Bennett Johnston to Address Indiana Carbon Capture & Sequestration Summit

At the invitation of Governor Mitchell E. Daniels, Jr., of the State of Indiana, Senator Bennett Johnston will deliver the keynote address at the Indiana Carbon Capture & Sequestration Summit on Wednesday afternoon, September 3, 2008, in Indianapolis.

Senator Johnston will address the invitation-only gathering of leading technical experts, regulators and policy makers who will develop a plan to guide Indiana’s efforts to become a national leader in clean coal technology.

Below are the remarks Senator Johnston will deliver:

Speech of Senator J. Bennett Johnston
Indiana Carbon Capture & Sequestration Summit
September 3, 2008

An emerging consensus of world climate scientists, environmental leaders and policy makers seems clear:  man-made carbon in the atmosphere causes global warming and the world must act decisively to prevent a global catastrophe.  As Nobuo Tanaka, the Executive Director of the International Energy Agency observed:  “The pathway we are on is not sustainable.  Time is running out.”

The question is whether policy directions are emerging both worldwide and in the United States which are likely to result in success in stemming the onslaught of climate change.  A successful climate change strategy for the United States must involve two parts.  First, in the United States, as the largest emitter in the world, we must set the example by reducing our own carbon footprint to acceptable levels.  Second, we must lead the world by providing technologies that will permit robust energy growth which is necessary to support economic growth.

The question is not whether global warming is real but rather how do we reduce the greenhouse gases that cause it.

Economic and energy forecasting are now mature sciences led by the International Energy Agency (IEA) in Paris and the US Energy Information Administration (EIA).  Both are decades old, non-partisan and are funded annually at tens of millions of dollars.  In addition to gathering extensive data, they “model” energy supply and demand trends.  They have focused on the period 2004-2030 as the reference period.

These two agencies, along with virtually all forecasters, predict a robustly-growing world economy – doubling in size from 2000 to 2030 -- with China and India leading the way with annual growth rates at 6.5 per cent and 5.7 per cent respectively.  World energy use is slated to increase 57 per cent. 

Even more startling is the projected growth of coal in the emerging world, especially China.  Now dependent on coal for 70 per cent of their power, the Chinese have doubled coal consumption in just the last seven years.  They use more than twice as much as is used in the US (2.4 billion tons vs. 1.1 billion tons).  The Chinese are projected to increase their use of coal by 146 per cent.  The future is slated to bring a 74 per cent increase in world coal use between 2004 and 2030 with 80 per cent of that growth occurring in China and India. 

The reliance and projected increase in coal consumption in the United States, though less formidable than in China, is nonetheless daunting.  We now generate 50 per cent of our electricity from coal.  Our consumption is projected to increase by 50 per cent by the year 2030.

What this picture tells us is that if we are to reach our own greenhouse goals, much less offer the Chinese a plausible way to reduce their own without sacrificing economic growth, we must create a pathway to carbon efficient coal technology.  At the same time, we must maximize our savings from the other sources. 

Natural gas supplies are not projected to meet domestic demand.  To expect Liquefied Natural Gas to fill the role of coal through imports is unrealistic.  The first casualty of such an attempt would undoubtedly be in the price of natural gas and further dependence on foreign sources.

Nuclear energy is a non-emitting source with the potential eventually to fill a large part of the gap.  But, thus far, policymakers’ efforts have not succeeded in encouraging its use.  The EIA projects only a modest growth (12,500 megawatts).

Renewables, particularly wind, are our fastest growing energy source.  The EIA predicts that with an expanded production tax credit, technological improvements and higher fuel prices, we expand its use by 57 per cent.  But the renewables share of the electricity market, including hydro, will only increase from 7 per cent to 8 per cent.  (Last year, the Chinese added 28 times as much coal as we added wind (114,000 megawatts to 4,000 megawatts).

The limitation with wind is not the wind itself or the turbine technology.  The wind blows strong on the high plains and the technology is increasingly efficient. The problem is the cost and difficulty of siting transmission.  The distance from the turbine to the load is usually hundreds of miles with major rivers, interstate highways, and population centers in between.  On top of that, the wind does not blow 60 plus per cent all the time and requires backup generation.

I wish my friend Boone Pickens luck, but so far he has no turbine and no generation.  Today wind is fast growing, but is only 1 per cent of electric generation.

Energy efficiency and conservation will undoubtedly play a huge and increasing role in the climate change battle.  However, the forecasters’ growth rate of coal at 50 per cent already subsumes the gain from efficiency and conservation.   

