Jarad Daniels

Office of Clean Coal & Carbon Management

Thursday 19th June 2014

U.S. CCS Policy

President’s Climate Action Plan: Three overarching themes

Mitigation (Emissions Reduction)

• ALL OF THE ABOVE

• Efficiency, Renewables, Nuclear, Gas

• Coal with CCS/CCUS

Adaptation and Resilience

• Smart, reliable grid

• Key infrastructure investments

International Partnerships

• China and Asia

• Coordinated Intl. Efforts

2Once in a Generation Opportunity to Build

3

Effects of Market Realitieson the “All of Above” Strategy

• Regardless of EPA Greenhouse Gas regulations, the Energy Information Administration (EIA) projects that no new coal-fired generation will be built in the US in the foreseeable future.

• The expansion of shale gas production in the U.S. has led to lower natural gas prices, challenging the cost-competitiveness of coal-fired power generation.

4

Electric Utility Sector & EPA RegsIssue Federal Regulation/Compliance

Air SOx & NOx crossing state lines

Cross-State Air Pollution Rule (CSAPR)finalized 7.7.2011; 12.30.2011, DC Circuit stay of CSAPR (CAIR in effect); 8.21.2012, DC Circuit decision vacating CSAPR; SCOTUS overturned, EPA Review Pending

Compliance: Unknown

Mercury and Hazardous Air Pollutants (HAPs)

Mercury and Air Toxics Standards (MATS) Rule for Electric Generation Units finalized 12.16.2011

Compliance: ~2015

GHG emissions GHG New Source Performance Standards (NSPS) new rule proposed 9.20.2013

Existing GHG Regulationproposed rule delivered 6.2014; final rule expected 6.2015 (under Presidential Memorandum)

Waste Coal Combustion Residuals (e.g., coal ash, boiler slag)

Coal Combustion Residuals (CCR) Rule proposed rule 6.10.2010; schedule for final rule expected 1.2014 (court memorandum)

Compliance: Unknown

Water Cooling Water Intake Structures – impact on aquatic life

CWA §316(b) Ruleproposed rule 4.20.2011; final rule delivered 5.2014 (settlement agreement)

Compliance: Within 8 Years

Surface water discharges; Surface impoundments

Steam Electric Effluent Limitations Guidelinesproposed rule expected 11.2012; final rule expected 5.22.2014 (settlement agreement)

Compliance: Unknown

Near-term (through 2015-2016) Compliance Horizon for EPA regulations may create potential localized reliability issues

Local reliability issues can be managed with timely notice and coordination on retirement and retrofit decisions

States and regions will play a valuable role in addressing EPA regulation impacts

Non-transmission alternatives can help alleviate reliability impacts when/where available

EPA regulations are only one aspect impacting the future of our electricity system

5

2011 2012 2013 2014 2015 2016 20212010

For Reliability Critical Units

Technically in Effect

(conditional)

316(b)Final Rule

5.2014Compliance within 8 years of effective date

Eff GuideFinal Rule5.22.2014

Eff GuideProp Rule6.7.2013

316(b)Prop Rule4.20.2011

MATSFinal Rule

12.16.2011

Compliance within 3 years of effective date + 1 add’l year if granted by permitting authority

MATSProp Rule3.16.2011

CSAPRFinal Rule7.7.2011

CSAPRProp Rule4.26.2010

EGU GHG NSPS

Final Rule2013-2014*

EGU GHG NSPS

Prop Rule3.27.2012

CCRFinal Rule

2014??

Compliance Currently UnknownPROPOSED: Subtitle D – 6 months; Subtitle C – state decision

CCRProp Rule6.21.2010

Compliance Currently Unknown

•CSAPR: 4.29.2014 opinion vacating CSAPR overturned by Supreme Court; EPA is reviewing the opinion

•MATS: EPA Enforcement Policy Memorandum; Presidential Memorandum; FERC Policy Statement•EPA finalized its reconsideration of MATS for new sources on 3.28.2013; only impacts new sources to be built in the future.

