Solutions

CARBON CAPTURE, UTILIZATION AND STORAGE (CCUS)

CCUS can be considered the “lynchpin” to our goal of carbon neutrality. CCUS, at scale, will be important to the future of existing industries and to enable system-wide carbon management and emissions reduction in the focus areas.

TRANSPORTATION

The movement of people and goods by land, air, waterways, sea and rail is today largely fueled by hydrocarbon consumption. The transportation segment is the largest emitter of CO2 and methane and would be significantly impacted by carbon neutral electricity, hydrogen and alternative fuels, and new low carbon fuel supplies enabled by carbon capture.

LIABILITY

Pore space ownership, royalties, and liability issues must be resolved in order for Texas to pursue a path toward a viable CCUS industry.

WORKFORCE

The education and skills development of the workforce of the future underpins all of these objectives. Jobs, economic growth and our quality of life depend upon a skilled workforce equipped to succeeding the carbon neutral energy future right here in Texas, particularly in new products and growth of new industry.

INVESTMENT AND ECONOMIC INCENTIVES

Enabling support by the state for the legal, regulatory and economic framework will serve to create the CCUS industry through state incentives to promote transformative economic growth and emissions reductions.

ELECTRIC GRID

Demand for electricity in the industrial, commercial and residential markets will continue to grow and carbon capture is essential. Of critical importance is that the electricity be delivered in a reliable and resilient manner, thus requiring the rapid growth of carbon neutral energy storage and the continued need for baseload power that is carbon neutral.

Electric Grid Testimony

Incentives to promote all forms of carbon-neutral electricity will be necessary through technology investments, direct incentives and the creation of a system strengthened underpinned with baseload power, that is carbon neutral, and operated with the full range of technology and fuels to optimize performance. Therefore, creating an economic framework to encourage the adoption and deployment of CCUS is critical.

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RRC Primacy Comment

CNC submitted a response in support of the Railroad Commission of Texas application for Class VI Primacy from the EPA and related proposed rule changes. Streamlining the regulation of Class VI injection in Texas to one state agency will encourage and expedite the use of CCUS in Texas, helping the state produce needed energy while reducing emissions.

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Senate Transportation Committee Testimony

The Senate Committee held an interim hearing on the use of alternatively fueled vehicles in Texas. CNC submitted testimony outlining the benefits of an increased reliance on alternative fuels, such as CNG and hydrogen, in the effort to provide reliable, affordable energy while also reducing carbon emissions.

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Environmental Regulation Commitee Testimony

The House Committee held an interim hearing on a charge related to the Texas Emissions Reduction Program (TERP), a program that offers financial incentives to eligible businesses for the reduction of emissions from vehicles and equipment. CNC submitted testimony advocating for CCCUS eligibility under TERP.

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CEQ Filing April 2022

The Council for Environmental Quality published a Carbon Capture, Utilization and Sequestration Guidance document, touting the benefits of CCUS and expressing a commitment to accelerating the development and deployment of the technology on a federal level. CNC responded with a public comment in support of advancing CCUS, on both the federal and state level.

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SEC Response

CNC submitted a public response to the SEC's proposed rule amendments requiring climate-related disclosures for investors. CNC opposes the SEC's involvement in climate-related issues, and the prohibitive and overly burdensome reporting requirements proposed.

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Electric Grid Testimony

 

TO: Senate Committee on Business & Commerce

 

DATE: Senate Business & Commerce Committee Hearing Wednesday, June 29

 

RE: Interim Charge: Study issues impacting the Texas electric grid, including weather preparedness and the natural gas supply chain.

 

The Carbon Neutral Coalition (CNC) is advocating for energy sources to be carbon neutral by 2050. One key focus that is pivotal in this effort is the electricity grid in Texas. That objective must be met in a reliable manner, where energy made and consumed is: (1) available and reliable to all consumers; (2) affordable and cost competitive; and (3) with a carbon neutral future as the mission.

 

Establishing a more reliable electric grid is an issue critical to the state, as significant effects from unexpected weather extremes exposed our need for more dispatchable energy. At the same time, Washington and Wall Street have increased demand for energy that is carbon neutral, if not carbon free. The ability to meet carbon neutral goals, while ensuring thermal baseload and dispatchable generation on the grid, will be challenged by the need to effectively integrate and effectively utilize our mix of natural gas, coal, wind, solar, nuclear and other sources. The answer to the issues exposed by weather events is far beyond simply “weatherization,” but rather requires a fundamental ability to integrate fuel sources, storage options, and reliability. The ultimate goal of the CNC is increasing grid reliability (which includes more transmission), along with carbon neutrality.

 

In response to Winter Storm Uri and the Texas legislature’s response, ERCOT and PUC have made several important steps toward improving reliability, including creating an Electricity Supply Chain Map, locating critical electric and natural gas facilities throughout the state, along with emergency contact information, in order to respond more efficiently in case of emergency. The PUC plans to update the map two times per year. The map is meant to provide advance warning to ERCOT when there are failures in the grid. There are also new weatherization requirements, and the Legislature created an advisory council, the Texas Energy Reliability Council to encourage communication and address planning for emergency preparedness. The Legislature also created the State Energy Plan Advisory Committee and charged the committee with preparing a state energy plan to evaluate and make recommendations to improve reliability, stability, and affordability of electric service in the state.

