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WGA CTL tech team


									DRAFT MEETING SUMMARY Coal to Liquids Team Participants Bob Williams, Princeton Environmental Institute John Brenner, USDA Natural Resources Conservation Service Steve Ellenbecker, WY Governors’ Office Greg Schaeffer, Arch Coal Dick Sheppard, Rentech Dave Perkins, Rentech Alex Schroeder, WGA Pam Inmann, WGA Kathleen Rutherford, Kearns & West Tom Kasierski, MT Governor’s Office (phone) Paul Bollinger, U.S. Air Force (phone) Chuck McGraw, NRDC (phone) ACTIONS/NEXT STEPS Review/refine meeting summary Assign Drafters o Potential - Graham Parker o Barriers – Dave Perkins/Dick Sheppard o Environmental and Life Cycle Impacts - Chuck McGraw o Synergies with other Fuels - Dave Perkins/Dick Sheppard (IGCC) and Bob Williams (biomass) o Policy Recommendations - WGA Review Guideline for Report from Advisory Committee-direct to write to this; identify gaps from May 10th meeting: o Life cycle and environmental impacts o Markets o Advantages and disadvantages o Infrastructure TIMELINE  June 8 - Iteration #2-draft sections to WGA for collation  June 12 - Conference call to review whole document; assign final drafting prior to public comment  July 8- Final draft due to WGA  July 15 – Report will be released for public comment  August-Set date for conference call to review public comment, finalize draft  Late September- Final draft due to advisory committee

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DRAFT MEETING SUMMARY Coal to Liquids Team AGREEMENTS Draft Paper Review, by Section Current Status o Project Descriptions:  FEED: the group agreed that projects covered will have to use a feedstock of coal or coal plus (e.g. coal plus petcoke);  PRODUCT: the output at the back end must include liquid transportation fuels and can include potential liquid transportation fuels;  PLANT DEFINITION will be a four-fold description: conceptual (a press release); feasibility (looking at economics, looking for investors; design (started FEED); and demonstration. o Information to include in tables o Cite study/sources of information and date of estimate with reported costs; o Note where those are absent carbon capture costs and describe the carbon journey (e.g. distribution to site; sequestration or enhanced oil recovery (EOR) options available o Add co-production of electricity and show that at net electricity for sale at the busbar o Add existing state incentives (Greg Schaeffer to obtain list and distribute to group) o It was discussed and agreed to not characterize Shell in the paper as a turnkey operation Predicted Deployment o The paper should articulate a disclaimer that acknowledges this is our best effort, it may and likely has overlooked something, and that it references only public information o Page 23-the rewritten paragraph is best placed in the introduction o Page 23- amplify the CTL-EOR link- for each barrel of CTL produced, enough carbon to support the production of 2 barrels of crude (Advanced Resources Institute – ARI) Framing of Report o Address link between climate and energy security o Next step in CCS is going to be large # of large scale projects (e.g. 1-5 million tons of carbon underground per year)-CTL community could lead this effort o Optimal systems link source and sink o A stand-alone chapter should address CCS-quantity; costs; advantages; opportunities o A principle this paper should advance is that the lack of a regulatory regime shouldn’t slow progress, but rather it should be adaptive and used to refine. An approach to consider here would be an incremental one, where the group might Western Governor’s Association Fuels for the Future Initiative 2

DRAFT MEETING SUMMARY Coal to Liquids Team suggest temporary regulations that evolve over time with experience of application. DRAFT POLICY RECOMMENDATIONS State • • • • • • • • • • • • • Maximize CO2-EOR economic potential Sequestration would be required for CTL Consider adopting a low carbon fuel standard Streamline permitting to allow infrastructure to be installed in a timely manner CO2 sequestration demonstration projects should be treated as laboratories Issuing bonds for infrastructure development Loan guarantees Policies to support and encourage relevant engineer/labor experience Establish regional partnerships to develop CO2 infrastructure through WGA Incremental OPEC Rent Tax w/ consumer and producer rebates WGA should lead the effort to establish sequestration regulations and standards (should be done in 2 phases <2015 and >2015) Streamline permitting to allow infrastructure to be installed in a timely manner Encourage the use of CO2 for regional EOR projects (i.e. pairing sources and sinks across states lines, transporting infrastructure) Encourage that current DOE carbon sequestration demonstrations use CO2 from CTL Encourage coupling CTL with IGCC demonstration projects Encourage Congress to increase funding for CTL R&D (DOE) Encourage DOE to integrate of fundamental and field research to develop CTL technology Streamline permitting to allow infrastructure to be installed in a timely manner Federal lease statutes-the development process can be longer than the lead times currently structured at 1% of reserves in 10 years if the project is not build, risk lease loss. Restructure.