EPA Regs Compliance Horizon

CAIR in effect; CSAPR Compliance Currently Unknown; pending SCOTUS review

* PM directs EPA to issue new proposed EGU GHG NSPS by 9.20.2013 and a final rule “in a timely fashion after considering all public comments, as appropriate”

EGU GHG NSPS

Prop Rule #29.20.2013

Complaince, 2018- 2030+

Existing EGU GHGFinal Rule6.2015*

Existing EGU GHGProp Rule6.2014*

* PM directs EPA to issue proposed existing source EGU GHG rule by 6.2014 and a final rule by 6.2015.

6

Clean Air Act - 111(b) New Source Performance Standards (NSPS) for Greenhouse Gases (GHGs) from new fossil sources, burning at least 50% coal or 50% natural gas

Coal-Fired Units: less than 1,100 lbs CO2/MWhReference: New Super Critical: 1,800-2,000 lbs CO2/MWh

Coal may comply with ~ 40% capture

Gas NGCC:1,000 lbs CO2/MWhGas simple cycle 1,100 CO2/MWh

- Compliance is on a 12 month rolling basis- Captured CO2 may be sent for geologic storage - EOR may be used with appropriate reporting

Timeline:Proposed Regulation: November, 2013Final Regulation expected November 2014 – January 2015 (1 year after proposal)

Note: 111(b) must be final before 111(d) is final!

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Clean Air Act - 111(d): SummaryApproach:

1.) Develop Building Blocks to guide emission reductions2.) Set state targets for 20303.) Request State implementation plans by 2016-20174.) Gradual reduction over 12 years, with binding cap in 2030

EPA defines the “best system” as the Electricity system as a whole. Therefore, new non-emitting sources can be used

EPA is seeking to provide as much flexibility to states as possible to develop individual plans

Published concurrently with Modified source rule (Modified sources under 111(b). Note that this counts as a precursor to 111(d) regulations, as does the New Source Performance Standards, also under 111(b)

111(d) has only been used 5 times before for smaller rules. This is new legal territory for EPA.

8

111(d): Building BlocksApproach: EPA Developed 4 “Building blocks”

1.) 6% Improvement in Coal Plant Heat Rate (4% from “Best practices”, 2% from Equipment Improvements

2.) Increase existing NGCC capacity factors to 70%3.) Expanding new, less carbon – intensive generating capacity

(Renewables, New Nuclear, and credit for retaining existing nuclear)

4.) Demand Side Energy Efficiency

- Building blocks are calculated on a per-state basis.

- States DO NOT have to use the 4 building blocks above.

- Building blocks set the state emission rate; State Implementation Plan can determine how best to meet the emission rate.

- 2012 Baseline Year

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CO2 emission rate =CO2 emissions from all affected fossil fuel EGUs

Generation from affected fossil fuel EGUs +New RE Generation +

Generation from new and “preserved” NE +Cumulative MWh saved from demand side EE

State Implementation Plans:- SIPs due in June, 2016, unless states opt in to a multi-state approach- Multi-State Plans due in June, 2017.

- Plans will be evaluated based on 4 criteria:- Enforceable Measures- Emission Performance- Quantifiable and Verifiable Emission Performance- Reporting and Corrective Action

EPA will be publishing guidelines to aid states in developing SIPs

111(d): Emission Rates and SIPs

10

Draft Rule: 2 June 2014

Final NSPS: November 2014 – January 2015

Final Rule: June, 2015 (Per President’s Directive)

State Plans: June, 2016

Multi State Plans: June, 2017

Initial Reductions: 2018

SIPs shall set interim goals to assess performance over the time period from 2018-2030.

Binding State Goals: 2030; 3-year rolling average thereafter.

111(d): Timeframes:

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Cross-Cutting Research Crosscutting technology development program

Major Goals: 2016: advance 2nd gen materials, sensors, modeling technologies to applied programs 2020: develop distributed communication sensor networks (transformational tech.)