What has become clear is that the key to a successful program to reduce greenhouse gases in the United States is a credible program that achieves the ability to utilize coal as a clean fuel.

The US, in general, and Midwest states like Indiana, in particular, have the opportunity to be a world leader in the deployment of clean coal technologies that incorporate Carbon Capture and Sequestration technology.

Indiana has made a terrific start in that direction with 2 major coal gasification projects under development right now – one Integrated Gasification Combined Cycle, or IGCC power plant, and one coal-to-Substitute Natural Gas, or SNG plant.  Both of these projects will be using cutting edge coal gasification technologies that enable the capture of CO2 for sequestration.

In the case of an SNG plant, the capture of CO2 is fortunately inherent in the design of the facility.  The chemical refining process for converting coal into SNG – I should note that SNG is really methane, or CH4 just like the chemical composition of natural gas – requires the separation of CO2 into a concentrated form that is available for compression and sequestration.

In other words, no additional cost is required to capture CO2 at SNG project, so it will provide an ideal platform from which to take the CO2 to demonstrate and prove it can be permanently stored in geologic formations and/or economically sold for Enhanced Oil or Gas recovery.    

Producing SNG from local coal is one important way to improve energy security and hedge against volatile natural gas markets.  SNG produced in southern Indiana and the Illinois Basin will not be subject to Gulf Coast hurricanes, terrorist threats, or overseas market dynamics.  And the SNG plant here in Indiana could be just the tip of the iceberg – across the nation dozens of SNG plants could be built to supplement and stabilize natural gas supplies. 

Building 35 SNG plants the size of the one being discussed here in Indiana could produce as much gas as could be delivered through the Alaska Gas Pipeline.

And, as I noted before, SNG plants separate concentrated streams of CO2, making them the perfect platforms from which to demonstrate and commercialize carbon capture and storage technology.

Initial opportunities for CO2 sequestration may actually serve to improve the economics of early clean coal projects while helping increase domestic energy supplies.  I am referring to the opportunity for CO2 captured by clean coal plants to support Enhanced Oil Recovery in depleting oil fields or Enhanced Gas Recovery from Shale formations.  We currently inject millions of tons of CO2 into geologic formations for Enhanced Oil Recovery in West Texas and the Gulf Coast.

Substantial monitoring and verification work being done on these projects is demonstrating that the CO2 will stay sequestered permanently.

In Indiana and other parts of the Illinois Basin, there are parties looking to build CO2 pipeline infrastructure to transport CO2 from the Midwest to regions where CO2 is actively used for Enhanced Oil Recovery.  Over 3,000 miles of CO2 pipelines have been built in the US.  Such pipeline construction could provide a major economic opportunity for Indiana.

Beyond Enhanced Oil and Gas recovery – which will only provide a solution for a portion of the CO2 that must ultimately be sequestered – we must also prove that CO2 can be safely, permanently and economically stored in deep saline aquifers. Some of the nation’s most promising sites are in the Illinois Basin and appear to be within economic reach of Indiana projects.

CCS deployment presents economic and regulatory challenges.

In the short term, the United States must demonstrate the feasibility of CCS at commercial scale.  This should entail perhaps 4 – 5 projects demonstrating different technologies and geologic formations.  Scientists world wide have successfully employed CCS at smaller scale and are confident that it can be done at commercial scale.  Government support in the form of tax credits, sequestration credits, grants loan guarantees or other finding mechanisms will be critical to making early commercial-scale CCS economically feasible.

State and Federal regulatory support is also necessary.  Such regulation should provide for how much and where underground injection can take place and how it should be monitored.  Clarity on liability should be provided.

The US Environmental Protection Agency has taken an important first step in promulgating draft rules for the injection of CO2.

These rules need to be finalized and complimented with state initiatives to implement CO2 injection permitting the regulatory programs.  The current EPA regulations do not, however, address issues of liability and will need to be worked through by state and federal government before private firms can appropriately evaluate the risks they take in undertaking CO2 sequestration activities.

The new Congress will deal with the most vital, complicated and controversial aspect of climate change policy – how do we pay for it?  Both Presidential candidates have endorsed different versions of “cap and trade” legislation which would mandate a cost on carbon emissions.   With the current economic slowdown, it is difficult to predict whether this Congress can resolve the considerable differences that exist on cap and trade.  The outlook for CCS commercial scale demonstration however is much brighter and, in my opinion, is the key to success.

Ultimately, America must and will deal successfully with climate change and CCS is essential to this task.  I believe Indiana can lead the way.