Regulation of Carbon Dioxide (CO2) Sequestration Pipelines: Jurisdictional Issues
Prepared for Members and Committees of Congress
In the last few years there has been a surge in interest in carbon capture and sequestration (CCS)
as a way to mitigate manmade carbon dioxide (CO2) emissions and thereby help address climate
change concerns. This approach may require the transportation of captured carbon dioxide via
pipeline to an underground storage reservoir with the intent of keeping it out of the atmosphere.
Congress has begun to address this issue.
The recently enacted Energy Independence and Security Act of 2007 (P.L. 110-140) contains
measures to promote research and development of CCS technology, to assess sequestration
capacity, and to clarify the framework for issuance of CO2 pipeline rights-of-way on public land.
Other legislative measures, including S. 2191 and S. 2323, have also sought to encourage the
development of CO2 sequestration, capture, and transportation technology. Further, measures
have been introduced in Congress, including the Carbon Dioxide Pipeline Study Act of 2007 (S.
2144), that would require the Secretary of Energy to study the feasibility of constructing and
operating a network of CO2 pipelines for CCS. If these pipelines crossed state lines, it could raise
important issues concerning regulatory jurisdiction over siting and pricing.
This report discusses federal jurisdictional uncertainty over CO2 pipelines under existing law, as
well as potential legislative activity to address any possible regulatory “gap” in jurisdiction. It
should be noted that such a potential gap does not necessarily demand federal legislative
resolution. Nevertheless, some analysts, drawing on the history of oil and natural gas pipeline
development, anticipate a potential need for better defined federal legislative/regulatory authority
over an interstate CO2 pipeline network. Accordingly, Congress may be called upon to consider
whether existing federal jurisdictional disclaimers and the state-by-state regulatory structure for
Enhanced Oil Recovery (EOR) pipelines is an appropriate regulatory scheme for a possible
interstate CO2 pipeline network in support of CCS. Congress could opt to amend existing statutes,
possibly those related to the interstate pipeline jurisdiction of the Federal Energy Regulatory
Commission (FERC) or the Surface Transportation Board (STB) to provide for definitive CO2
pipeline rate jurisdiction by the federal government if it does not favor the existing regulatory
scheme. Alternatively, Congress could establish another federal regulator of CO2 pipelines or
possibly other legislation to amend the existing regulatory scheme.
Introduc tion ..................................................................................................................................... 1
History and Background..................................................................................................................1
Recent Carbon Control Activity................................................................................................2
FERC and STB Pipeline Jurisdiction........................................................................................2
Prior CO2 Pipeline Regulation: Cortez Pipeline........................................................................3
Potential Issues Related to ICC Jurisdiction.......................................................................5
Policy Implications of the Possible Regulatory “Gap”...................................................................6
Author Contact Information............................................................................................................7
In the last few years there has been a surge in interest in carbon capture and sequestration (CCS)
as a way to reduce carbon dioxide (CO2) emissions, and thereby help to address concerns about
climate change. The recently enacted Energy Independence and Security Act of 2007, P.L. 110-
140, contains measures to promote research and development of CCS technology and assess
sequestration capacity, including a measure to clarify the framework for issuance of CO2 pipeline
rights-of-way on public land. Other legislative proposals, including S. 2191 and S. 2323, have
also sought to encourage the development of CO2 sequestration, capture, and transportation
technology. Further, measures have been introduced in Congress, including the Carbon Dioxide
Pipeline Study Act of 2007 (S. 2144), which would require the Secretary of Energy to study the
feasibility of constructing and operating a network of CO2 pipelines for CCS.
If interstate CO2 pipelines for carbon sequestration are ultimately developed, they could raise a
variety of issues concerning jurisdiction over the siting of these pipelines and the prices they may
charge for their transportation services. While jurisdiction over CO2 pipeline safety resides with
the Office of Pipeline Safety (a branch of the Department of Transportation), jurisdiction over
hypothetical interstate CO2 pipeline siting and rate decisions is not clear. Jurisdiction could fall to
the Federal Energy Regulatory Commission (FERC) or to the Surface Transportation Board
(STB). However, both agencies have at some point expressed a position that interstate CO2
pipelines are not within their purview.