CO2 StorageSafe, permanent storage of CO2 from power and industry

Major Goals: 2020: technologies and tools available to measure and account for 99% of injected CO2

2020: CCS best practices and protocols completed based upon RCSP Phase III activities

CO2 Capture and CompressionCost effective capture for new and existing plants

Major Goals: 2016: complete 2nd gen field tests (~1.0 MW scale)2020: complete 2nd gen pilot tests (10 to 25 MW) 2025: complete transformational tech. field tests (~ 1.0 MW)

Office of Clean Coal: Program Summary

Advanced Energy SystemsGasification, Adv Turbines, Adv Combustion, CBTL, and fuel cells

Major Goals: 2016: Complete Warm Gas Cleanup demo.2025: 20-30% Reduction in Combined Cycle Capital Cost (2nd gen)2025: Advanced combustion ready for pilot scale operation

12

Carbon CaptureSub-program is focused on the development of post-combustion and pre-

combustion CO2 capture technology for new and existing industrial and power-producing plants

The National Carbon Capture Center in Wilsonville, Alabama

FY 2015 Request: $77.0 Million

• Post-Combustion Capture Systems(65.0 Million)

• Pre-Combustion Capture Systems(12.0 Million)

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Carbon Storage Sub-program advances safe, cost-effective and

permanent geologic storage of CO2

FY 2015 Request: $80.1 Million

• Storage Infrastructure (Regional Carbon Sequestration Partnerships)

(60.1 Million)

• Geologic Storage Technologies(8.5 Million)

• Monitoring, Verification, Accounting and Assessment(4.5 Million)

• Focus Area for Carbon Sequestration Science(7.0 Million)

Regional Carbon Sequestration Partnerships

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Advanced Energy SystemsSub-program focuses on improving the efficiency of coal-based power systems,

enabling affordable CO2 capture, increasing plant availability, and maintaining the highest environmental standards

FY 2015 Request: $51.0 Million

• Advanced Combustion Systems(15.0 Million)

• Gasification Systems(22.0 Million)

• Hydrogen Turbines(11.0 Million)

• Solid Oxide Fuel Cells(3.0 Million)

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Cross-Cutting ResearchDevelopment of new materials, catalysts, instrumentation and sensors,

and advanced computer systems that will be used in future power plants and energy systems

FY 2015 Request: $35.3 Million

• Plant Optimization Technologies(7.0 Million)

• Coal Utilization Science(23.5 Million)

• University Training and Research(2.75 Million)

• Energy Analyses(0.85 Million)

• International Activities(1.1 Million)

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CCS & Power Systems FundingFY 2013 - 2015

($ in thousands)FY 2013

FY 2014

Enacted

FY 2015

Request

Carbon Capture

Post-Combustion

Natural Gas CCS Prize

Pre-Combustion

Total, Carbon Capture

51,336

0

12,389

63,725

80,000

0

12,000

92,000

65,000

0

12,000

77,000

Carbon Storage

Storage Infrastructure (Regional Carbon Sequestration Partnerships)

Geological Storage

Monitoring, Verification, Accounting and Assessment

Carbon Use and Reuse

Focus Area for Carbon Sequestration Science

Total, Carbon Storage

76,961

13,845

6,229

719

8,991

106,745

71,866

16,300

10,000

800

9,800

108,766

60,084

8,500

4,500

0

7,000

80,084

Advanced Energy Systems

Advanced Combustion Systems

Gasification Systems

Hydrogen Turbines

Coal and Coal Biomass to Liquids

Solid Oxide Fuel Cells

Total, Advanced Energy Systems

14,790

36,051

13,866

4,621

23,110

92,438

18,500

36,000

15,000

5,000

25,000

99,500

15,000

22,000

11,000

0

3,000

51,000

Cross-cutting Research

Plant Optimization Technologies

Coal Utilization Science

Energy Analyses

University Training and Research

International Activities

Total, Cross-cutting Research

12,629

23,293

4,711

3,699

1,286

45,618

17,025

19,000

950

3,600

1,350

41,925

7,042

23,550

850

2,750

1,100

35,292

NETL Coal Research and

DevelopmentNETL Coal Research and Development

Total, NETL Coal Research and Development

33,338

33,338

50,011

50,011 34,031

Total, CCS & Power Systems 341,864 392,202 277,407

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Fossil Energy Budget: 2015:

