
Introduction: CO2-EOR vs. CCS
In recent years, the importance of carbon capture technology has grown significantly as a means to combat climate change. With the emergence and advancement of geologic technologies, and their application in the energy industry, many industrial companies are deploying both CO2 Enhanced Oil Recovery (CO2-EOR) and Carbon Capture and Storage (CCS) technologies for distinct purposes. This article explores the differences between CO2 Enhanced Oil Recovery (CO2-EOR) and CCS, highlighting their processes and regulatory frameworks.[1]
CO2-EOR is a process whereby CO2 is injected into a partially depleted hydrocarbon reservoir, displacing the oil or gas, and allowing for additional hydrocarbon production. This method has been used for decades in the United States to extend the life of oil and gas reservoirs, resulting in the permanent storage of CO2 within the reservoir. When the CO2 used in these injection activities is CO2 that was previously captured, the CO2-EOR process could qualify as a CO2 storing activity eligible for carbon capture and storage tax credits under 45Q of the US Internal Revenue Code.
Another CO2 storing activity that qualifies for such tax credits is CCS. CCS involves the capture of CO2 and injecting it into permanent geologic storage, typically saline aquifers. It involves no utilization of the gas, only its capture and storage. The capture processes used in CCS and CO2-EOR can be identical, both involving the injection of CO2 via wells for permanent storage in geologic formations. Despite these similarities, CCS and CO2-EOR are governed by different regulations, with CCS subject to what are arguably the more complex requirements.
Regulatory Framework
State regulations may vary,[2] but federal regulations significantly contribute to the different treatment of these processes. The Environmental Protection Agency regulates underground injections through wells via the Underground Injection Control (UIC) regulatory framework under the Safe Drinking Water Act. These regulations sort types of injection wells into classes depending on the threat the injected material poses to drinking water. CO2-EOR wells fall under “Class II” and have been regulated as such since the inception of the UIC. For decades there was no need for specific regulations for CCS wells as it was not widely performed. Then in 2010, due to the increasing interest in geologic storage of CO2, the EPA created a new classification of wells: Class VI, geologic sequestration (GS) wells.
Highlights of Class Requirements
The following provides an overview of some of the differences in regulation between the two classes of wells. The complex regulatory rules governing well injection can be categorized into five broad categories: Permitting, Well Construction, Operation, Well Plugging and Post-Injection Care and Closure.
For Class II wells, CO2 EOR wells may either be issued permits or be authorized by rule.[3] Wells that are new must obtain a permit, but previously existing wells are generally authorized by rule for the lifetime of the project. As for well construction, Class II wells must be constructed in a manner that will prevent any fluids from leaking outside the injection zone. During operation, Class II wells must conform to testing and monitoring requirements for well integrity, At the end of the project’s operation, the wells must be plugged in a manner that will not allow fluid movement to endanger US Drinking Waters. For post-injection care and closure, the operator must establish and maintain financial instruments that are sufficient to cover the cost of plugging.
Compare these requirements to those of Class VI wells.[4] Class VI wells must always be authorized by permit, never by rule. In addition, in order to obtain a permit Class VI wells must meet site characterization requirements to ensure the area is free of faults and fractures and that seismicity is not a concern. A Class VI well permit also requires the use of computational modeling to predict the extent of an injected CO2 plume and to identify and address any deficiencies of existing wells within a specific area. When it comes to well construction, Class VI wells must also be constructed in a manner that will prevent fluid leaks from outside the injection zone, but operators must also demonstrate well materials are corrosion-resistant and appropriate materials will be used. Class VI wells have the same testing and monitoring as Class II wells, but they must also test and monitor the CO2 plume, pressure front, and groundwater quality throughout the life of the project. Class VI wells also must have corrosion monitoring required from injection through site closure. Plugging requirements for Class VI wells are the same as those of Class II wells. However, Class VI wells have much more post-injection care and closure requirements. For Class VI wells, operators must establish and maintain financial instruments sufficient to cover the cost of post-injection site care, corrective actions, emergency response, and other events. This includes a requirement to develop and maintain site-specific emergency plans. These wells also require post-injection site care for 50 years after injection and operators must report all monitoring and testing results throughout the life of the project.[5]
Reasoning for Disparate Treatment
The heightened requirements for Class VI wells are primarily due to the significant difference in tax credits available for the two processes. CO2 captured from ethanol production and stored via CO2-EOR may qualify for up to $60 per metric ton of stored CO2, while the same CO2 stored via CCS may qualify for up to $85 per metric ton. This difference reflects the lack of additional economic incentives in CCS, unlike CO2-EOR, where extra hydrocarbons provide economic benefits. The government compensates for this by offering higher tax credits for CCS, ensuring the permanence of storage through stringent regulations. However, these stringent requirements, and the lack of states with primacy to approve permits, result in much longer timelines for a CCS project to reach operation compared to a CO2-EOR project, which can start operation via rule.
Conclusion
While both CO2-EOR and CCS are vital for carbon capture and storage, they are subject to distinct regulatory frameworks due to their differing economic incentives and environmental impacts. CO2-EOR benefits from additional hydrocarbon production and is regulated under the less stringent Class II requirements. In contrast, CCS, lacking such economic incentives, faces more rigorous Class VI regulations to ensure the safety and permanence of CO2 storage. These regulatory distinctions highlight the government’s approach to balancing economic incentives with robust environmental safeguards.
[1] In this article, CCS refers only to non-utilization carbon storage processes.
[2] Many states have primacy for certain classes of wells and implement their own additional regulations. As of the writing of this article only three states have primacy for class VI wells: Louisiana, North Dakota, and Wyoming.
[3] For more further information on these requirements see: 40 C.F.R. § 144.22; 40 C.F.R. § 146.10; 40 C.F.R. § 146.10; 40 C.F.R. § 146.8; C.F.R. § T. 40, Ch. I, Subch. D, Pt. 146, Subpt. D.
[4] For more further information on these requirements see: C.F.R. § T. 40, Ch. I, Subch. D, Pt. 146, Subpt. H; 40 C.F.R. § 146.10.
[5] This timeline may be shortened at the discretion of EPA if there is a showing of substantial evidence that the geologic sequestration project no longer poses a risk of endangerment to US drinking waters.