Hydrogen Production And Carbon Sequestration May Require The Surface Transportation Board To Clarify Jurisdiction Over Carbon Dioxide Pipelines

• Published date: 22 November 2022
• Subject Matter: Environment, Energy and Natural Resources, Energy Law, Environmental Law, Oil, Gas & Electricity
• Law Firm: Venable LLP
• Author: Mr Richard E. Powers, Jr., Joseph R. Hicks and William G. Bolgiano

A coming wave of planned carbon sequestration projects related to the production of blue hydrogen and climate change remediation may force the Surface Transportation Board (STB) to clarify whether it has jurisdiction over the rates and practices of interstate carbon dioxide pipelines. Currently, it is unclear which, if any, regulations apply to the United States' limited number of carbon dioxide pipelines. Clarity concerning jurisdiction is necessary to alleviate uncertainty and ease the completion of what is expected to be a large number of new carbon dioxide pipelines.

The Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) have earmarked tens of billions of dollars for carbon sequestration projects, as well as the production of "blue" hydrogen'where hydrogen is produced from fossil fuels and the carbon dioxide emissions are captured and sequestered. Bringing these carbon dioxide sequestration projects to fruition will require the construction and conversion of a massive pipeline network aimed at transporting carbon dioxide from the point of production to storage sites. According to one estimate made prior to either the IRA or the IIJA, by 2050 the United States may be transporting twice as much carbon dioxide as the oil it currently transports.¹

Under the Interstate Commerce Commission Termination Act (ICCTA), the STB is tasked with regulating pipelines carrying any "commodity other than water, gas, or oil."² Under the ICCTA, pipelines are regulated as common carriers under a regime very similar to the Federal Energy Regulatory Commission's (FERC) regulation of oil, petroleum products, and natural gas liquids pipelines under the Interstate Commerce Act (ICA).³ The word "gas" in this statute was meant as a shortened wording of "natural gas and artificial gas."⁴ Therefore, by the terms of the statute, every interstate pipeline not regulated by FERC (carrying "oil" or "gas") should be regulated by the STB.⁵

However, an isolated and uncontested decision from 1980, Cortez Pipeline Company, created confusion over the jurisdictional status of carbon dioxide pipelines. In that decision, the Interstate Commerce Commission (ICC), which is the STB's predecessor agency, agreed with a pipeline applicant that it could not regulate carbon dioxide pipelines because the commodity is gaseous.⁶ Since then there have been conflicting opinions expressed by government agencies and commenters concerning this issue.⁷ Furthermore, the STB also...