As the demand for energy around the globe continues to grow, so too does the world’s reliance on fossil fuel resources, which further contributes to the increased atmospheric releases of carbon dioxide (CO2). While energy efficiency and conservation measures combined with the broader utilization of renewable energy sources can help mitigate CO2 releases, many state policy makers are getting out in front of federal efforts in responding to the building momentum for the deployment of Carbon Capture and Storage (CCS) technology as a key tool to reduce greenhouse gas emissions and curb climate change. Quite honestly, the United States appears to be lagging behind other nations on CCS developments.
CCS can be used to capture CO2 from point sources – such as fossil-fueled power plants, refineries and other industrial sources – and then inject it into subsurface geological formations where it can be stored for thousands of years. Since CCS can allow for significant reductions in CO2 emissions from fossil-based systems as a GHG solution, many believe the technology can serve as a bridge to the energy regime of the future. Responding to this dynamic, several states have recently enacted laws to regulate CCS and incentivize the development and deployment of this technology, and this update provides a brief overview of the state efforts.
Overview of States’ Efforts
- Montana in 2009 enacted a law (S.B. 498) establishing a mechanism for the state’s takeover and long-term responsibility of a closed CSS site, but only if the storage company has complied with the state’s permitting, recordkeeping, injection well management, surface land restoration, and other regulations. This law also establishes fees for CO2 storage in order to fund the state’s monitoring and management of CSS sites, gives the state Land Board authority to decide if the state should assume liability for the sites, and clarifies that liability for operation and management of CO2 injection wells and storage sites remains with the storage operator until a certificate of completion is issued and title for the site is transferred to the state.
- Utah in 2008 enacted a law (The Energy Resource and Carbon Emission Reduction Initiative) directing agencies to establish CCS-related rules in order to reduce atmospheric CO2 emissions, to ensure that adequate health and safety standards are met, and to minimize the risk of unacceptable leakage of CO2. The law also directs state agencies to present recommended rules to the state’s Legislature by 2011 addressing CCS site characterization approval, permit issuance procedures, well maintenance and construction specifications, standards for allowed composition of injected matter, and testing and monitoring processes.
- North Dakota enacted three laws in 2009. SB 2221 creates incentives for coal conversion facilities that capture CO2. The law provides a credit against privilege taxes on coal conversion facilities for CCS projects. Under the law, removal of CO2 emissions from coal conversion facilities is measured by a specific regulatory scheme depending on whether the facility is an electrical generating plant or a coal gasification facility, and standards were established for daily and annual measurement and recording of the captured CO2. A 20% reduction in coal taxes is granted for a facility that captures 20% of CO2 emissions in any year. SB 2095, a law relating to geologic storage of CO2, vests authority over CCS activities with North Dakota’s Industrial Commission. Liability for injected substances rests with the operator for a ten year term until a certificate of completion is issued. Thereafter, liability transfers to the state of North Dakota. The law also establishes the permitting process and fee structures. SB 2139 clarified the definition of “pore space” (the space between rock or sediment grains that can contain fluids) as “a cavity or void, whether natural or artificially created, in a subsurface sedimentary stratum.” SB 2139 established that ownership of pore space in North Dakota is vested in the owner of the overlying surface estate.
- Texas enacted a law in 2009 scheduled to take effect in September that establishes a regulatory framework for CCS projects. The law gives the state’s Railroad Commission jurisdiction over all phases of CCS projects, and imposes fees to cover the cost of permitting and monitoring geological storage sites. The law directs that permits for CCS sites be granted only when the project is in the public interest; if it will not put at risk any oil, gas or other mineral formation; if it maintains safeguards adequately protecting fresh water reserves; and, if the applicant can demonstrate financial responsibility. The law also required the Railroad Commission to adopt rules and procedures (consistent with EPA regulations) addressing geological site characterization, well construction, operation, mechanical integrity testing, monitoring, wellplugging, post-injection site care, and long-term stewardship.
