Carbon dioxide (CO2) is a byproduct of many natural and industrial processes and is one of the primary greenhouse gas (GHG) emitted through human activity. With GHG contributing to climate change concerns, reducing or controlling CO2 emissions represents a key technical challenge around the world.
In this article, we explore carbon capture, utilization, and storage (CCUS) projects, the current Class VI Underground Injection Control (UIC) carbon sequestration well permitting process, and recent updates to tax credits designed to incentivize companies to reduce CO2 emissions. We also offer insight into why ethanol facilities, specifically, may stand to benefit from carbon reduction efforts.
What are carbon capture, utilization, and storage projects?
As the name implies, CCUS projects focus on capturing, using, and storing carbon. Several types of industries may benefit from CCUS, and momentum around CCUS projects is growing as governments establish goals and frameworks related to CO2 emissions reductions, such as the United States Administration’s Pathways to Net-Zero Greenhouse Gas Emissions by 2050, which was released in November 2021.
CCUS projects may focus on:
- Capturing CO2, compressing it, and selling it.
- Capturing CO2 and using it to make products or provide services.
- Capturing CO2 and permanently storing it in deep underground wells (Class VI injection wells), thereby receiving credits in return for reducing their carbon intensity.
What are Class VI injection wells?
The United States Environmental Protection Agency’s (EPA’s) Federal Requirements Under the Underground Injection Control Program for Carbon Dioxide Geologic Sequestration Wells, codified in 2010, established a new class of injection wells (Class VI) approved specifically for the geologic sequestration of CO2 in a way that protects underground sources of drinking water (USDWs), also known as groundwater aquifers. Because Class VI wells must be sited, constructed, operated, and closed in a manner that protects USDWs, a stringent permit process is involved in obtaining approval to construct a new well.
How does the Class VI UIC permitting process work?
As with most large industrial construction projects, the Class VI UIC permitting process has several stages and may require several years to move from application submittal to the “permit to drill” (well construction) stage to receiving the authorization for UIC operation (CO2 injection) (Figure 1).
Before a company begins the permitting process, though, a preliminary site screening process is conducted to confirm favorable subsurface and land ownership access/control conditions. If conditions are favorable, the permitting process may begin, with the first two stages requiring the submittal of a detailed permit application including numerous supporting planning documents and an iterative review process with the permitting agency (Figure 2).
Table 1 provides a summary of Class VI UIC Carbon Sequestration well permit applications that have currently been filed or that have been approved by EPA or delegated state agencies. As shown, ethanol/biofuel facilities account for a number of these initial Class VI UIC well applications.
What tax incentives are available for carbon reduction?
Currently, Section 45Q of the tax code provides for 12 years of tax credit incentives for every metric ton (~$32-$50/mton) of geologically sequestered CO2 (Table 2). Currently, to qualify for Section 45Q tax credits, CCUS facility construction must begin before January 1, 2026. Different types of facilities are also subject to different eligibility requirements for carbon capture. A power plant is expected to capture at least 500,000 mton, whereas direct air capture (DAC) and other large facilities must capture at least 100,000 mton. Small facilities emitting fewer than 500,000 mton/year must capture at least 25,000 mtons.
Additionally, individual states are beginning to establish low carbon fuel standards (LCFS) to encourage further reductions in GHG emissions. Out-of-state facilities and operations may also be eligible to participate in these programs. Thus, facilities that may have traditionally treated CO2 as a waste stream may be able to use carbon sequestration to generate Section 45Q credits or tradable LCFS tax credits as a result of reducing their carbon intensity.
CCUS project considerations
Even as the financial and regulatory framework around carbon reduction grows more secure, CCUS projects still represent large-scale undertakings with a myriad of considerations to evaluate before moving forward. The following three areas highlight a few of the key project considerations for CCUS projects:
- Area of Review (AoR): Properly evaluating and accurately delineating the AoR is critically important to carbon sequestration projects. The AoR for the CO2 plume will typically be limited to a relatively close distance (e.g., within a couple of miles) from the injection well, whereas the threshold pressure front for the AoR may potentially extend some distance (e.g., tens of miles) outward from the injection well(s).
Why is this important? The AoR identifies the area surrounding the injection well(s) for which pore space and mineral right ownership need to be addressed (see more below). It also defines the area within which corrective actions may be required to address any potential avenues (e.g., unplugged deep boreholes/wells) for undesirable CO2 or displaced formation fluid/brine migration. Care must be taken to prevent and avoid undesirable CO2 or brine migration outside the planned injection interval that may potentially threaten a USDW (aka groundwater aquifer).
Land, Pore Space, Mineral Ownership: Prior to pursuing or submittal of a Class VI UIC permit application, the CCUS project developer will want to obtain necessary access agreements/authorizations from the applicable landowners for surface access and the subsurface pore space and mineral rights for properties identified within their predicted AoR, including an allowance for a buffer area (safety factor). Therefore, it may be necessary for a CCUS project developer to perform a detailed property title evaluation to determine the aforementioned ownership rights for each of the different properties identified within their AoR. If federal, state, or tribal lands are identified within the AoR, the negotiations and process for obtaining these various access agreements may create additional challenges to the overall CCUS project.
- Other Permit Approvals/Authorizations: In addition to the Class VI UIC well permit, the entire CCUS project may require multiple other federal, state, and local agency permits or land use/zoning approvals. A CCUS project developer needs to be prepared to permit the entire CCUS project (e.g., new CO2 pipelines or CO2 capture equipment). Preparing a concise description of the conceptual CCUS project overview that identifies anticipated technical challenges and regulatory issues may be useful in the early project meetings and discussions with regulatory agencies.
Further, it is important to identify early in the CCUS project viability evaluation process whether any federal land, funding, or actions may be required for the project that could potentially trigger National Environmental Policy Act (NEPA) review. UIC permits, including Class VI permits for carbon sequestration, issued in accordance with the Safe Drinking Water Act are not subject to NEPA (USEPA 2016). Thus, if there is a NEPA-related triggering event, it would likely be associated with a different aspect of the CCUS project. However, if triggered, the NEPA process may present an obstacle for projects requiring the federal government’s involvement and may present a considerable financial and schedule threat to the overall viability of the CCUS project.
Ethanol facilities and CCUS
In comparison to many other types of industrial processes, the ethanol fermentation process and associated operations typically produce a high quality and pure CO2 stream (>90%) (Figure 3). This relatively pure and highly concentrated CO2 stream requires less cleanup (i.e., dehydration) and processing than many other industrial operations before it can be injected for sequestration. Therefore, carbon capture costs for ethanol facilities are typically some of the lowest costs (per ton) as compared to most other industrial CO2 sources (Table 3).
Catch up with Trihydro at the International Fuel Ethanol Workshop & Expo
On June 13-15, 2022, Trihydro will be attending the International Fuel Ethanol Workshop & Expo in Minneapolis, Minnesota. Brad Pekas, PE, PG, Senior Engineer/Geologist/Hydrogeologist, will be presenting a deep-dive into permitting Class VI sequestration wells. We hope to see you there!