This report reviews the history of pipeline regulation, including the limited history of interstate
CO2 pipeline regulation, and examines the regulatory missions of FERC, the STB, and other
agencies. The report discusses possible responses to preceived jurisdictional uncertainties under
existing law as well as potential legislative steps intended to address any potential regulatory
“gap” in interstate CO2 pipeline jurisdiction.
The transportation of CO2 via pipeline is not a hypothetical concept, nor even a recent
development. For many years companies have moved CO2 from one location to another for
enhanced oil recovery (EOR)—a process which extends oil production from mature oil fields.
There are several EOR methods, but gas injection, dominated by CO2 injection, accounts for 1
nearly 50% of EOR production in the United States. During this process, CO2 is injected
underground at an oil field, forcing more oil from the reservoir to the extraction wells, ultimately
increasing the amount of oil that can be recovered from a given field.
Approximately 5,800 kilometers (3,600 miles) of CO2 pipeline operate today in the United 2
States. The oldest long-distance CO2 pipeline in the United States constructed for EOR is the 225 3
kilometer Canyon Reef Carriers Pipeline (in Texas), which began service in 1972. Other large
1 U.S. Dept. of Energy, “Enhanced Oil Recovery/CO2 Injection,” web page (June 12, 2007).
2 U.S. Dept. of Transportation, National Pipeline Mapping System database (June 2005).
3 Kinder Morgan CO2 Company, “Canyon Reef Carriers Pipeline (CRC),” web page (2007).
CO2 pipelines constructed since then, mostly in the Western United States, have expanded the
CO2 pipeline network for EOR. These pipelines carry CO2 from naturally occurring underground
reservoirs, natural gas processing facilities, ammonia manufacturing plants, and a large coal
gasification project to regional oil fields. Additional pipelines may carry CO2 from other
manmade sources to supply a range of industrial applications. However, with one notable
exception discussed below, federal regulation of siting and rates for these pipelines has not been
addressed, due in large part to the fact that many of them are intrastate and that they often
transport CO2 for the benefit of the pipeline’s owners (so there are no rate or service disputes).
In recent years, the public, the press, and government officials have shown increasing concern
about global climate change. Many have suggested that recent increases in the global
temperature, as well as future anticipated increases, are the result, at least in part, of emissions of
large quantities of CO2 from manmade sources. One of the more prominent ideas to limit CO2
emissions, especially CO2 emissions from power plants, is carbon capture and direct sequestration
(CCS). CCS is a process whereby CO2 emissions are “captured” at their source and then stored 4
(“sequestered”) either underground or elsewhere, rather than being released into the atmosphere.
CCS science and associated technology are still in the early stages of development. Among many
questions yet to be answered is whether we may ultimately see a large number of sequestration
sites located geographically close to CO2 source facilities, or a smaller number of more 5
centralized, or more distant, sequestration locations. If a widespread CCS network does develop,
whether that network features decentralized or centralized storage configurations remains to be
seen; however, pipeline requirements and storage configurations are necessarily related. If
sequestration is widely used and relatively centralized, a significant interstate pipeline network
would likely be required to transport the CO2 to the sequestration sites.
If an interstate pipeline system for CCS more extensive and elaborate than the current pipeline
network for EOR is to be developed, questions arise as to who will regulate pipeline siting and
the rates to be charged for the transportation of CO2. Based on their current regulatory roles, two
of the more likely candidates for jurisdiction over interstate pipelines transporting CO2 for
purposes of CCS are the Federal Energy Regulatory Commission (FERC) and the Surface
Transportation Board (STB).
The Natural Gas Act of 1938 (NGA) vests in FERC the authority to issue “certificates of public
convenience and necessity” for the construction and operation of interstate natural gas pipeline 6
facilities. FERC is also charged with extensive regulatory authority over the siting of natural gas
4 For a detailed discussion of CCS, see CRS Report RL33801, Carbon Capture and Sequestration (CCS), by Peter
5 See, alternative views in: R.T. Dahowski, J.J. Dooley, C.L. Davidson, S. Bachu, N. Gupta, and J. Gale, “A North
American CO2 Storage Supply Curve: Key Findings and Implications for the Cost of CCS Deployment,” Proceedings
of the Fourth Annual Conference on Carbon Capture and Sequestration (Alexandria, VA: May 2-5, 2005); and Jennie
C. Stevens and Bob Van Der Zwaan, “The Case for Carbon Capture and Storage,” Issues in Science and Technology,
vol. XXII, no. 1 (Fall 2005): 69-76.
