Carbon capture, utilization, and storage (CCUS) projects involve various legal issues. Like traditional exploration and development, CCUS projects require the operator to secure both the necessary private property rights from landowners as well as regulatory approval from the appropriate administrative agency in order to proceed. This article focuses on the latter.
Regulatory approval for CCUS falls under two broad categories. Namely, agency approvals related to enhanced hydrocarbon recovery and those related to geologic sequestration. Both categories are regulated by the Office of Conservation within the Louisiana Department of Natural Resources.
Enhanced Recovery:
Use of carbon dioxide for enhanced hydrocarbon recovery requires the creation of a unit by the Commissioner of Conservation for the purpose of secondary or tertiary recovery under La. R.S. 30:5(C). However, pilot programs can be available to allow the commencement of an enhanced recovery project prior to creation of the unit.
Any order approving such a unit operation shall be issued by the Commissioner only after notice and public hearing and shall be based on findings that: (a) the order is reasonably necessary to prevent waste and the drilling of unnecessary wells, and will appreciably increase the ultimate recovery of oil or gas; (b) the proposed unit is economically feasible; (c) the order will allocate to each separate tract within the unit a proportionate share of the unit production; and (d) at least three-fourths of the owners and three-fourths of the royalty owners have approved the plan and terms for unit operation. The order creating the unit will also name a unit operator and allocate unit costs in the same proportion that unit production is allocated.
In addition to the unit order, the operator must receive approval for its injection wells. Oil and gas related injection wells are considered Class II wells and are regulated by the Underground Injection Control (UIC) program within the Office of Conservation, which has achieved primary enforcement authority under the applicable federal guidelines. The pertinent regulations are in Statewide Order No. 29-B and address permitting, construction, operations, monitoring, testing, reporting, and closure for Class II wells.
Geologic Sequestration:
Geologic carbon sequestration requires approval of a storage facility under the Louisiana Geologic Sequestration of Carbon Dioxide Act (La. R.S. 30:1101-1111). Approval of a storage facility is not the creation of a unit. Rather, it is the approval to use a specific reservoir for injection and storage of carbon dioxide.
Approval of a storage facility by the Commissioner requires notice and public hearing and shall be based on findings that: (a) the reservoir is suitable and feasible for the project; (b) the reservoir is depleted of hydrocarbons or that a certain percentage of mineral owners have consented to the use of the reservoir if it is not depleted; (c) use of the reservoir will not contaminate other fresh water formations or other oil, gas, or mineral formations; and (d) use of the reservoir will not endanger human lives or cause a hazardous condition to the property. Unlike enhanced recovery unit hearings that are held in Baton Rouge, hearings to approve geologic storage facilities must be held in the parish where the facility is located. Beyond approval of the storage facility itself, the Louisiana Geologic Sequestration of Carbon Dioxide Act provides for expropriation authority, a trust fund, and a liability release upon cessation of storage operations under certain conditions.
In addition to approval of the storage facility, the operator must also receive approval for its injection wells. Injection wells used for geologic sequestration of carbon dioxide are considered Class VI wells. Unlike Class II wells, Louisiana’s application for primary enforcement authority for Class VI wells remains pending. It is currently anticipated that primacy for Louisiana will be granted in late 2022 or early 2023. In the meantime, the Environmental Protection Agency remains the primary enforcement authority for Class VI wells. The State regulations that will govern Class VI wells once primacy is achieved are in Statewide Order No. 29-N-6, which addresses permitting, construction, operations, monitoring, testing, reporting, and closure for Class VI wells.
The reader is directed to the referenced statutes and statewide orders for more detail on the particular requirements discussed above. The author would also be happy to assist with any legal issues or questions that may arise in your CCUS endeavors and can be reached at jdlieberman@liskow.com or (337) 232-7424.
Article original published in the Society of Applied Geoscientists and Engineers Magazine, the SAGE MAGE, March 2022, vol. 1, issue 1, sagetech.org.
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