 

Beyond weatherization, the system management to assure reliability, and Electric Reliability Council of Texas (ERCOT)’s operational strategy, will both be central to the discussion and also the fundamental construct of the manner in which electricity providers make and sell power into the grid. Costs for generation should include installed capital, necessary infrastructure for wires and distribution, complete life cycle analysis (LCA) of technology options, and consideration of the impact to the emissions profile of the system in Texas.

 

The market demand for low carbon energy must also be considered, as dispatchable power will be increasingly required to be carbon neutral. It is essential that Texas meet the objective of carbon neutrality so that our industries remain competitive and that the jobs and industrial growth in Texas are expanded. The demand for lower carbon emissions will drive the marketplace. One recent announcement points in that direction:

 

“Google’s parent company, Alphabet, and Microsoft and Salesforce have collectively promised to spend $500 million on technology to capture and store carbon emissions. Three other companies — AES, an electric power distribution company headquartered in Virginia; Mitsui O.S.K. Lines, a Japanese transport company; and Swiss Re, a reinsurance company based in Switzerland — each committed to removing 50,000 tons of carbon from the atmosphere by 2030. The governments of India, Japan, Sweden, Denmark, Italy, Norway, Singapore and Britain have also joined the coalition.”1

 

Consequently, taking no action to reduce or capture carbon emissions can drive industries elsewhere if the state continues to produce high intensity carbon electricity that will then contribute to high carbon intensity goods produced.

However, there is a counterbalancing threat that reducing emissions produces an outcome that makes our grid less reliable and less resilient, or non-competitive, from a cost perspective. There are a number of barriers to making the electricity grid reliable and sustainable. The system requires the continued implementation of carbon neutral options that includes nuclear and geothermal, but the state must consider the use of Carbon Capture, Utilization and Storage (CCUS) as the necessary option as a means of reducing emissions while providing reliable energy.

 

With CCUS, the carbon that is captured is the carbon dioxide that is emitted from producing facilities such as oil and gas refineries, petrochemical plants, electric power plants, cement, steel and other manufacturing facilities. The combustion of fossil fuels produces this CO2 emission, and it represents a significant portion of these industrial process plants’ “carbon footprint.” The process of CCUS is where the CO2 captured or removed from the plant emissions streams and is then purified and compressed into a concentrated stream. The CO2 is then introduced to a pipeline or other transportation media such as ships or rail vessels, and ultimately utilized for value or injected into geologic formations to assure safe and permanent long-term storage.

 

Technologies and approaches such as CCUS provide a way for increased energy production with reduced emissions. In LaPorte, Texas, a company called NET Power has successfully executed a process to generate zero-emission electricity from natural gas, delivering that electricity onto the ERCOT grid. The technology burns natural gas with pure oxygen, and recycles the resulting CO2 through the combustor, turbine, heat exchanger, and compressor, creating lower-cost power with zero emissions. NET Power now seeks to accelerate development of more commercial projects to “help achieve aggressive climate targets at an affordable price.”2 While the NET Power achievement is promising, a key consideration is that as the state seeks ways to build dispatchable energy that is carbon neutral, building new commercial technologies and plants will often be cost prohibitive. CCUS, however, is not limited to new plants, but can be applied by retrofitting currently operating plants, lowering costs and bringing older technology in line with new regulations on emissions.

 

The electric power grid must grow and meet the increased demand for electricity that is projected to increase globally by 50% in the next 30 years3, and move towards carbon neutrality, making CCUS essential. Not only must we add capacity to generate more electricity, but those electrons must be reliable and available such that the baseload needs of 24/7 operations be met. Gas and coal powered generation can be made carbon-free by deployment of CCUS and represent the key pathway to delivering this capability.

 

Incentives in Texas to promote wind and solar have led to much broader deployment in our state than anywhere else in the United States 4, but renewables still do not provide close to the amount of energy needed in the state.

 

 

Incentives to promote all forms of carbon-neutral electricity will be necessary through technology investments, direct incentives and in the creation of a system strengthened underpinned with baseload power, that is carbon neutral, and operated with the full range of technology and fuels to optimize performance. Therefore, creating an economic framework to encourage the adoption and deployment of CCUS is critical.

 

The Texas Emissions Reduction Program (TERP) presents one opportunity for state incentives. The TERP program offers financial incentives to eligible businesses and others for the reduction of emissions from vehicles and equipment. The Texas Commission on Environmental Quality (TCEQ) administers the program, and it is funded by revenues from fees and surcharges relating to certain off-road equipment and on-road vehicles. CCUS could be considered eligible for several current grant programs in TERP, such as the New Technology Implementation Grant Program (NTIG) or the Emissions Reduction Incentive Grants (ERIG).5 In 2021, TCEQ granted TERP funds to one carbon capture project by Vistra Energy, for the installation of a carbon capture facility next to an existing facility, with the end use for enhanced oil recovery (EOR). CNC’s goal is to expand the use to carbon capture projects for uses beyond EOR, particularly more dispatchable energy for the grid that is carbon neutral.

