Vol. No. 53-2 Natural Resources

Natural Resources & Land Use

Carbon Sequestration and Class VI Well Primacy

Introduction

The public has become increasingly interested in carbon capture and storage (CCS) as the United States transitions to net-zero carbon emissions.[1] A form of CCS that American entities have recently focused on is geologic sequestration of carbon, where carbon dioxide (CO2)  is captured and stored underground in wells.[2] The underground injection of CO2 is subject to regulation under the Safe Drinking Water Act and requires entities to obtain a permit to inject the carbon.[3] In most states, the Environmental Protection Agency (EPA) is the primary entity for obtaining permits for Class VI wells, which are necessary for geologic sequestration.[4] Like other classes of wells, however, states may obtain primacy, or primary enforcement and permitting authority,[5] and some believe that state primacy will streamline the permitting process.[6]

Streamlining the process could alleviate industry hesitation in seeking permits, since the current process is subject to potential delays as the majority of applications are reviewed by the EPA.[7] Removing this hesitation could increase the implementation of CCS, as monetary incentives have made the technology much more appealing.[8] The Inflation Reduction Act, passed in August 2022, raised the 45Q tax credit for geologic CO2 storage from $50 to $85 per metric ton.[9] Encouragingly, incentives also exist to help states gain primacy. The Infrastructure and Investment Jobs Act provides for a $50 million grant program to support states seeking primacy over Class VI wells.[10]

These incentives will hopefully function together to achieve the desired goal of investment in geologic sequestration. Texas has shown interest in obtaining primacy over these wells with the hope of streamlining the permit process and encouraging business investment.[11] Texas is in the process of amending its rules governing Class VI wells to meet federal standards and applying for primacy.[12] On the heels of these moves, the largest carbon capture plant in the world restarted operations in Texas.[13] If the state’s application is approved, more industry will likely be attracted to the state and geologic sequestration business will continue to develop.

Geologic Sequestration and Class VI Well Primacy

Geologic sequestration stores CO2 underground in rock formations.[14] Natural gas companies have used underground injection of CO2 for both enhanced gas recovery and enhanced oil recovery.[15] Underground injection of CO2 for geologic sequestration, however, is a more recent interest, with EPA publishing its final rule establishing a new class of wells for geologic sequestration in 2010.[16] The regulations associated with Class VI wells were designed to protect underground drinking water sources and address “siting, construction, operation, financial responsibility, testing and monitoring, . . . and site closure.”[17]

To inject carbon dioxide into a Class VI well and sequester it, an entity must apply for a permit. EPA initially has primacy over all Class VI well applications, but states may apply for primacy.[18] Currently, only two states have applied for and received Class VI primacy—North Dakota and Wyoming.[19] To obtain primacy, states must make it through four steps: “(1) pre-application; (2) completeness review and determination; (3) application evaluation; and (4) final rulemaking and codification.”[20]

Texas’ Move Toward Primacy

Texas has initiated the process for gaining primacy over Class VI wells.[21] Currently, however, EPA retains primacy.[22] As such, interested entities must apply for permits through both EPA and the Railroad Commission, the state agency in charge of regulating Class VI wells.[23] If Texas’s application for primacy is approved, the Railroad Commission will be the sole agency that entities in Texas must submit permit applications to. Texas is hopeful that applications running solely through one agency, instead of two, will streamline the permitting process, encourage the CCS business, and complement the state’s oil and gas industry.[24] The state may also have been encouraged by the grant program supporting state primacy in the Infrastructure and Investment Jobs Act.[25]

Texas took its first big step toward primacy on May 3, 2022, when the Railroad Commission voted to (1) publish “proposed amendments to its rules implementing the state program for geologic storage of anthropogenic CO2 and incorporating federal requirements,” (2) submit a pre-application for primacy to EPA, and (3) “request[ed] that the [Texas] Governor formally ask EPA for Class VI UIC well program approval.”[26] After publishing its proposed amendments on May 3,[27] the Railroad Commission quickly made headway on the next action, submitting its pre-application on May 31, 2022.[28] The agency’s proposed amendments were approved on August 30, 2022.[29]  Finally, Texas submitted its application for primacy on December 19, 2022.[30]

Texas is not the only state seeking primacy for Class VI well permits; Louisiana has also applied and is waiting on a decision from EPA.[31] While there is currently only one Class VI Well application pending for Texas, there are 15 pending applications for Louisiana.[32] In response to a request by Louisiana’s governor asking for the status of Louisiana’s primacy application, an EPA spokesperson stated that EPA is still reviewing both Louisiana’s and Texas’ applications for primacy.[33] It is unclear how long the application process will take.[34] The EPA has not stated a timeline, and North Dakota’s and Wyoming’s applications are not consistent reference points—those applications took approximately five years and nine months, respectively.[35]

If Texas’ application for primacy is approved, the Railroad Commission’s rules, which would be at least as stringent as federal standards, will be the sole regulations that entities must abide by for Class VI wells. The rule revisions that were approved in August 2022 amend Part 1, Title 16, Chapter 5 of the Texas Administrative Code.[36] Significant modifications to the rules were made to meet the same stringency as federal standards and to meet the federal administration’s environmental justice goals, including to:

1. 1. 1. 1. Improve program and permit transparency.  For example, draft permits and draft permit fact sheets will be posted on the Railroad Commission’s website.  Each fact sheet will include, among other things, the type of facility, the source and quantity of carbon dioxide proposed to be injected and stored, and a description of the procedures for reaching a final permit decision.
         2. Define key terms so they are consistent with federal tax credits for these projects.
         3. Require additional data from the permit applicant. For example, applicants must identify the source(s) of carbon dioxide that will be captured by the project. This requirement was added to ensure the collection of more accurate carbon emission data and to help inform advancements in carbon sequestration strategies.
         4. Provide appropriate notice to environmental justice and limited English-speaking households. This new requirement is consistent with the Biden administration’s focus on environmental justice.[37]

Comments made by EPA on the August 2022 rules indicate that while most of the rules are sufficient, stringency concerns remain.[38]

Conclusion

Federal support for climate goals and state primacy have increased incentives for investment in geologic storage and for states to obtain primary jurisdiction over relevant programs. Texas has made significant progress toward being one of the few states with Class VI well primacy. If Texas gains primacy over Class VI wells, it could achieve its goal of attracting more CCS industry to the state.

Francesca Eick is a Senior Associate with Baker Botts in Austin. Ms. Eick’s practice focuses on regulatory compliance, permitting, litigation, and transactions involving environmental, land use, natural resource, and energy issues. Ms. Eick has advised public and private clients on matters relating to a range of environmental statutes including the Clean Water Act (CWA), the Endangered Species Act (ESA), the Clean Air Act (CAA), and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

Shelby Thompson is a 3L from Austin, Texas. She attended Texas A&M University before coming to The University of Texas School of Law. Shelby joined TELJ during her 2L year and plans on practicing environmental law.