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Earlier this month, Gulf Coast Sequestration (“GCS”), a limited liability company based in Lake Charles, announced its plans to build and operate a carbon capture and sequestration (“CCS”) project that will create a repository 10,000 feet underground for the permanent storage of more than 80 million tons of carbon. Once completed, the GCS facility is expected to be the largest CCS project in the United States and one of the largest in the world, according to its press release.

The next step for GCS will be to obtain a Class VI Underground Injection Control (“UIC”) permit from the U.S. Environmental Protection Agency (“EPA”) in order to operate its proposed CCS facility.[1] GCS has stated, “[t]he permit application comes after years of comprehensive data collection and analysis which determined that the area’s geologic pore space is ideally suited to build and operate a world-class carbon sequestration project.” GCS will partner with industrial customers to capture CO₂, ship it to the GCS facility, and safely pump it underground. The facility will have capacity to sequester 2.7 tons of CO₂ annually, which is equivalent to removing about 600,000 passenger vehicles from the road every year, GCS estimated.

The GCS announcement comes on the heels of new legislation related to CCS passed at the federal and state level. Section 45Q U.S. federal tax credits were recently expanded to provide for $35/ton or $50/ton of CO₂ emissions sequestered depending on the storage location. On the state level, Act No. 61 of the 2020 Regular Legislative Session (Senate Bill 353, by Sen. Sharon Hewitt) updates the Louisiana Geologic Sequestration of Carbon Dioxide Act which is designed to pave the way for a CCS market in Louisiana. The new update seeks to further clarify the framework for carbon capture and storage, in part, by authorizing the commissioner to approve the conversion of depleted oil formations and existing enhanced oil or gas recovery operations into geologic storage facilities. In addition, recently enacted Louisiana Revised Statute § 30:1108 expands eminent domain authority over surface and subsurface rights to CCS operators that have obtained a certificate of public convenience and necessity from the Louisiana Department of Natural Resources Office of Conservation (“Office of Conservation”).

The Office of Conservation is currently seeking to obtain primary enforcement authority from the EPA over the aforementioned Class VI wells, which are used to inject CO₂ into deep rock formations beneath the Earth’s surface. This month, the Office of Conservation announced its proposal to adopt Statewide Order 29-N-6,  which is a set of regulations that would govern the oversight of these wells within the UIC program if the Office of Conservation is granted primacy. Statewide Order 29-N-6 provides clear guidelines for Class VI wells, which cover the permitting process, siting criteria, area of review, well construction and completion, operational protocol, testing and monitoring specifications, plugging and abandonment procedures, and reporting requirements. If or when the Office of Conservation becomes the primary regulator for Class VI wells in Louisiana, the industry will have greater regulatory certainty to advance CCS projects for both traditional and renewable energy sources.

Beyond the recent legal and regulatory advancements made to encourage CCS development within the state, Louisiana is inherently well suited for the development of large-scale CCS projects for a variety of reasons. First, the state has abundant industrial carbon emissions from the Lake Charles to Mississippi River corridor which are in close proximity to depleted geological formations that tend to be ideal for carbon storage. Second, Louisiana already has a developed pipeline infrastructure that is necessary to transport carbon dioxide to where it can be utilized and stored. Third, because Louisiana has been one of the most prolific hydrocarbon producers in the United States for over a century, there is a large amount of subsurface data, knowledge and production history which will assist in defining and accessing carbon storage opportunities.

To read more about CCS, click here.

[1] Section 1421 of the Safe Drinking Water Act (“SDWA”) requires the EPA to develop UIC program requirements that protect underground sources of drinking water from endangerment. The EPA has developed UIC program requirements that are designed to be adopted by states, territories, and tribes.  Class VI injection wells are discussed further herein.

Primary enforcement authority, often called primacy, refers to state, territory, or tribal responsibilities associated with implementing EPA approved UIC programs. A state with UIC primacy oversees the UIC program in that state.  In 2018, North Dakota was the first state to receive primacy for Class VI UIC wells, which are used for long-term storage of carbon dioxide captured from industrial and energy related sources.   Wyoming’s application for primacy was approved last month, making it the second state to receive primacy for Class VI UIC wells.

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