 

Another incentive proposal is to utilize a tax credit already in statute, the Tax Credit for Clean Energy.6 Initially created in 2009, this tax incentive was modified in the 83rd legislative session. Though expired in 2018, this program provides the framework needed to create a tax incentive for CCUS projects. The value of the tax credit was equal to the lesser of 10% of capital costs or $100 million, limited to three projects. If this program were to be extended to all thermal generating facilities, there would have to be some limiting principle, such as basing eligibility on plants in non-attainment areas otherwise the fiscal cost could be prohibitive in the near term. With an updated incentive, combined with federal tax incentives such as the Section 45Q incentive7 and other state incentives, Texas could become the preeminent space for CCUS technology and advancement, providing reliable, low-carbon energy to the grid.

 

The market and technical barriers are clear: (1) Reliability and baseload capacity with 24/7 carbon neutral electricity; (2) CCUS must be recognized as necessary for both coal and natural gas fired units, in order to product a 24/7 carbon neutral source of electricity; (3) CCUS must be incentivized in Texas to become viable; and (4) There must be policy parity across all technologies and fuels to achieve carbon neutrality.

 

The impact we can make with a more reliable electric grid is also clear. Texas can continue to attract investment and industrial growth. Workforce, economic growth and gains, and an attractive place for global investment are all hallmarks of the Texas energy industry, and bolstering the grid with reliable, low-carbon energy will support further growth. That electricity, coupled with other energy sources, can meet future demands while also meeting new goals on carbon. Consumer and industry satisfaction can help attract new industries and population, and dissuade business migration away from Texas. Finally, emissions reductions can be realized here in Texas unmatched globally, and can have a massive, positive impact on U.S. emissions.

 

1 https://www.nytimes.com/2022/05/25/climate/corporate-climatepledges davos.htmlreferringSource=articleShare 

2 https://netpower.com/press-release-nov-16-2021/  

3 https://www.eia.gov/todayinenergy/detail.php?id=49876  

4 https://www.puc.texas.gov/industry/electric/business/rec/Rec.aspx

5 https://www.tceq.texas.gov/airquality/terp/ntig.html

6 https://capitol.texas.gov/BillLookup/History.aspx?LegSess=81R&Bill=HB469  

7 https://www.law.cornell.edu/uscode/text/26/45Q

 

RRC Primacy Comment

June 8, 2022

VIA EMAIL

Railroad Commission of Texas
Ms. Leslie Savage
1701 N. Congress
Austin, TX 78701

 

RE: Amend re: HB 1284 (2021), RRC’s sole jurisdiction over carbon sequestration wells

 

 

 

Dear Ms. Savage:

 

Thank you for the opportunity to respond to the Commission’s proposed amendment to 16 Texas Administrative Code (TAC) Chapter 5 and Pre-Application for Class VI Primacy from EPA, addressing statutory authority on the regulation of injection and geological

sequestration and storage of anthropogenic carbon dioxide in Texas.

 

The Carbon Neutral Coalition (CNC) supports the proposed amendment designating the Railroad Commission of Texas (RRC) as the sole authority in the state over onshore and offshore injection and geologic storage of anthropogenic CO2. CNC also supports the RRC

application for primacy from the Environmental Protection Agency (EPA) for administration of the Class VI injection well program.

 

CNC stood in full support of House Bill 1284 in the 87th Legislative Session, and the proposed amendment is in agreement with the bill’s statutory requirements. Streamlining the regulation of Class VI injection in Texas to one state agency, rather than two, will encourage

and expedite the use of Carbon Capture, Utilization, and Storage (CCUS) in the state. As noted in the proposed amendments, interest in carbon capture and storage has increased in recent years. With a regulatory framework in place, Texas can make steps toward creating a

thriving CCUS industry.

 

CNC’s position is that Texas must support the CCUS industry to face the growing challenges of a global community demanding products that are lower carbon or carbon free, but the elimination of fossil fuels is not a feasible nor desirable objective. Texas industries, workforce, and economic structure are all reliant on the oil and gas industry. Texas can meet the energy in demand, but the requirements of the marketplace will also demand carbon neutrality, and CCUS is the backbone of that necessity. We can gain increased ability in

meeting domestic demands while positioning Texas products preferentially in the global marketplace through lower carbon intensity production.

 

As energy demand continues to grow, supporting and growing the CCUS industry will be vital to ensure the fossil fuel industry meets increasing energy demand while simultaneously reducing carbon emissions. As stated in the proposed rules:

 

          “Achieving meaningful reductions in CO2 emissions while preserving the benefits of our energy-intensive economy cannot be             accomplished without significant deployment of carbon sequestration.”

 

For the CCUS industry to be successful in Texas, there must be the regulatory, legal and economic framework built in the state to support it. CNC and our Advisory Board support the proposed rules and application for primacy from the EPA, as these are integral steps towards those goals, and to ultimately achieve carbon neutrality while preserving affordable, reliable energy and maintaining a strong economy. We welcome the opportunity to discuss these comments further if needed. Thank you for your consideration and support of the burgeoning CCUS industry in Texas.

 

Sincerely,

Corby Robertson, Jr.                          Susan Combs

Senate Transp Alt-Fuel Testimonial

May 3, 2022 To:

Senate Transportation Committee

Re: Interim Charge: Alternatively Fueled Vehicles: Review the Texas Department of Transportation's plan for federal funding related to alternatively fueled vehicle infrastructure development. Examine the increase of private and public owned alternatively fueled vehicles registered in the state and make recommendations for road user fee fairness between alternatively fueled vehicles and gasoline and diesel vehicles.