$205,0001,600

19,95015,580

Researchand Development

CCS Demonstrations Natural Gas Carbon Capture & Storage

CCS & Power SystemsCarbon CaptureCarbon StorageAdvanced Energy SystemsCross-cutting ResearchNETL Coal R&DTotal CCS & Power Systems

Oil & Natural Gas Technologies

PetroleumReserves

Other R&D/Prog. Direction/Mgmt.Support

Total, Research and Development

(Dollars in Thousands)FY2015

25,000

77,00080,08451,00035,29234,031

$302,407

$35,000

$138,093

$475,500

Request

Total Fossil Energy Budget $711,030

Strategic Petroleum ReserveNortheast Home Heating Oil Reserve*Naval Petroleum Reserves/RMOTCElk Hills School Land Fund

Rescission of CCT Prior Year Funds ($6,600)

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DOE CCUS Demonstration Projects

CCPI

FutureGen

ICCS (Area I)

Hydrogen Energy CaliforniaIGCC with EOR

$408 Million - DOE$4.0 Billion - Total

Summit Texas Clean EnergyIGCC with EOR

$450 Million - DOE$1.7 Billion - Total

NRG EnergyPost Combustion with CO2

Capture with EOR$167 Million – DOE$339 Million - Total

Air ProductsCO2 Capture from Steam

Methane Reformers with EOR$284 Million - DOE $431 Million - Total

LeucadiaCO2 Capture from Methanol

with EOR$261 Million - DOE $436 Million - Total

Archer Daniels MidlandCO2 Capture from Ethanol w/ saline storage

$141 Million - DOE $208 Million - Total

FutureGen 2.0Oxy-combustion with CO2 capture

and saline storage$1.0 Billion - DOE

$1.3 Billion - Total

Southern Company ServicesIGCC-Transport Gasifier w/CO2 pipeline

$270 Million - DOE$2.67 Billion - Total

Focus – Large-scale commercial demonstration of CCUS integrated with coal power generation and industrial sources.

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Southern Company ServicesAdvanced IGCC with CO2 Capture

Plant SitePlant Site

Status

Plant construction >85% complete;>5,100 construction workers on site

CO2 off-take agreements signed

Lignite mine under development

Combustion turbine startup: Aug 2013

Roll Steam Turbine: Oct 2013

Gasifier heat-up: June 2014

Key Dates

Project Awarded: January 2006

Project moved to MS: December 2008

Construction: July 2010

NEPA ROD: August 2010

Operations: Nov/Dec 2014

• Kemper County, MS

• 582 MWe (net) IGCC: 2 Gasifiers, 2 Siemens Combustion Turbines, 1 Toshiba Steam Turbine

• Mississippi Lignite Fuel

• ~67% CO2 capture (Selexol® process) 3,000,000 tons CO2/year

• EOR Denbury Onshore LLC, Treetop Midstream Services LLC

• Total Project: $4.3 Billion DOE Share: $270 Million (7%)DOE Reimbursement to date: $248 Million

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Southern Company ServicesAdvanced IGCC with CO2 Capture

Remaining Issues/Concerns:

There are few remaining challenges for the Kemper project to overcome, but none of them are anticipated to preclude the plant from operating as planned.

Portions of the plant are presently being tested and full operations is expected to start in early 2015.

Litigation was filed by the Sierra Club on the Certificate of Public Convenience and Necessity. The issue is before the Mississippi State Supreme Court.

Mississippi Power Company (MPC) has increased estimated plant costs several times over the past year. MPC will not seek to recover these increases from customers.

2121

Kemper County, MSSouthern Co., 2010

2222

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Archer Daniels MidlandCO2 Capture from Biofuel Plant

• Decatur, IL

• CO2 is a by-product (>99% purity) from production of fuel grade ethanol via anaerobic fermentation

• Up to 90% CO2 capture; dehydration (via tri-ethylene glycol) and compression – ~900,000 tonnes CO2 /year

• Sequestration in Mt. Simon Sandstone saline reservoir

• Total Project: $208 Million

DOE Share: $141 Million (68%) DOE Reimbursement to date: $75 Million

Key Dates

Phase 2 selection: Jun 15, 2010

FEED Complete: Apr 2011

NEPA FONSI: Apr 2011

Construction start: May 2011

UIC Class VI Injection Well Permit: Aug 2014

Sequestration start: Feb 2015

Status

Construction ~55% complete

UIC Class VI permit submitted: Jul 2011

Two monitoring wells drilled: Nov 2012

Commissioning compression and dehydration: began in July 2013

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Archer Daniels MidlandCO2 Capture from Biofuel Plant

Remaining Issues/Concerns:

The ADM draft permitting process for the first UIC Class VI CO2 injection well permit is on track.