- Wyoming in 2008 enacted laws attempting to clarify issues regarding ownership of pore space and establishing the regulatory structure for administration of the state’s CSS program. Under those laws, which retained the common law rights of the mineral estate, the surface owners were provided ownership rights of the pore space underlying their lands, and the ability to transfer the pore space along with the overlying real property. In addition, the Wyoming Department of Environmental Quality was vested with the authority to regulate the state’s CSS program and charged with the responsibility for enhancing CSS development. The Wyoming Oil and Gas Conservation Commission was given jurisdiction over later extraction of sequestered CO2.
- CSS issues were again a major theme during the 2009 Wyoming legislative session. A bill (H.B. 56) to limit CCS activity in areas having recoverable hydrocarbons (and to protect those oil, coal, and natural gas deposits from any potential harm caused by the CSS activity) failed to become law. Other bills were enacted into law in 2009, including:
- a bill (H.B. 57) reaffirming that surface owners – not mineral owners – have the primary right to underground pore space where CO2 is stored;
- a bill (H.B. 58) assigning liability for CCS projects to the injecting companies rather than to the state or the pore space owners; and
- a bill (H.B. 80) requiring requirements for and unitization of CCS projects, providing profit-sharing investment interests for landowners to sell or sublease the subsurface for CO2 storage, and requiring compliance with state CSS regulations.
- West Virginia enacted a statute to regulate the practice of CCS. H.B. 2860 requires that permitted carbon sequestration facilities must operate in compliance with the federal Water Pollution Control Act as related to West Virginia’s National Pollutant Discharge Elimination System (NPDES) program. The statute provides the legal and regulatory framework for permitting CCS facilities which includes how to terminate a CCS project, notice requirements in the event of leaked CO2, post-closure facility operations and on-site monitoring.
- In 2008, the state of Oklahoma enacted the Oklahoma Geologic Storage of Carbon Dioxide Act setting out what is necessary for a reservoir to be used as a carbon dioxide storage facility. The Corporation Commission and Department of Environmental Quality are established as the Regulatory Agency. To use a reservoir for CO2 storage, the Regulatory Agency must establish suitability for injection and storage of CO2, obtain consent from a majority of effected landowners, assure no contamination of other formations will occur and will not unduly endanger human health and the environment.
- The state of Washington enacted a law in 2007 (Mitigating the Impacts of Climate Change Act) that directed state agencies to develop criteria for evaluating CSS plans proposed by electric generation facilities. This Act required state agencies to establish provisions for financial assurances sufficient to ensure successful implementation of CSS plans, effective monitoring of CSS plans, provide for public participation in the development of CSS plans, and penalties and offset measures if electric generation facilities failed to utilize CSS or other technologies to meet the greenhouse gas emissions targets established by the Act.
- Kansas enacted a law in 2007 (The Carbon Dioxide Reduction Act) requiring the Kansas Corporation Commission to develop carbon dioxide injection rules and regulations, and requirements for CO2 storage facility operating permits. This law also included property and income tax exemptions and incentives for the development of CCS. The regulations have not yet been promulgated.
- In 2007, the state of Illinois enacted a law (The Clean Coal FutureGen for Illinois Act) to induce the FutureGen Alliance to build a near zero emission coal gasification/carbon sequestration power plant in Illinois. The statute mandates the FuturGen Alliance transfer all rights, title and interest in and to and any liabilities associates with the sequestered gas to the State of Illinois after the gas has been injected. The FutureGen Alliance shall retain all rights, title, and interest in and to and any liabilities associated with the pre-injection sequestered gas. Further, the Illinois State Geological Survey of the Illinois Department of Natural Resources is charged with monitoring, measuring and verifying the permanent status of the sequestered carbon dioxide and co-sequestered gases in which the State has acquired the right, title, and interest.
- Other states have also been active in attempting to address the incentive, liability, certification, monitoring, and many other issues relating to CCS projects. The non-exhaustive list of states that have recently considered, but failed to enact, CCS-related legislation include Missouri, Iowa, California, Kentucky, Massachusetts, New Mexico, New York, and Pennsylvania.
All of this recent state-level legislative and regulatory activity attempting to address CCS development and deployment indicates that momentum may be building to take CCS technology past the concept stage, in order to make it a key piece of climate change mitigation plans.