The Carbon Neutral Coalition (CNC) is a Texas organization dedicated to preserving our high-skilled, high-paying energy sector jobs and shaping the future of fossil fuels. The objective of CNC is to achieve carbon neutrality in Texas by 2050, while also preserving affordable, reliable energy, creating new jobs, and maintaining a strong economy.

The energy industry continues to face growing energy demands from an increasing population, while also being called to reduce emissions on a significant scale. Innovations in technology and process, including Carbon Capture, Utilization, and Storage, provide one pathway for the fuel industry to both meet demand and move towards carbon neutrality. Another way is the increased use of alternative fuels, including compressed natural gas (CNG), propane, and hydrogen in the transportation sector, allowing the industry to create new opportunity while rebuffing challenges by Washington and Wall Street. Expanding our energy sources, while ensuring continued funding for the state highway fund, is the key to addressing the problems facing the transportation sector today.

The use of CNG provides the benefits of similar performance to gasoline or diesel-powered vehicles, reduced emissions, more stable pricing than gasoline due to its pricing structure, abundance of supply, and lowered risk of leak or spillage. There remains a need in the state for more fueling stations and infrastructure to support CNG-powered vehicles, but due to its abundance in the state, natural gas as a fuel source for vehicles provides the added benefit of promoting a Texas-based energy resource that can satisfy the call for lowered emissions.

The utilization of hydrogen as a fuel source also provides many benefits and has gained more traction in recent years by both industry and the government. Hydrogen is known as an affordable, reliable, clean, and secure energy source. Hydrogen has the ability to be a zero-emissions fuel, making it a critical part of many industry and government goals for reducing or eliminating emissions. Hydrogen can also be used as a ‘responsive load’ on the grid, enabling stability and energy storage and increasing utilization of power generators. In October of 2021, Senator Cornyn introduced a bi-partisan infrastructure package to support hydrogen technologies, touting it as a versatile, clean, and reliable energy source, with the goal of making hydrogen more accessible and cost-effective. The package would create grant and financing programs to incentivize the building of hydrogen infrastructure at ports and heavy industrial facilities, as well as hydrogen transport infrastructure, including storage and vehicle refueling stations.

While all of these energy sources provide the benefit of meeting energy demand while also reducing emissions, the use of alternative fuels presents the problem of a decrease in state funding stemming from a reduction in the motor fuels tax, which would have a significant impact on state revenue. At least 30 states have imposed special fees for hybrid and electric vehicles to address the gap in gas tax revenue, through a special registration fee, or road user charges.i CNC supports a fair and equitable fee or tax in Texas for all vehicles, including alternatively fueled and electric vehicles, whether that be a flat registration fee, or tax per recharge. CNC supports the need to continue to generate the revenue necessary for the growing state in the state highway fund.

Thank you for your consideration of this matter.

Environ.Reg Testimony.TERP.4.26

The Carbon Neutral Coalition (CNC) is a Texas organization dedicated to preserving our high-skilled, high-paying energy sector jobs and shaping the future of fossil fuels. The objective of CNC is to achieve carbon neutrality in Texas by 2050, while also preserving affordable, reliable energy, creating new jobs, and maintaining a strong economy. We can achieve this through the use of carbon capture, utilization and storage (CCUS) technologies. To materially rebuff attacks from Washington and Wall Street against fossil fuels, Texas must be pre-eminent in this new industry. Economic incentives are key, however, and the Texas Emissions Reduction Program (TERP) provides a great opportunity for the state to meet increasing energy demand while also reducing emissions.

The TERP program offers financial incentives to eligible businesses and others for the reduction of emissions from vehicles and equipment. TCEQ administers the program, funded by revenues from fees and surcharges relating to certain off-road equipment and on-road vehicles. TERP is intended to help Texas meet the goals of reduced pollution and improved air quality. Establishing an avenue for TERP funding to apply to CCUS can help TCEQ and the state achieve those goals.

CCUS is the technology that will be necessary at scale to effectively reduce carbon emissions from existing industries. Because of the cost of this technology, there is a great need for economic incentives. If increased federal CCUS economic incentives are enacted into law, such as the proposed increase in the Section 45Q tax credit, state legislation to create profitable investments could effectively bridge the gap for emitters and states to pursue these projects and lower carbon emissions on fossil fuels.

TERP is one of many state programs already in statute that could be revised to help incentivize deployment of carbon capture technology. Amending TERP to include CCUS technology and equipment as eligible for incentives would allow Texas to get engaged in this new industry, charting a way for the state to continue to provide reliable, affordable energy while also reducing emissions and cleaning the air. CCUS should be considered eligible either through a specific grant program such as the New Technology Implementation Grant Program or Alternative Fueling Facilities Program, a new grant program, or inclusion in statute as a potential recipient of TERP funds. By utilizing programs like TERP, Texas will be strategically enabled to advance the CCUS industry, which will promote transformative economic growth AND emissions reductions. CNC encourages the use of TERP to develop a viable CCUS industry in Texas, to move toward carbon neutrality while maintaining a robust economy, a good standard of living, and affordable energy to power our lives. Economic support from the state is a critical need in achieving these goals.

