Carbon Dioxide Capture And Storage: A Pathway For Greenhouse Gas Emission Reductions

• Jurisdiction: United States,Federal
• Law Firm: Jenner & Block
• Subject Matter: Environment, Energy and Natural Resources, Energy Law, Environmental Law, Oil, Gas & Electricity, Clean Air / Pollution
• Author: Mr Steven M. Siros, Arie Feltman-Frank and Tatjana (Tanja) Vujic
• Published date: 10 January 2023

As businesses continue to optimize their environmental, social, and governance (ESG) strategies, an important arrow in the ESG quiver may be carbon dioxide (CO₂) capture and storage (CCS). CCS involves capturing, compressing, transporting, and then injecting CO₂ into deep underground porous rock formations for long-term storage, known as geological sequestration (GS). These formations are often a mile or more beneath the surface and overlaid by impermeable, non-porous layers of rock that trap the CO₂ and prevent it from migrating upward.

The effectiveness of carbon capture,¹ coupled with the robust storage capacity available in the United States,² make CCS a promising method to minimize the climate-forcing effects of CO₂ emissions. Indeed, the Security and Exchange Commission's (SEC's) proposed climate-disclosure rule refers to investing in CCS technologies as one way by which companies can 'take advantage of climate-related opportunities.' CCS may also be a viable compliance option for 'major' federal contractors which, according to a recently proposed Federal Acquisition Regulatory Council rule, will be required to set 'science-based targets' to reduce their greenhouse gas (GHG) emissions in order to do business with the federal government.

Injecting CO₂ underground is not new. For decades, the oil and gas industry has been utilizing enhanced oil recovery (EOR), a process that involves injecting CO₂ into oil-bearing formations to increase the amount of oil and gas produced from oil and gas reservoirs. What is relatively new, however, is the increased focus on GS as a vital, if not indispensable,³ part of meeting CO₂-reduction goals. This client alert will predominantly focus on the GS component of CCS and the permitting requirements associated with GS of CO₂ for the purpose of meeting GHG reduction targets.

I. The Safe Drinking Water Act and Geological Sequestration of CO₂

The primary federal program governing GS of CO₂ is the Safe Drinking Water Act's (SDWA's) Underground Injection Control (UIC) program. According to EPA, the 'chief goal' of the UIC program is the 'protection' of underground sources of drinking water (USDWs).⁴ Under the SDWA, EPA must publish regulations for state UIC programs that 'contain minimum requirements for effective programs to prevent underground injection which endangers drinking water sources.'⁵ Interested states can then apply for primary enforcement responsibility of the UIC program, known as 'primacy.'⁶

The statutory vehicle for primacy applicable to GS of CO₂ is section 1422, whereby states must demonstrate that, among other requirements, they have adopted and will implement a UIC program that meets the 'minimum requirements' established by the federal regulations.⁷ While the federal regulations establish a floor, they do not preclude states from adopting or enforcing 'more stringent or [] extensive' requirements or '[o]perating a program with a greater scope of coverage.'⁸ If EPA approves a state's UIC program, the state achieves primacy; if EPA disapproves the program (or parts thereof), or if a state fails to apply, the federal UIC program applies.

There are six classes of underground injection wells that are regulated under the SDWA.¹⁰ Of these classes, Class VI and Class II wells are most relevant to GS of CO₂.

Class VI wells are used for non-experimental GS of CO₂.¹¹ EPA promulgated regulations governing minimum federal requirements for Class VI wells by final rule on December 10, 2010. The regulations are generally set forth at 40 C.F.R. Parts 124, 144, 145, and 146 and required EPA to establish a Federal UIC Class VI program in each state that did not submit a complete primacy application by September 6, 2011. Because no state applied by the deadline, on September 6, 2011, the federal Class VI program became effective nationwide.

Since then, only North Dakota and Wyoming have achieved Class VI primacy. In all other states, the federal program applies. Only two Class VI permits have been issued under the federal UIC program, both by EPA Region 5 to Archer Daniels Midland in Decatur, Illinois, which took EPA approximately three years to issue (measured from the date the applications were submitted to issuance). Another 28 Class VI permit applications are pending in California, Illinois, Indiana, Louisiana, Ohio, and Texas. It is anticipated that over time, the permitting process will become both faster and more efficient, especially in light of increased funding provided by the Infrastructure Investment and Jobs Act (IIJA), which appropriates $5 billion annually to EPA over the next five years for the permitting of Class VI wells as a way to facilitate more CCS.¹²

Class II wells, which include wells that inject fluids into oil and gas reservoirs for EOR,¹³ are also relevant to GS of CO₂ because long-term storage of CO₂ in these wells can be incidental to the injection process. Notably, most states have achieved Class II primacy.¹⁴ When EOR results in some 'incidental storage' of CO₂in a Class II well, the owner or operator is likely not required to seek a Class VI permit. However, if the owner or operator elects to use a Class II well originally used for EOR to inject CO₂ for the 'primary purpose of long-term storage,' the regulations require that the owner or operator obtain a Class VI permit 'when there is an increased risk to...