6 15 U.S.C. 717f(c).
import and export facilities, as well as rates for transportation of natural gas and other elements of
transportation service. FERC also has jurisdiction over regulation of oil pipelines pursuant to the 7
Interstate Commerce Act (ICA). The ICA, as amended by the Hepburn Act of 1905, provided
that the Interstate Commerce Commission (ICC) was to have jurisdiction over rates and certain
other activities of interstate oil pipelines, as these pipelines were considered to be “common 8
carriers.” This jurisdiction was transferred to FERC in the Department of Energy Organization 9
Act of 1977. FERC’s jurisdiction over oil pipelines is not as extensive as its jurisdiction over
natural gas pipelines. FERC is not involved in the oil pipeline siting process. However, as with 10
natural gas, FERC does regulate transportation rates and capacity allocation for oil pipelines.
FERC is assigned jurisdiction over natural gas and oil pipelines explicitly in statutory language.
Jurisdiction over rate regulation for “other” types of pipelines resides with the STB. The STB is
an independent regulatory agency (administratively affiliated with the Department of
Transportation) charged by Congress with the primary mission of resolving railroad disputes
pursuant to the ICA. It is the successor agency to the ICC. Pipelines, like railroads, are “common
carriers” used by more than one company for the transportation of goods. Therefore, the ICA also
assigned the ICC (and thus the STB) oversight authority over pipelines transporting a commodity 11
other than “water, gas or oil.” It should be noted, however, that unlike FERC, the STB does not
require pipeline companies to file tariffs and justify their rates. Instead, the STB acts as a forum
for resolution of disputes related to pipelines within its jurisdiction. Parties who wish to challenge
a rate or another aspect of a pipeline’s common carrier service may petition the STB for a
hearing; there is no ongoing regulatory oversight.
Thus, there are two federal regulatory agencies that, generally speaking, have jurisdiction over
interstate pipeline rate and capacity allocation matters. However, as explained below, both of
these agencies appear to have explicitly rejected jurisdiction over CO2 siting and rates, and there
is no legislative or judicial history indicating that their rejections were improper. These decisions,
the reasoning behind them, and the status of federal jurisdiction over CO2 pipelines are covered in
the next section.
As mentioned above, CO2 is used for enhanced oil recovery, and in some cases companies have
used pipelines to transport CO2 over state lines (i.e., in interstate commerce) for EOR purposes.
One such pipeline of regulatory significance is the Cortez Pipeline, which runs through Colorado,
New Mexico, and Texas.
In December of 1978, the Cortez Pipeline Company (Cortez) sought a declaratory order from
FERC that the construction and operation of a proposed interstate pipeline transporting a gas
7 49 App. U.S.C.§1.
8 Id. at 1(1), 1(4), and 1(7).
9 P.L. 95-224.
10 Section 1801 of the Energy Policy Act of 1992 directed FERC to “promulgate regulations establishing a simplified
and generally applicable ratemaking methodology” for oil pipeline transportation.
11 49 U.S.C. § 1-501(a)(1)(c).
comprising of 98% CO2 and 2% methane would not be within the Commission’s jurisdiction.
Cortez argued that the gas in question was not “natural gas” as the term is defined in Section 2(5) 12
of the NGA, so a proposed pipeline to transport this gas was not under FERC’s NGA
jurisdiction. FERC agreed with Cortez and issued a declaratory order disclaiming jurisdiction 13
over the proposed pipeline. In its decision, FERC explored the inherent ambiguity in the term
“natural gas,” explaining that it has two very different definitions. FERC recognized that in the
terminology of chemistry, “natural gas” refers to any substance that is gaseous in its natural state, 14
including carbon dioxide. However, according to FERC, the more common usage of the term 15
“natural gas” refers to a gaseous mixture of hydrocarbons. FERC held that it was this meaning
of “natural gas” that applied to the term as it was used in the NGA. FERC pointed to the goals 16
and purposes of the NGA, which are primarily to regulate a specific “natural gas” industry.