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DRAFT MEETING SUMMARY Coal to Liquids Team DISCUSSION Welcoming Remarks Steve Ellenbecker welcomed the group and thanked them for their commitment to this important initiative. He stressed the need to incorporate everything we can on carbon capture and sequestration as there is a large group out there wanting it and because that may affect support. The group needs to describe what we know, and then focus on what can we do to improve the situation- specifically what the governors can do to benefit and improve the situation. Tom Kasierski seconded Mr. Ellenbecker’s remarks, and added his support to the initiative outcome of promoting diversified fuels, stating that Montana has interest in biofuels and CTL. CTL is one amongst a diverse portfolio of fuel options that are important for our region and the nation Bob Williams also joined the opening remarks. Mr. Williams came from a NETL meeting focused on CCS, where he was a plenary speaker. He shared that he changed the thrust of his talk after the first day because there was nothing on syn fuels. He stressed the need to find way to address climate change and energy supply security; and that this needs to be a marked departure from how we have dealt with alternative fuels in the past. He stated that the policy system in place now puts government in the role of picking winners; and stressed the need to instead let the market pick the winners in this challenge. He noted that the low carbon obligation for fuels introduced by Governor Schwarzenegger this year is one way to get there. Mr. Williams went on to propose that we ought to be thinking at the national level about a policy for alternative fuels that eliminates winner picking subsidies that are out there now, eg ethanol subsidy, and replace it with a low carbon standard for fuels. With a trading mechanism attached, this would work like an RPS. He noted several of the many adverse downstream effects associated with alternative fuels subsidies and production. Discussion then went to broad support of these principles, while noting that the report cannot denigrate other alternative fuel resources. It was proposed that the best long term goal would be to move beyond technology favoritism into a level playing field that does not seek to balance subsidies between resources, but instead lets markets decide. Political viability of this goal was questioned. Alex Schroeder, WGA walked the group the Transportation Fuels for the Future Initiative. Kathleen Rutherford, Kearns and West, walked through the process, protocols and timeline. Synergies on feedstock, technology were noted and it was requested that a crosstechnical team group examine synergies prior to the workshop. This group would function to identify synergies across the fuel groups and shape up a cross walk for the advisory committee review. Recent activity on the energy bill as it relates to CTL was discussed, specifically that incentives to plants that capture carbon were said to be positive, whereas an oil price floor was questionable. As to the former, questions of liability and whether such incentives would slow or stop plants were asked. An alternative to the oil price floor was Western Governor’s Association Fuels for the Future Initiative 4

DRAFT MEETING SUMMARY Coal to Liquids Team posed, such a policy should sustain pressure on the consumer and reward performance. One such policy would be to increase retail tax on transportation fuels and rebate revenues in the situation of an oil price decrease. Rebates could go to consumers on a per capita basis, and to producers of fuel alternatives to oil proportionately- per unit of liquid energy. A short discussion about a strategic oil reserve went to the fact that coal is a reserve analogous to crude, and would not require additional refinery capacity. Challenges related to transportation and siting include moving feedstock to plants, carbon to storage and/or sequestration, and products to market, be that through rail or pipeline. It was noted that carbon pipelines are easier to site than others, and that if co-firing with biomass transportation efficiencies could be gained in states such as Wyoming, Utah and Colorado by shipping biomass feedstock on trains returning through the farm belt. No rail interests were present at the meeting to comment. An overall approach was discussed at length. If the group is going to take the approach that their policy recommendations should set goals and let the market decide, there is a question as to the relationship of that principle to state incentives. The state role in initiating change is key, but what does it look like in statute? Another principle to consider is an adaptive or piecemeal approach, whereby learning and application of lessons learned is wired into the progression of policy moving from short to longer term. It was noted that a carbon sequestration permitting process needs to be created. Because interstate jurisdictions would be in play, this may be both a regional and national issue with which FERC might be involved. WGA may be ideally positioned to work on developing draft processes for the region. Public/private partnerships could also be pursued, such as that demonstrated by the Bellona Foundation in Norway to develop a carbon infrastructure for offshore EOR. CHALLENGES AND BARRIERS A proposed approach to this section would be to proactively address the suite of concerns up front, and start with a vision of what it would take to make CTL economical, e.g. upsize production/industry expansion necessary to achieve mega scale, and pro-actively address key issues in regulatory regime, particularly as it relates to carbon, mining safety, health and environmental concerns. Also noted was the need to address carbon more specifically, and it was suggested that this be done in a stand alone chapter. One issue to be addressed is the mining of coal, and one approach offered would be to link climate change and health, safety and environmental concerns. The opportunity would be to shape legislation, show progress on the issues and highlight that which remains to be addressed and how. Other issues identified as challenges related to co-firing biomass were related to transportation, and technical issues related to gasifier technology,water use and availability, a dearth of skilled labor and engineers, and transportation for getting feedstock to plant, carbon to storage and product to market. Additionall, financing linked to carbon uncertainty and carbon cost/price in future was identified as a challenge, as was the absence of national sequestration regulations and the associated questions as to risk sharing liability and what that might look like, e.g. Tribes, Federal, States, Multi state compacts. Because CTL is coal based, there is an inherent institutional constraint in that Western Governor’s Association Fuels for the Future Initiative 5

DRAFT MEETING SUMMARY Coal to Liquids Team the gas industry will work the carbon management side because they own the existing pipelines. Strong links need to be forged between the coal and oil and gas industries to follow the EOR opportunities. Other infrastructure-related challenges included transportation (getting feedstock to plant, product to market, and carbon to storage) ; start up power; gasifiers (roadway or built on-site); transmission access for energy to be sold to grid/utility

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