Pending California Legislation Highlights Need for Stronger Commitment to Carbon Capture and Sequestration – Environment

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Abstract

Geological sequestration is just one tool that businesses and governments can use to achieve carbon neutrality. Our Environment, Land Use and Natural Resources group explores the barriers California is discovering as its legislature seeks to make carbon capture an integral part of its emissions reduction strategy.

  • Authorization of CCS projects is rare and expensive
  • The uncertainty of post-injection care and long-term liability
  • Pathways to follow

A bill pending in the California State Senate could strengthen support for carbon capture and sequestration projects. The California Climate Crisis Act (AB 1395), which has already been passed by the Assembly, sets out state policy to achieve net greenhouse gas emissions as soon as possible, and no later than 2045. The bill recognizes the need for a variety of greenhouse gases. capture and storage technologies (CCS) to achieve these dramatic reductions. Governor Gavin Newsom recently asked the California Air Resources Board and other agencies to develop plans to achieve the goal of neutrality 10 years earlier, by 2035.

Carbon capture removes carbon dioxide from an emissions stream at a power plant or industrial facility. The new technology also removes carbon dioxide directly from the air. Once removed, this captured carbon can be stored permanently by injecting carbon dioxide through a sink into deep rock formations for long-term storage. “Beyond the carbon stored in plants and soils through natural solutions, the storage of captured carbon consists of storing it permanently and safely thousands of feet underground in the form of CO2, in porous rocks of the same type as those that make up California’s oil and gas fields. “

In order to meet the state’s ambitious net carbon neutrality goals, the current wording of AB 1395 recognizes that CCS will play a critical role in climate change mitigation by reducing emissions to the atmosphere. The federal government also encourages the implementation of CCS projects. Congress enacted the Section 45Q tax credit, which provides up to $ 50 per metric tonne of sequestered CO2. The current wording of the infrastructure bill pending in Congress also allocates more than $ 12 billion to CCS projects. These significant investments demonstrate the importance of CCS in the country’s climate change strategy.

While CCS will play an important role in achieving carbon reductions, substantial permitting and regulatory obstacles must be overcome for these projects to be developed and implemented on the scale envisioned by aggressive policies of the EU. California.

Authorization of CCS projects is infrequent and costly

The EPA regulates geological sequestration through its Class VI Underground Injection Control (UIC) license. To ensure the safety of underground sources of drinking water, the Class VI rule includes strict requirements for all phases of a project. States, however, can request primacy to take over management responsibilities from the EPA. So far, only North Dakota and Wyoming have achieved primacy for Class VI wells, but more states may seek primacy as geological sequestration becomes a more viable and popular endeavor. Facilitating geological sequestration projects will require recognition of its challenges and cooperation between industry leaders, policy makers and other stakeholders to navigate the complex regulatory landscape.

Despite the benefits of geological sequestration in reducing carbon emissions, the EPA has issued only six Class VI permits to date, four of which have expired without any well construction. The small number of such permits can largely be attributed to the complicated and relatively new licensing process. Streamlining this process is critical to the national long-term climate change mitigation strategy: the United States has sufficient geological storage capacity for hundreds of years of CO2 emissions. California, in particular, offers significant opportunities for geological sequestration, with 90% of natural gas power plants, cement plants and refineries reportedly located within 50 km of a potential sequestration site.

The Class VI rules, inspired by the Class I rules on industrial and municipal waste disposal wells, take a very cautious approach. Application requirements are therefore extremely onerous, iterative and time consuming, with an average of six years to receive approval for a permit. If the government is to meet its ambitious goals, it may need to gain program primacy to adopt a more risk and performance-oriented approach. This change will speed up the permitting process to meet the recommended goals of issuing a drilling permit within six months of application and an injection permit within six months of receiving a completion report. well.

The uncertainty of post-injection care and long-term liability

Site operators are generally responsible for damage caused by the storage site during all phases of the project, including monitoring, mitigation and remediation of health or environmental impacts. Once the injection operations are completed, the operator generally remains responsible. Class VI rules set a default post-injection care period of 50 years, although this can be adjusted at the discretion of the EPA administrator. However, under California’s Low-Carbon Fuel Standard (LCFS) CCS protocol, project operators must monitor sites for 100 years to receive LCFS credits. These long-term commitments and responsibilities increase costs and discourage project development.

Some states, such as Montana, North Dakota, and Louisiana, allow responsibility for stored CO2 to be transferred to the state when it meets certain criteria. For example, Montana would take responsibility after a 30-year post-injection surveillance period. The assumption of responsibility by the State from the start of a project would encourage more early projects. Likewise, Texas and Mississippi have established trust funds that can be used for surveillance and remediation once the state assumes responsibility.

These types of programs would encourage investment and reduce uncertainty for companies seeking to implement CCS projects.

Ownership of rights to porous space

Many ownership documents do not define who owns the pore space rights to a site, making it difficult to acquire carbon storage rights for developers of CCS projects. Only a few states have addressed the problem, with Montana, Wyoming, and North Dakota defining the interstitial space below the surface as the property of the surface owner. To inject CO2, a project developer would therefore have to either own the rights to the pore space or receive permission from the owner. This could increase storage costs and create conflicting uses of the subsoil. For most CO2 storage projects in salt formations, securing these interstitial space rights could require the approval of hundreds of landowners. Conflicts of use can also arise when the subsoil is used for the production of oil, gas or geothermal energy. In addition, no mechanism currently exists to grant access and use of porous space rights for CCS projects on federal or state lands.

Some states allow forced unification of mineral resources, which means that if a certain percentage of owners agree, the remaining owners can be forced to participate. This has not yet been extended to interstitial space rights, but North Dakota has taken a similar approach that allows for interstitial space rights to be merged.

Only six states have looked at the ownership of post-injection CO2: Montana, Wyoming, North Dakota, Texas, Oklahoma and Louisiana. In these states, the project operator owns the CO2 until responsibility is transferred to the state, and the owner of the interstitial space, if different from the operator, is not no time responsible for CO2. Louisiana also allows the project operator to transfer ownership of the CO2 while the CO2 is in the storage facility.

These issues should be addressed in California to encourage investment and development of CCS projects.

Pathways to follow

Although the Class VI permit approval process can raise complex legal issues, project developers have already obtained permits successfully. Early permit approvals involved constant back and forth between project developers and the EPA to navigate and clarify the regulatory path, which future developers can benefit from. These past projects can provide useful information for moving forward.

In the existing system, the lengthy licensing process is mainly attributed to the in-depth discussions between the project developers and the EPA so that the agency can understand the technical basics of applying for a Class VI license. As the process is new, it is extremely iterative, requiring frequent exchanges of additional information as the application progresses. Communication with the regulator is therefore essential to understand and meet the requirements of a new regulatory regime.

Alston & Bird attorneys have extensive experience in federal and state CCS projects and will be happy to answer any questions your business may have about a CCS project.

Summer associate Ytran Hoang provided invaluable assistance in researching and writing this review.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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