The permitting process may continue through August 2014 to get the final permit. Any delay would impact the injection well drilling schedule.

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Decatur, ILADM 2013

Compression FacilityCO2 Pipe to Injection Well

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ADM - Project Monitoring Photos (June 2013)

Soil Gas and CO2 FluxNetworks

Shallow Groundwater Sampling

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ADM - Project Photos (June 2013)

Four Compressor Train Compressor & Auxiliaries

Dehydration System 8” High Pressure transmission Line

28

Air Products & ChemicalsSteam Methane Reforming with CO2 Capture

• Port Arthur, TX (Hydrogen plant at Valero Refinery)

• 90%+ CO2 capture (Vacuum Swing Adsorption) from 2 steam-methane reformers (SMRs) yielding ~925,000 tonnes CO2/year

• ~30 MWe cogeneration unit to supply makeup steam to SMRs and operate VSA and compression equipment

• CO2 to Denbury for EOR - West Hastings oilfield

• Total Project: $431 Million DOE Share: $284 Million (66%) DOE Reimbursement to date: $266 Million

Key Dates

Phase 2 selection: Jun 15, 2010

FEED complete: Nov 2010

Permit By Rule (PBR) and Standard Air Permits issued: May 2011

NEPA FONSI: Jul 2011

Construction start: Aug 2011

Operation start: Dec 2012

Status

PA-1 initiated operation: Mar 3, 2013

PA-2 initiated operation: Dec 16, 2012

– Operating continuously since Dec 31, 2012

– Full capacity achieved: April 2013

– Total CO2 delivered: 922K tons (Mar 2014)

Final MVA report submitted: Feb 2013

Air Products & ChemicalsSteam Methane Reforming with CO2 Capture

Remaining Issues/Concerns:

APCI is currently operating and there are no present issues of concern with this project.

The project reached 1,000,000 metric tons of contained CO2 in the mid-April 2014 timeframe.

APCI has requested a 2-year no-cost time extension beyond September 30, 2015 to provide additional operational data.

VSA VesselsVSA Vessels

Co-Gen Unit

Blowers

CO2 Compressor & TEG Unit CO2 Surge

Tanks

Existing SMR

Air Products and Chemicals, Inc. - Port Arthur 2

31

0

500

1000

1500

2000

2500

3000

3500

4000

HECA FutureGen 2.0 Archer DanielsMidland

Summit TXClean Energy

NRG Energy Air Products Leucadia SouthernCompany

Tota

l Pro

ject

Co

st (

Mill

ion

s o

f D

olla

rs (

$))

DOE CCUS Demonstration ProjectsFunding Sources

DOE Funding Industry Funding

32

Texas Clean Energy ProjectA breakdown of the financing

Project Details• Advanced Integrated Gasification Combined Cycle

• Poly-generation with Enhanced Oil Recovery

• 90% CO2 capture ~ 2.7 million tons of CO2 per year• CO2 used for EOR in the Permian Basin oilfields

Project Funding• Foreign Investment

• MOU signed by representatives of Summit, Sinopec Engineering Group, and The Export-Import Band of China• Pending a possible $ 1 billion foreign investment Sinopec Engineering Group and China’s state-

owned Export-Import Bank (Chexim)

• Total Funding Breakdown• $ 1.3 billion in debt financing in the form of bonds and bank loans• $ 845 million from equity and tax equity• $ 450 million in DOE Clean Coal Power Initiative funding

• Federal Tax Incentives – Long-term benefits totaling $1.49 billion• $ 313 million – Advanced Coal Program Investment Tax Credit• $ 253 million – Total available Carbon Sequestration Tax Credits over the first 10 years• $ 925 million – estimated MACRS accelerated depreciation tax benefits over the first 5 years

Plant Production Details• 400 MW of gross power

• 160 MW net available for sale to the power grid.

