Long-term liability rules needed for scaling Gulf offshore carbon storage projects: experts

The US Department of the Interior will need to create long-term liability rules for offshore carbon injection wells if the carbon capture and storage industry is going to fulfill its potential in the US, experts said during an April 28 House subcommittee hearing.

The Biden administration's Infrastructure Investment and Jobs Act passed last year instructs the Interior Department to develop a regulatory framework for offshore carbon sequestration on the outer continental shelf, or the ocean floor that falls under federal jurisdiction. In particular, the Gulf of Mexico basin – one of the most studied geologic regions in the world – is increasingly seen as a resource with immense subsurface carbon storage capacity capable of sequestering several gigatons of US emissions.

But deep-sea carbon storage has special challenges. Leaks, for instance, can have serious environmental and climate consequences, yet methodologies for monitoring well pressure or leakage are still under development. During the House Energy and Mineral Resources subcommittee hearing, carbon researchers and experts emphasized that the Interior Department's future regulatory framework for offshore carbon storage needs to consider who is liable for leaks or hazard in the long term.

While project operators hold responsibility for the carbon well during the life of the project – which typically lasts for 15 to 30 years – there remains an open question as to who holds liability over the well after an offshore lease expires. And that uncertainty can inhibit companies from jumping into the offshore carbon business.

"Companies are not going to want to be investing when they don't have the certainty around what the liability will be," Erik Milito, president of the National Ocean Industries Association, told lawmakers. "That needs to be sorted."

In the European Union, a transfer of liability provision shifts liability from an operator to a government after the operator has demonstrated that the carbon is secure under the sea. But the regulatory framework also allows the government to reopen liability later down the road if an operator is discovered to have provided erroneous data, acted negligently, or if any hazard arises. That framework could be used as a model for US policy, experts said.

"What we're concerned about is the potential for liability transfer done too early, or a situation where operators lack an incentive to decrease their exposure risk because they're not going to pay significant consequences if projects eventually fail or have negative effects," said Nichole Saunders, director and senior attorney at the Environmental Defense Fund.

Gulf CCS gaining ground

The Gulf of Mexico has become an increasingly attractive carbon sink for offshore companies. Talos Energy, for instance, has focused its carbon business on storage opportunities in the Gulf. And ExxonMobil has indicated interest in offshore carbon storage opportunities near Texas.

During the Bureau of Ocean Energy Management's latest Gulf lease auction last year, Exxon placed bids on nearly 100 offshore shallow-water tracts off the Texas coast – areas with depleted oil and gas reservoirs ideal for carbon storage projects.

Although the company never confirmed if it had carbon storage in mind when placing the bids, the tracts are located in close proximity to the company's announced $100 billion carbon capture and storage hub in southeast Texas.

According to Tip Meckel, a research scientist at the University of Texas, the US Gulf Coast is home to 1,500 offshore wastewater injection wells which, if they were repurposed for carbon storage, have the capacity to store a gigaton of CO2 annually.

"We expect wells to be able to do even more than that," Meckel told lawmakers. "We expect the development of even more CCS, and the order of thousands of wells in the outer continental shelf that will be injecting gigatons of CO2 by 2050. That's a significant reduction in the US emissions profile."

According to S&P Global Commodity Insights, the assessed price of tech carbon capture credits – a basket assessment that reflects credits issued by a range of technology projects that remove emissions – was $133/mt of CO2e as of April 28, down from a late January peak of $170/mt.