Bud's Offshore Energy (BOE)

Background:

• A provision in the “Infrastructure Bill” that was enacted on 11/15/2021 amended the OCS Lands Act to provide for offshore carbon sequestration.
• Because carbon disposal is arguably dumping, the legislation included an exemption from the Marine Protection, Research, and Sanctuaries (Ocean Dumping) Act of 1972.
• The bill mandated that the Secretary of the Interior (DOI) promulgate implementing regulations within one year (l.e. by 11/15/2022).
• These provisions were added to the bill without debate and their inclusion was a surprise to most observers. Presumably, DOI had the opportunity to review the text, because that is standard practice.
• The legislation also authorized $2.5 billion for commercial sequestration projects.
• 2 days after the Infrastructure Bill was signed (11/17/2022), Exxon was the only bidder (Oil and Gas Lease Sale 257) on 94 nearshore tracts off the Texas coast. The sale notice did not mention carbon sequestration; nor had DOI assessed the potential environmental impacts of sequestration as required by NEPA.
• Sale 257 was vacated by the DC Federal Court for reasons unrelated to the sequestration bids.

Questions:

• What are the costs per ton of offshore carbon sequestration including emissions collection, offshore wells and platforms, the associated pipeline infrastructure, ongoing operational and maintenance costs, and decommissioning?
• What is the timeframe given that the starting point is likely years away?
• How long would CO2 sequestration continue.
• Who pays? Polluters? Federal subsidies? Tax credits?
• Who is liable for:
  • safety and environmental incidents associated with these projects?
  • CO2 that escapes from reservoirs, wells, and pipelines (now and centuries from now)?
  • decommissioning?
  • hurricane preparedness and damage?
• For Gulf of Mexico sequestration, how much energy would be consumed per ton of CO2 injected? Power source? Emissions?
• To what extent will these operations interfere with other offshore activities?
• Relatively speaking, how important is US sequestration given:
  • the steady progress that is being made via natural gas and renewables?
  • the massive emissions elsewhere?
  • the continued growth in worldwide coal consumption?
• What are the benefits of offshore sequestration relative to investments in other carbon reduction alternatives?
• Will BOEM conduct a proper carbon sequestration lease sale with public notice (as required by BOEM regulations) such that all interested parties can bid?
  • What will be the lease terms?
  • Environmental assessment?
  • How will bids be evaluated?
• What happens to the Exxon bids if the Judge’s Sale 257 decision is reversed?
• What is the status of the DOI regulations mandated in the legislation with an 11/15/2022 deadline?
  • When will we see an Advanced Notice or Notice of Proposed Rulemaking?
  • Given that DOI has no jurisdiction over the State waters and onshore aspects of these projects, what is the status of parallel regulatory initiatives?
• Finally and most importantly, how does drilling offshore sequestration wells instead of exploration and development wells increase oil and gas production?

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