CEQ Filing April 2022

April 18, 2022

VIA FEDERAL eRULEMAKING PORTAL

Brenda Mallory, Chair
Council on Environmental Quality
730 Jackson Place NW
Washington, DC 20503

RE: Request for Comments on Council for Environmental Quality’s “Carbon Capture, Utilization and Sequestration Guidance,” Docket Number CEQ-2022-0001

Dear Ms. Mallory:

Thank you for the opportunity to respond to the Council on Environmental Quality’s “Carbon Capture, Utilization, and Sequestration Guidance.” The Carbon Neutral Coalition supports the Administration’s commitment to “accelerating the responsible development and deployment of CCUS to make it a widely available, increasingly cost-effective, and rapidly scalable climate solution across all industrial sectors.”i

The Carbon Neutral Coalition (CNC) is a Texas organization dedicated to shaping the future of fossil fuels. CNC was founded by Corbin J. Robertson Jr., Chairman and CEO of Natural Resource Partners, and its Advisory Board is chaired by Susan Combs, former Assistant Secretary for Policy, Management and Budget at the U.S. Department of Interior. The objective of CNC is to achieve carbon neutrality in Texas by 2050 while also preserving affordable, reliable energy, creating new jobs, and maintaining a strong economy, through the use of carbon capture, utilization and storage (CCUS) technologies.

Without question, fossil fuels are essential to the state and nation, and Texas is the current leader in energy production and economic activity. The fossil fuel industry generated $422 billion of Texas economic activity alone in 2019; it also makes Texas the number one U.S. CO2 emitter. To that end, CNC is currently working with institutions, business leaders and government officials to support initiatives and policies that will drive carbon neutrality in a way that creates jobs and continues to provide reliable, affordable energy. As energy demand continues to grow, CNC believes that supporting and growing the carbon capture, utilization and storage (CCUS) industry in Texas and in the nation will allow the fossil fuel industry to meet increasing energy demand while simultaneously reducing carbon emissions to meet the goal of carbon neutrality.

There are many CO2 emitters and abundant permanent storage opportunities in the nation, but there are also many issues that need to be resolved to create a CCUS industry: permanent storage liability, pore space ownership, a regulatory review and approval process, and economic incentives needed to justify the capital and operating costs of CCUS. CNC is working closely with the Texas legislature to resolve these issues on a state level, but on the federal level, there must be support for the industry as well to meet future carbon emissions goals, including carbon neutrality.

To meet the goal of carbon neutrality, CCUS should be considered the first order enabler, or “lynchpin”, for the future of energy. CCUS at scale will be necessary to reduce carbon emissions from existing industries and to enable system-wide carbon management and emissions reduction in the focus areas. Specifically, CCUS use will enable the reduction of CO2 emissions faster and more effectively. As validated by the International Energy Agency (IEA), for global climate targets to be met, broad commercialization of CCUS must contribute 15% of global CO2 emissions reduction.ii The utilization of CCUS as a means of carbon reduction also enables a hydrogen economy that will fuel transportation and meet the industry requirement of H2 at scale with H2 that is decarbonized.

The 2019 National Petroleum Council issued an extensive report on Carbon Capture, Utilization and Storage (CCUS)iii that was produced by hundreds of contributors: scientists, engineers, energy executives, environmentalist, market exports, and federal and state government representatives. The comprehensive report outlined many recommendations that need to be implemented to allow emitters to capture carbon, transport and permanently sequester CO2. If federal CCUS economic incentives are enacted into law, emitters and states can create profitable investments to further clean fossil fuels. Building on federal incentives, state legislation can enable low capital cost and property taxes; permanent storage fees could be split between surface and mineral owners, states can administer state-sponsored liability programs for the permanent storage liability, like North Dakota has established; and $85/tone of CO2 sequestered Section 45Q tax credit is enough to bridge the gap to profitable CCUS investments. The current $50/ton Section 45Q tax benefit is not enough to justify the CCUS projects. The $35/ton increase to $85/ton will bridge the gap and emitters and investors will then initiate CCUS projects.

CCUS, as determined by the NPC study, would create the following economic impact: (1) $680 billion in capital investments (U.S. alone and union jobs) through 2050 to reach the deployment scale of 500MM tons of CO2 abatement; and (2) 230,000 jobs on an annual basis for construction and ongoing O&M at facilities.

While also enabling the reduction of emissions as desired by the Administration, the use of CCUS in conjunction with renewable energy will also support a reliable, affordable, electrical grid. The U.S. will benefit from an electrical grid that can provide 24/7 decarbonized baseload electrons to meet reliability, resiliency, and low-cost delivery. Texas leads the United States in this area as its $88 billion investments in wind and solar provide over 20% of its electricity. CCUS can be coupled with a growing renewables investment to ensure we have the baseload, resilient system that only natural gas power plants can provide. Eventually these turbines will run on H2 rather than natural gas, and advance the baseload power production platform of carbon free power. CO2 emissions reductions in manufacturing represent about 45% of total US emissions, as most of the rest is transportation tailpipe; in pursuing this goal the industry can create a Scope 1,2,3 emissions reduction to our products that would then be sold on a global market as the lowest carbon intensity products. Cement, steel, fuels, chemicals, and more would all be lower carbon intensity. The electrical grid requires baseload power to provide reliable and resilient electricity. Natural gas-based power, with CCUS, provides what does not exist today, outside of nuclear: a carbon-free source of baseload electricity.