• 2.2 million tons of CO2 per year for EOR• 720 thousand tons of Urea per year

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Loan Program Office Project Development FinancingLPO Advanced Fossil Energy Solicitation

$8 billion in loan guarantees

CARBON CAPTURE• From traditional coal or NG generation• Saline formations or EOR

ADVANCED RESOURCE DEVELOPMENT• ECBM, UCG, novel oil and gas drilling• Use of co-produced waste gases vs. flaring

LOW CARBON POWER SYSTEMS• Oxycombustion, chemical looping• Syngas-, H2, or NG-based fuel cells

EFFICIENCY IMPROVEMENTS• CHP and waste-heat recovery• High-T or high-efficiency cycles

34

Funding CCS Projects in the United States…American Reinvestment and Recovery Act (ARRA):

- $ 1 Billion, FutureGen 2.0- $ 1.52 Billion, Industrial CCS Applications- $ 800 Million, CCPI Round 3 Expansion- $ 100 Million, Training, Research, and Program Direction

U.S. DOE Office of Fossil Energy- $ 25 Million, requested for Natural Gas CCS demonstration in FY 2015

Loan Guarantees$8 Billion available for Advanced Fossil Projects

- Will guarantee up to 80% of the project cost- First round of applications submitted April, 2014

Tax Credits:At least 500,000 metric tons per tax year captured and used for:

(1) $20 per metric ton of carbon dioxide which is - (A) captured by the taxpayer at a qualified facility, and (B) disposed of in secure geological storage (Saline Formations)(2) $10 per metric ton of qualified carbon dioxide which is—(A) captured by the taxpayer at a qualified facility, (B) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, and (C) disposed of by the taxpayer in a secure geological storage.

35

Carbon SequestrationLeadership Forum (CSLF)

• A ministerial-level international climate change initiative focused on the development of improved, cost effective CCS.

• Comprised of 23 members representing 22 countries and the European Commission.

• CSLF member countries represent over 60% of the world’s population and over 70% of man-made CO2

emissions, world energy production and consumption, and world GDP.

36

Carbon Sequestration Leadership Forum

The CSLF aims to:– Share information on CCS

Projects, policy initiatives and legal and regulatory developments in member countries;

– Build the capacity for CCS in the developing country CSLF Members;

– Explore methods for financing CCS projects, including in developing countries, and;

– Develop global roadmaps for research, development and demonstration of CCS technologies.

37

Global challenge global progress:

new global solutions still required

Key unit of innovation – global engines of discovery

Uthmaniyah (KSA)

Lula (BRA)

Quest (CAN) Mongstad (NOR)

ESI (UAE)

Gorgon (AUS)

GreenGen (PRC)

We just need more projects and more information

China: necessary and equal partner

• Global leader and driver– In coal use, production, &

imports

– In CO2 emissions

– In boiler and gasifierconstruction

– In renewable loading and production

• Technically advanced– Gasification technology and use

– USC-PC; developing A-USC cycles

– Advanced modeling & simulation

• Global economic powerhouse

38

39

US-China CERC: Premier bi-lateral R&D platform

This work performed under the auspices of the U.S. Department of Energy by Lawrence Livermore National Laboratory under Contract DE-AC52-07NA27344

Active as of Oct. 2010

Joint R&D platform for efficient

buildings, efficient vehicles, and

clean coal plus CCUS

•Carbon sequestration tech. &

practice

• Capture technology and

engineering

• Coal Conversion and CO2

utilization

Large industrial projects as part

of R&D platform

Technical management plan

(with IP protections) signed

Sept. 2011

40

U.S.-China Climate Change Working Group

• Five cooperative initiative were launched after the April 2013 visit to China by Secretary Kerry:1. Carbon Capture Utilization and Storage

2. Smart Grid

3. Emission reduction from heavy-duty & other vehicles

4. Collecting and managing GHG emission data

5. Energy efficiency in building & industry

• CCUS initiative focus on partnering new China CCUS demonstration projects in EOR and water production with their U.S. counterparts.