Thus, the term “natural gas” as used in the statute referred to a gaseous mixture of 17
hydrocarbons. As a result, FERC held that the proposed Cortez Pipeline was not within the 18
NGA jurisdiction of the Commission.
In 1980, after FERC issued its CO2 ruling, the owners of the proposed Cortez Pipeline went to the
ICC to seek a similar declaratory order that the pipeline would not be subject to the ICC’s
jurisdiction either. As the ICC recognized at the outset of its decision, there was no controversy
concerning whether ICC approval was necessary for construction or expansion of pipeline
facilities—the statute and previous case law plainly state that the ICC has no pipeline siting 19
jurisdiction whatsoever. Furthermore, the ICC noted that the U.S. Department of Transportation 20
would exercise jurisdiction over the pipeline’s compliance with applicable safety standards.
Instead, the decision focused solely upon the ICC’s regulation of other aspects of pipeline service
(i.e., rates), and whether CO2 pipelines are covered by the statutory exception from ICC 21
regulation for pipelines that transport “water, gas or oil.”
Relying on the legislative history of previous versions of the statutory language in the ICA (which
excluded “natural or artificial gas”) as well as the plain language of the current statute, the ICC
concluded that Congress intended to exclude all types of gas, including CO2, from ICC
regulation. The ICC recognized that its initial ruling in this matter, in concert with FERC’s order
disavowing jurisdiction over the proposed Cortez Pipeline, created a regulatory gap of sorts. The
ICC noted that generally, “[t]he opinion of a sister agency should be given weight, if possible, so 22
that related statutes can be coordinated.” However, the ICC found that “in this case the FERC
12 15 U.S.C. § 717(a)(5).
13 Cortez Pipeline Company, 7 FERC ¶ 61,024 (1979).
14 Id. at 61,041.
18 Id. at 61,042.
19 Cortez Pipeline Company—Petition for Declaratory Order—Commission Jurisdiction Over Transportation of Carbon
Dioxide by Pipeline, 45 Fed. Reg. 85177 (December 24, 1980).
21 49 U.S.C. § 1-501(a)(1)(c).
22 Cortez Pipeline Co., 45 Fed. Reg. at 85178.
decision is not helpful to us because it did not construe or interpret the terms natural and artificial 23
gas [under the ICA]. Its decision was based on other grounds.” Although the ICC found in this
initial decision that it likely did not have jurisdiction over CO2 pipelines, it did conclude that “the
issue is important enough to institute a proceeding and accept comments on the petition and our 24
view on it.” After the comment period the ICC confirmed its view that CO2 pipelines were 25
excluded from the ICC’s jurisdiction.
Notwithstanding the ICC’s 1980 disclaimer of jurisdiction over CO2 pipelines in the Cortez
Pipeline case, other evidence indirectly suggests the possibility that interstate CO2 pipelines could
still be considered subject to the jurisdiction of the STB. For example, an April 1998 report by the 26
General Accounting Office (GAO) stated that interstate CO2 pipelines, as well as pipelines
transporting other gases, are subject to the board’s oversight authority. The report stated that GAO 27
had identified five products carried by 21 pipelines subject to the STB’s jurisdiction. One of the
five identified products was CO2. (Another was hydrogen—also a gas). In fact, the report lists 14
different pipelines transporting CO2 for purposes of EOR, including the Cortez Pipeline, which 28
are said to be subject to the jurisdiction of the STB. The GAO states that the STB reviewed its 29
analysis and, presumably, did not object to this jurisdictional classification.
It should also be noted that the Cortez Pipeline decision was issued by the ICC, not the STB.
Although the STB is the successor to the now-defunct ICC, and the statutory language regarding
the STB’s jurisdiction is virtually identical to the language at issue in the Cortez decision, they
are not the same agency. The STB conceivably could determine that its jurisdiction is not
governed by the ICC’s decision in the Cortez Pipeline matter. Indeed, the Supreme Court has
ruled that federal agencies are not precluded from changing their positions on the issue of
regulatory jurisdiction. According to the Court, “an initial agency interpretation is not instantly
carved in stone. On the contrary, the agency, to engage in informed rulemaking, must consider 30
varying interpretations and the wisdom of its policy on a continuing basis.” Accordingly,
regulation of CO2 pipelines for CCS purposes by the STB (or by FERC, for that matter) under
existing statutes remains a possibility.