Many significant companies are already advancing CCUS technology and projects. Attached to this document is a current list of NETL CCA Initiatives and other CCUS technology and project sponsors. The CCUS consortia for commercialization of CCUS is funded by the Department of Energy through the Southern States Energy Board (SSEB) and centered at University of Houston and its Center for Carbon Management in Energy (CCME). There are forty-two entities including NGOs as well as universities, and thirty companies for Oil and Gas, Petrochemical and Electric Power all represented.

If supported, Texas will be strategically enabled by the state’s industry clusters, abundance of pipeline and infrastructure, and the proximal geology for storage in both Enhanced Oil Recovery and saline formations unmatched in the world. Support on the federal and state level for the legal, regulatory and economic framework for CCUS would serve to advance the CCUS industry, which needs tax policies, access to low-cost loans or classes of bonds, and incentives to promote transformative economic growth AND emissions reductions.

CNC, along with our Advisory Board, believes that the developing a viable CCUS industry could enable Texas and the nation to reach three objectives: (1) become carbon neutral by 2050; (2) maintain a robust economy that provides a good standard of living and affordable energy, products and services; and (3) lead the way toward carbon neutrality, create jobs, increase efforts to reduce carbon emissions and continue to provide reliable, affordable energy to power our lives.

Thank you for your consideration and support of the CCUS industry.

Sincerely,

Corby Robertson, Jr.

Susan Combs



CNC Advisory Board

 Susan Combs, Austin, Texas (Chairperson): Fellow at the University of Texas Center for Identity, Former Texas Comptroller of Public Accounts, and Former Assistant Secretary for Policy, Management and Budget, and Chief Financial Officer at the United States Department of Interior. 

Thurmon Andress, Houston, Texas: President of Andress Oil & Gas LP.

Mike Belenkie, Calgary, Alberta, Canada: President and Chief Operating Officer of Advantage Energy Ltd.

Sarah Biller, Boston, Massachusetts: Executive Director of Vantage Ventures and Co-Founder of the FinTech Sandbox.

Jim Blackburn, Houston, Texas: Professor of Environmental Law at Rice University and Faculty Scholar at the Baker Institute.

Tina Yturria Buford, Harlingen, Texas: Director of Education for the East Foundation, Former Board President of Texan by Nature, and Former Board President of the Texas Wildlife Association.

Tom Carter, Houston, Texas: Chief Executive Officer and Chairman of the General Partner of Blackstone Minerals.

Dan E. Cole, Frisco, Texas: Vice President of Commercial Development and Governmental Relations for Denbury Inc. 

James H. Clement, Jr., Dallas, Texas: Houston Trust Company and former Chairman of King Ranch, Inc.

Elizabeth Coleman, Rosedale, Mississippi: Partner at EnergyNorthAmerica, LLC, Former Texas State Representative, and Former Texas Railroad Commissioner. 

Jack Coleman, Rosedale, Mississippi: Founder and Managing Partner of EnergyNorthAmerica, LLC.

Robert Eckels, Houston, Texas: Founder and Director of Texas Central Railway, Former Texas State Representative, and Former Harris County Judge.

Don Evans, Midland, Texas: Chairman of the Permian Strategic Partnership, Former United States Secretary of Commerce under President George W. Bush, and Former Chairman of Energy Future Holdings.

Scott Frazier, Chapman Ranch, Texas: Texas Farm Bureau Board Member, District 13.

Kinnan Golemon, Austin, Texas: President and Founder of KG Strategies, Founder and former Chair of State Bar of Texas Environmental and Natural Resources Law Section

Maynard Holt, Houston, Texas: Chief Executive Officer of Tudor, Pickering, Holt & Co.

Devin Hotzel, Houston, Texas: Government Relations at Enbridge

Jodie Jiles, Houston, Texas: Director of Business Development for Transwestern Commercial Services and Regent on the University of Texas System Board.

Tom Luce, Dallas, Texas: Founder and Managing Partner of the Hughes and Luce Law Firm and Former United States Assistant Secretary for Education under President George W. Bush.

Tim Matthews, The Woodlands, Texas: Chief Executive Officer of Cozairo Corporation.

Dave Marchese, Houston, Texas: CEO of Caliche Storage

Charles McConnell, Houston, Texas: Executive Director for Carbon Management and Energy Sustainability at the University of Houston and Former Assistant Secretary of Energy at the United States Department of Energy under President Obama. 

Kenneth Medlock, Houston, Texas: James A. Baker, III, and Susan G. Baker Fellow in Energy and Resource Economics at the Baker Institute and Senior Director of the Center for Energy Studies at Rice University.

Reed Morian, Houston, Texas: Chairman, Chief Executive Officer, and President of DX Holding Company Inc. and DX Service Company Inc. and Former Chairman of the Texas Parks and Wildlife Commission. 

Harriet O'Neill, Austin, Texas: Founder of the Law Office of Harriet O’Neill, PC and Former Texas Supreme Court Justice.

