Below are some key points from two CCUS-related events in Texas last week: the annual CO2-EOR Conference in Midland, which has been going on for almost 30 years; and a symposium our firm hosted with the University of Houston on CCUS risk management. We’ll start with the latter.
CCUS Risk Management Symposium
Many companies considering CCUS are inquiring about risks. We’ve long anticipated that Class VI UIC storage will be safe when properly conducted, but how safe? What are the types of risks? How might they manifest? How long might a storage site pose risks? How much could damages be? What instruments are available to help manage the risks? We and others have been working on such issues for years, but with the volume of CCUS projects under consideration increasing dramatically, such questions are occurring to a new audience.
Risk polled as the top issue of interest for members of the CCUS Commercialization Consortium Legal and Regulatory Committee, which I chair. So when we launched our work earlier this year, we prioritized presentations on risk. We have received excellent ones—from those with experience in geology, economic valuation of environmental risk and the risk management industry. The point all have made is that if one follows the Class VI program—which sets a high floor for site quality up front and incorporates rigorous construction and operational standards—risks can be expected to be quite low.
How low has been a matter of speculation until recently. Work by Industrial Economics to value environmental risk indicates values that would be readily manageable by most companies. Moreover, representatives from Marsh, the world’s largest insurance broker, said that most CCUS project risks can be addressed through existing insurance coverage products. This is contrary to the view some have held that insurance isn’t available for CCUS.
The symposium, which Hunton Andrews Kurth LLP hosted last week with the University of Houston’s Center for Carbon Management in Energy, brought these important points to a broader audience. We need to reach those who are newly learning about CCUS and in need of reliable information. A deeper discussion of these issues can be found in this opinion piece that I wrote recently with Chiara Trabucchi of Industrial Economics and Dan McGarvey of Marsh: Online Feature: CCUS: Dispelling myths about risk. Another interesting new idea at the conference came from my partner Lorie Masters from our insurance coverage practice: a group captive to cover CCUS risks. This would be a flexible, low-cost solution for many companies.
Thanks to all the presenters in the symposium last week, and to Chuck McConnell and his team at the University of Houston.
Steve Melzer of Melzer Consulting hosts the annual CO2-EOR Conference to share developments related to CO2-based enhanced oil recovery (EOR), ranging from technical to commercial to policy. A confluence of various factors made this year’s conference very timely and popular, including the recent enactment through the Inflation Reduction Act of increased incentives for carbon capture and storage and clean hydrogen production (the latter of which likely will result in increased carbon capture and storage); increasing commitments by fossil fuel using and producing companies to reduce carbon emissions; and the need for increased US oil and gas production to supply world regions currently dependent on unstable sources.
A key takeaway from the conference is that a seeming clear majority of companies involved in CO2-EOR are considering significant new projects, which will result in more CO2 storage, and many are considering actions significant enough to be considered a strategic shift—not away from oil, which we will need for decades to come, but into analogous disciplines in the energy transition. This was highlighted through the first full day of the conference at the Carbon Management Workshop run by Mike Moore. The transition to a future of lower carbon emissions—one through which the world will continue to rely on traditional energy sources—matched with significant financial incentives, is spurring imaginative proposals for energy production, conversion and delivery.
We continue to hear skepticism from some quarters that a transition to lower carbon energy will take place, and that if it does, fossil fuels and CCUS can’t be part of it. To the contrary, the view any attendee of the conference would have taken away—and this is consistent with the inquiries we have been receiving from clients—is that industry very much is embarked on a lower carbon path, and that fossil fuels and CCUS are an indispensable element of it.