23 Id. at 85178.
25 Cortez Pipeline Company—Petition for Declaratory Order—Commission Jurisdiction Over Transportation of Carbon
Dioxide by Pipeline, 46 Fed. Reg. 18805 (March 26, 1981).
26 Now known as the Government Accountability Office.
27 GAO Report: SURFACE TRANSPORTATION: Issues Associated With Pipeline Regulation by the Surface
Transportation Board, April 1998.
28 Id. at 27.
29 Surface Transportation Board (STB), Personal communication, (December 2007). The STB Office of Governmental
and Public Affairs informed CRS that the board recognizes the conflict between this GAO report and the ICC decision
(as well as the wording of 49 C.F.R. § 15301 governing STB jurisdiction over pipelines other than those transporting
“water, gas or oil”). However the office did not want to state an opinion as to the current extent of STB jurisdiction
over CO2 pipelines and suggested that the STB would likely not act to resolve this conflict unless a CO2 pipeline
dispute comes before it.
30 Chevron U.S.A. v. Nat. Res. Def. Council, 467 U.S. 837, at 863-64 (1984).
If CCS technology develops to the point where interstate CO2 pipelines become more common,
and if FERC and the STB continue to disclaim jurisdiction over CO2 pipelines, then the potential
regulatory “gap” discussed above may receive attention. This gap does not necessarily demand
resolution. As commenters have noted, state laws and contractual arrangements among interested 31
parties established under the EOR model would also apply to CO2 pipelines for CCS. Interstate
CO2 pipelines would still be required to meet the safety requirements of the Department of
Transportation. Also, although there would be no federal rate regulation, any anti-competitive
behavior by the owners or operators of a CO2 pipeline could be addressed by federal antitrust
enforcement agencies, including the Federal Trade Commission and the antitrust division of the
U.S. Department of Justice. Finally, any pipelines needing to cross federal lands would be
required to obtain a right-of-way from the federal government, and so would be subject to any
conditions such rights-of-way might impose.
Nevertheless, some analysts, drawing on the history of oil and natural gas pipeline development,
anticipate a potential need for better defined federal regulatory authority over a potential 32
expansive CO2 pipeline network.
The growth of these sectors and the growing importance of transportation, abuses of market
power, price discrimination and other issues, including conflicts between state and federal
authorities led both to preemption by the federal government and administrative regulation.
As the CO2 transport and storage sector grows, similar issues of regulatory frameworks and
the mix of federal and state jurisdiction are likely to have to be confronted, as has been the
case for all network industries in the United States. The eventual economic regulatory
development for CCS will need to consider the varying approaches taken for oil and natural
gas, and the serious problems that their history experienced.
Thus, Congress may ultimately be asked to consider whether the existing federal jurisdictional
disclaimers and the state-by-state regulatory structure for EOR pipelines is an appropriate
regulatory scheme for a potential national CO2 pipeline network in support of CCS. Congress
could choose to amend existing statutes to provide for definitive CO2 pipeline rate jurisdiction by
the federal government if it does not favor the existing regulatory scheme. FERC and the STB are
two candidates for administration of such oversight. Alternatively, Congress could establish
another federal regulator of CO2 pipelines, or enact legislation addressing specific aspects of the
existing regulatory structure for EOR.
31 See, for example, Philip M. Marston, “Doing the Deal: Legal and Regulatory Aspects of the Evolving CCS Regime
in the USA,” Proceedings of the 2e Collogue International Captage et Stockage Géologique du CO2, Paris, France
(October 4-5, 2007), at: 3. http://www.colloqueco2.com/presentations2007/ColloqueCO2-2007_Session4_1-
32 M.A. de Figueiredo, H.J. Herzog, P.L. Joskow, K.A. Oye, and D.M. Reiner, “Regulating Carbon Dioxide Capture
and Storage,” MIT Center for Energy and Environmental Policy Research, Working Paper 07-003 (April 2007), at: 5.
Adam Vann Paul W. Parfomak
Legislative Attorney Specialist in Energy and Infrastructure Policy
email@example.com, 7-6978 firstname.lastname@example.org, 7-0030