Julie Parsley, Johnson City, Texas: Chief Executive Officer at Pedernales Electric Cooperative, Former Texas Solicitor General, and Former Public Utility Commissioner of Texas. 

Carl Ray Polk, Lufkin, Texas: Partner at Corner Capital Advisors and Former President and CEO of Polk Oil Co., Inc.

Beth Robertson, Houston, Texas: Managing Partner of Bald Cypress LLC and Chair of the Cullen Foundation.

Ron Simmons, Dallas, Texas: Founder of Retirement Advisors of America and Former Texas State Representative.

Sean Strawbridge, Corpus Christi, Texas: CEO of the Port of Corpus Christi and Chair of the Education Task Force for the Texas Railroad Commission

Cliff Thomas, Victoria, Texas: Co-owner and Chairman of the Board of Managers of Pilot Thomas Logistics, Owner and Founder of Speedy Stop Food Stores and C.L. Thomas Inc., and Regent on the Texas A&M System Board.

Bobby Tudor, Houston, Texas: Chairman of Tudor, Pickering, Holt & Co.

SEC Response

May 11, 2022

 

VIA ELECTRONIC MAIL

 

Vanessa A. Countryman, Secretary Securities

and Exchange Commission

100 F Street NE

Washington, DC 20549-1090

 

RE: RIN 3235-AM87; The Enhancement and Standardization of Climate-Related Disclosures for Investors; File Number S7-10-22

 

Dear Ms. Countryman,

 

Thank you for the opportunity to respond to the Securities and Exchange Commission’s proposed rule amendments, “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” The Carbon Neutral Coalition’s mission is to make Texas carbon neutral by 2050. Although we are actively engaged in creating the framework for carbon neutral investments that will lower our carbon emissions, we oppose the SEC’s new regulation requiring Scope 3 emission disclosure. The disclosures will not result in emission reductions as intended. Instead, Scope 3 emission disclosures will result only in confusion and overcounting for Scope 3 emission responsibility.

The Carbon Neutral Coalition (CNC) is a Texas organization dedicated to shaping the future of fossil fuels. CNC was founded by Corbin J. Robertson Jr., Chairman and CEO of Natural Resource Partners, and CNC’s Advisory Board is chaired by Susan Combs, former Assistant Secretary for Policy, Management and Budget at the U.S. Department of Interior. The objective of CNC is to achieve carbon neutrality by 2050 while also preserving affordable, reliable energy, creating jobs, and maintaining a strong economy, through the use of carbon capture, utilization and storage (CCUS) technologies and other innovative energy initiatives.

Active engagement in carbon reduction strategies, such as CCUS, is the smartest path toward carbon neutrality, not the reporting of Scope 3 emissions. Not only will the reporting be overly complicated, inaccurate, and exaggerated, climate solutions, to be effective, would have to be global, not national, to have any significant effect. SEC reporting by U.S. entities alone will not touch the majority of energy sources. Materials for renewables, batteries, and elective vehicles come from other countries who will not comply with SEC reporting. To be accurate and effective, all energy sources need the same reporting standards, all over the world. The new Scope 3 rule is overly burdensome on the U.S., without achieving any significant goal. For these reasons, CNC opposes these rule amendments.

I. CCUS Technology and Mitigating Effects

CNC recently provided comment in support of the Council for Environmental Quality’s focus on Carbon Capture, Utilization and Storage (CCUS) technologies, and the administration’s commitment to “accelerating the responsible development and deployment of CCUS to make it a widely available, increasingly cost-effective, and rapidly scalable climate solution across all industrial sectors.”i

To address climate-related risks, the answer is not more regulation and reporting but instead the adoption of carbon capture technology, storage, and the utilization of captured carbon to create new products and cleaner fuels like hydrogen and/or store carbon underground, in grasslands, forests, and seas will, on balance mitigate or offset the climate risks that concern the agency. As public companies engage in these activities, and more widely deploy these technologies (as clearly contemplated by the CEQ requested public comment), investors should be aware of these positive developments, including:

  • Reducing emissions though carbon capture and natural sequestration.
  • Creation of new products like CO2 concrete and carbon free steel.
  • Permanent geologic CO2storage reduces CO2 in the atmosphere.
  • Recognize the upside for public companies that engage in these activities

II. Global Climate Change Solutions

The CO2 contribution to climate change is a global problem, not a national problem. The U.S. has been more effective at reducing CO2 emissions than any other country, as evidenced by the charts below. To be truly effective, transparent and accurate accounting for all CO2 emissions from around the world is needed. Climate change solutions require global standards and implementation, rather than overly burdensome and duplicative reporting requirements for the U.S.

III. Renewables, Batteries, and EV Sources

The materials needed for renewables, such as solar and wind, batteries, and EVs are sourced overseas (see chart below from the USGS Mineral Commodity Summaries 2020).

Copper demand. What about its footprint? Copper Mines have huge environmental impacts, concentrates are shipped, and manufacturing is overseas.

Zinc demand. What about its footprint? Mines have huge environmental impacts, concentrates are shipped, smelters are nasty, manufacturing is overseas.

China controls reserves and processing for 70% of the world’s supply of lithium, cobalt, rare earth, and other materials needed to manufacture solar panels, batteries, EVs, and other renewable components.

