disseminate materials
• Briefings, conferences, webinars, workshops, one-on-one
meetings, earned media, op-eds, website, blogs
• Promote peer learning among state officials

22. Prognosis
• 45Q reform possible this year; broader PTC
probably will take longer
• Many states can act
• You can help

23. CONTACTS:
Judi Greenwald, C2ES
(703) 516-4146
greenwaldj@c2es.org
BRAD CRABTREE, GPI
(701) 647-2041
bcrabtree@gpisd.net
www.neori.org

24. BACK-UP SLIDES

25. Benefits to Increasing CO2-EOR
• Increase U.S. oil production by accessing domestic reserves with captured CO2;
– U.S. CO2-EOR potential equals 27 to 62 billion barrels with existing technology, 67 to 137 billion
barrels with next generation techniques; current U.S. proven reserves are around 20 billion barrels
• Lower trade deficits/Strengthen America’s national security by reducing dangerous dependence on
unstable and/or hostile regimes supplying the world oil market;
– An increase in oil production from EOR has the potential to reduce net crude oil imports by half and
provide up to $210 billion in increased state and federal revenues by 2030.
– EOR could reduce the U.S. foreign trade deficit by $11-$15 billion dollars in 2020 and $120- $150
billion by 2030.
• Create new, high-paying American jobs and retain and attract private sector investment in the U.S.
economy for capturing CO2, transporting it, and boosting U.S. oil production;
– Cumulatively by 2030, this reduction in oil imports would keep $600 billion here at home, generating
additional economic activity, high-paying jobs and revenues, rather than flowing out of the U.S.
economy to other countries.
• Enable commercial deployment of CCS industry to the long-term benefit of coal, natural gas, ethanol and
other domestic industrial sectors;
• Facilitate compliance and participation in low-carbon fuels markets by oil, natural gas and ethanol
producers; and
• Achieve significant net carbon reductions through sequestration in depleted oil fields.

26. Federal Production Tax
Credit for CO2 Capture
Key Elements
• Provided to owners of CO2 capture equipment installed on a broad range of power plants and
industrial processes, with the potential to supply significant volumes of CO2 to the EOR
industry;
• Limited to covering the additional incremental costs of new CO2 capture, compression, and
transport;
• Allocated through competitive bidding process, by source category
• Awarded to qualifying projects over a ten-year period based on performance;
• Designed with transparent registration, credit allocation, certification, and public disclosure;
• Provided with no limits on project scale or on the aggregation of different CO2 sources into a
single project to enable participation of smaller industrial facilities;
• Designed to ensure that the program achieves ongoing technology innovation, CO2 emission
reductions, and cost reductions for CO2 capture, compression, and transport; and
• Designed with explicit safeguards to penalize non-compliant projects, limit taxpayer
expenditure, and modify the program to ensure net positive federal revenues.

27. CO2-EOR production doubles
within 20 years…

28. NEORI Analysis suggests
significant oil production and
revenues over time…
Cumulative
Cumulative
Incremental CO2-EOR Cumulative Net
Time Phase CO2 Storage
Oil Production Present Value ($)
(tonnes)
(Barrels)
2013-2022 400 million $2 billion
2023-2032 2.5 billion $31 billion
~4 billion
2033-2042 6 billion $73 billion
2043-2052 9 billion $100 billion

29. Current CO2 Supply for EOR
• Some CO2 for EOR already comes from industrial sources
• Today, the U.S. EOR industry uses 72 million tonnes of CO2 per year
— profitably and without serious reported injuries, accidents or
environmental harm.
CO2 Supply (Mt/year)
Source Type (Location)
Natural Anthropogenic
Colorado, New Mexico (Geologic) 33 -
Texas (Gas Processing) - 6.4
Wyoming (Gas Processing) - 6.6
Mississippi (Geologic) 22 -
Oklahoma (Fertilizer Plant) - 0.7
Michigan (Gas Processing) - 0.3
North Dakota (Coal Gasification) - 3
Total 55 17
U.S. Department of Energy (2011), Improving Domestic Energy Security and Lowering CO2 Emissions with “Next
Generation” CO2-Enhanced Oil Recovery (CO2-EOR), DOE/NETL-2011/1504, citing Advanced Resources International
(2011). 29

30. And the oil production potential is vast…
Incremental Technically Recoverable Incremental Economically Recoverable
Projected CO2- Oil Oil
EOR Resources: (Billion Barrels) (Billion Barrels)
Best Practices Next Generation Best Practices Next Generation
Lower 48 Onshore 55.7 104.4 24.3 60.3
Total 61.5 136.6 29.6 67.2
Source: U.S. Department of Energy (2011), Improving Domestic Energy Security and Lowering CO2 Emissions with
“Next Generation” CO2-Enhanced Oil Recovery (CO2-EOR), DOE/NETL-2011/1504.
• An additional 26-61 billion barrels of oil could economically be recovered with
today’s EOR technologies, potentially more than doubling current U.S. proven
reserves.
• Moreover, “next generation” EOR technology could yield substantially greater gains,
potentially increasing recoverable domestic oil from EOR to 67-137 billion barrels,
and storing 20-45 billion metric tons of CO2 that would otherwise be released into
the atmosphere in the long term. 30

31. Enhancements to 45Q Tax Credit
To avoid stalling important commercial CO2 capture projects under
development, there is an urgent need to improve the functionality and
financial certainty of the 45Q federal incentive. Key Elements:
• Designate the owner of the CO2 capture facility as the primary
taxpayer;
• Establish a registration, credit allocation, and certification process;
• Change the recapture provision to ensure that any regulations issued
after the disposal or use of CO2 shall not enable the federal
government to recapture credits that were awarded based on
regulations that existed at that time; and
• Authorize limited transferability of the credit within the CO2 chain of
custody, from the primary taxpayer to the entity responsible for
disposing of the CO2

32. Education and Outreach
Materials for policy-makers, media and public:
• Address lack of awareness of commercial CO2-EOR and
its economic, energy security and environmental
benefits:
– Full NEORI report;
– Two pagers on: overview of CO2-EOR, economic
benefits, environmental benefits, agriculture, and
safety; and
– Forthcoming: two-pagers on importance and benefits of
CO2-EOR to the coal industry, natural gas industry, and
potentially other sectors.