As evidenced by these charts, the pursuit of renewables, batteries, and EV materials present many more problems than solutions to any climate challenge. Questions include:

  • These raw materials are sourced from what country at what footprints?
  • Transported to be processed at what footprints?
  • Processed at what footprints?
  • Transported to assembly/construction at what footprints?
  • Constructed at what footprint for all necessary materials, concrete, steel, glass and what are their footprint?
  • For batteries, what are the footprints of their power source?
  • What infrastructure is needed at what footprints to use renewables and EVs power transmission lines, distribution line upgrades for local demand, EV charging stations at home, office and on highway/street systems.

The shift in energy intensive manufacturing to the emerging economies means that the SEC reporting will have little effect on CO2 emissions. As these trends continue, global coordination and accountable reporting become more essential (see Chart below).

Waste Management: Oil, gas and coal are accountable for their waste. Wind, solar, nuclear, geothermal and biomass need to plan for their permanent waste disposal and other footprints around the globe. After 40 years of operation and nuclear waste generation, the US is allowing the nuclear waste to be stored onsite in short lived containers.

How will the SEC account for the waste created by the overseas mining, transport, processing, assembly, and distribution of all the materials used in the energy supply chain? Renewables, batteries, and EVs are completely dependent on foreign sources that do NOT report to the SEC, making any goals of an overall reduction in emissions impossible under these efforts.

 

IV. Detriment of Reporting Requirement on Scope 3 Emissions

 

Scope 3 Emissions reporting comes with many detriments and barriers to reaching climate goals, achieving the opposite of intended effect. As evidenced above, inconsistent international standards will negate the accuracy and accountability of SEC Scope 1, 2, and 3 reporting. Without consistent standards, and a global application, emissions reporting required by the SEC will result in confusion and inaccuracy. Further, potential costs of new rules and the difficulty of accurate reporting will stall innovation which would effectively reduce carbon emissions. Assessing who is responsible for Scope 3 emissions will be very difficult and contradictory; overcounting Scope 3 emissions is dishonest. The inevitable inaccuracy of reporting, due to inconsistent standards and overlap of emission information, will inevitably lead to lawsuits against the energy industry, again tying up the resources and focus away from innovation.

 

There are many parties that are partially responsible for Scope 3 emissions. There is no way that the responsibility can be assigned, so Scope 3 emissions are not over-counted. Energy production, transportation, processing, distribution and its multitude of products will create multiple entities reporting the same thing, which will exponentially over state Scope 3.

V. Need for Energy Parity in Regulations

 

Wind, solar, batteries, and EVs are manufactured from materials that are sourced internationally, have extensive carbon, environmental, social, and import footprints and are creating environmental damage around the world. The SEC must enforce the source standards on all energy sources. It does not matter where carbon is emitted. It has the same effect on climate.

 

Rather than punishing U.S. energy sources, there is a need to create a reporting template at multiple levels to create an accountable standard for all energy sources, such as a reporting template in which each company will disclose information that measures its carbon footprint, energy intensity or density, environmental impact, social/human impact, waste management, import dependence and economic impact for its products. Please provide guidance for how each reporting standard should be measured. To be truly equitable, there needs to be a template setting standards and measurement so that all energy is measured the same.

 

Each energy source should be evaluated using comparable metrics including its current contribution to the US energy supply:

  • Carbon intensity (GHG)/air emissions
  • Energy density 
  • Acreage required for each energy source per output (land use matters)
  • Processing, transportation and distribution
  • Feed stock availability
    • Foreign and from where?
    • Domestic 
    • Logistics
    • Cost 
    • Reserve/production ratio vs useful life of components 
    • Social/human/labor intensity
  • Environmental footprint 
  • Governance 
  • Infrastructure requirement: 
    • greenfield vs brownfield 
    • waste disposal plan and cost 
  • Economic factors: 
    • Benefits of accelerator effect
      • USA 
      • Foreign 
    • Infrastructure 
    • Capital cost 
    • Operating cost 
    • Jobs – domestic or foreign
    • Tax base/royalties/other public support/tax benefit or taxpayer 
    • Economic impact/GNP dependence

VI. Conclusion

In conclusion, the SEC, our federal and state governments should confront accountability with a global, cradle-to-grave analysis that all energy sources are required to report on a standardized basis that is accountable, verifiable, factual, and universal. There is no energy source available that does not have a carbon, environmental, social/human, waste management and import footprint. The evaluation should provide a level playing field based upon total, factual accountability. Where there is not a source of reliable, factual data, reporting sources should provide a transparent accounting for the estimated footprints. Our global economy is interdependent, but transparent information is not available on all impacts. If the SEC’s reporting requirement objective is to reduce CO2 emissions, it MUST have international accountability for all energy sources.

 

As former Comptroller of the state of Texas, I was its CFO and Treasurer. Regulatory frameworks inevitably spur business and investment decisions. In my view, the goal should be to balance regulatory need versus regulatory burden, and I am very concerned that the proposed regulation as drafted would be unreasonably burdensome, deter capital investment in vital energy processes, and not produce a good result.

 

Thank you.

Sincerely, 

 

Susan

Combs Chair, Advisory Board, Carbon Neutral Coalition