Carbon Capture, Utilization, and Storage – Louisiana Closer to Obtaining State Primacy for Class VI
On April 28, 2023, the U.S. Environmental Protection Agency (EPA) requested public comment on a proposal to grant Louisiana primary responsibility over Class VI wells under the Underground Injection Control (UIC) Program, which regulates the injection and long-term storage of carbon dioxide (CO2) into deep rock formations. If granted, Louisiana would become only the third state to obtain primacy over UIC Class VI wells.
Background on UIC Program
The Biden administration has continually stated that carbon capture, utilization, and storage (CCUS) will be essential in meeting its net zero GHG emission goals.1 Most recently, President Biden at a virtual meeting of the Major Economies Forum on Energy and Climate included CCUS as a pillar of action that is necessary to limit global warming to 1.5C.2
Pursuant to the UIC program, EPA has promulgated regulations and established minimum federal requirements for six classes of injection wells (Class I to Class VI). EPA has designated each well class based on the type and depth of the injection activity and the potential for the injection activity to impact underground sources of drinking water. For instance, “Class II wells are used only to inject fluids associated with oil and natural gas production” for purposes of either disposal, enhanced oil recovery (EOR), or hydrocarbon storage; Class III wells “are used to inject fluids to dissolve and extract minerals;” and Class IV wells are “shallow wells used to inject hazardous or radioactive wastes into or above a geologic formation that contains” an underground source of drinking water.3 In 2010, EPA established Class VI, the most recently created UIC well class, for wells used to inject CO2 into deep subsurface geologic formations for long-term underground storage — a process known as “geologic sequestration.” While there are approximately 180,000 active Class II wells throughout the United States, there are only two active Class VI wells in the United States and a rapidly growing list of pending applications to obtain Class VI well permits4 and pressure from the industry for EPA to act in a timely manner on the pending applications.5
Central to the role of CCUS in the U.S. energy transition is the tax credit provided under section 45Q of the Internal Revenue Code (the § 45Q credit), which was expanded and enhanced by the Inflation Reduction Act of 2022. The § 45Q credit is based on the annual metric tonnage of carbon oxide captured by a qualifying facility and subsequently (i) used in EOR and disposed of in secure geological storage, (ii) disposed of in secure geological storage, or (iii) utilized outside of EOR. With non-EOR utilization technologies still in their nascent phases, EOR and secure geological storage — both of which require compliance with applicable UIC or other regulations6 — are currently the dominant routes through which the § 45Q credit can be obtained. To qualify for the § 45Q credit, in addition to applicable UIC or other regulations, the well also must comply with applicable reporting requirements under 40 CFR part 98 subpart RR (or, in the case of a well used in EOR, specified EOR-related International Organization for Standardization standards endorsed by the American National Standards Institute).7
State Primacy of UIC Program
EPA’s UIC program requirements were designed to be adopted by states, territories, and tribes, which is known as obtaining “primacy” or obtaining primary enforcement authority over the UIC programs. Primacy is not mandatory or vested as a matter of right; rather, states, territories, and tribes must complete a rigorous application and review process with EPA. States, territories, and tribes may apply for and obtain primacy for all well classes, Classes I–V, or individual well classes, such as Class VI only. EPA may grant primacy for all or part of the UIC program (i.e., individual well classes). States seeking UIC primacy must demonstrate to EPA that the state has jurisdiction over underground injection; regulations that meet the federal UIC requirements and will be effective in preventing endangerment to underground sources of drinking water; and the necessary administrative, civil, and criminal enforcement penalty remedies.8
EPA has approved UIC primacy programs for well Classes I–V in 31 states and three territories. Florida and Idaho have EPA-approved UIC primacy for well Classes I, III, IV, and V. EPA retains direct implementation authority for Class II wells in those states. Currently, EPA implements the UIC program for all well classes in nine states and two territories.9 Importantly, when EPA approves primacy, it still retains oversight authority.
Since the inception of Class VI in 2010, states have been slow to apply for primacy, which was likely fueled by low demand for Class VI permits and the lengthy primacy application and review process. Currently, only two states have primacy for Class VI wells: North Dakota and Wyoming. North Dakota applied for primacy in 2013, which EPA approved in 2018. Wyoming formally applied in 2019 and was approved in 2020, but that process was preceded by years of dialogue with EPA Region 8. North Dakota and Wyoming are also the only two states that have primacy for all well Classes I–VI. While EPA directly implements the Class VI program in all other states, territories, and on tribal lands, demand for Class VI wells are increasing and several states have started or expressed interest in obtaining primacy for Class VI wells.
Louisiana Primacy Update
With 10 applications for Class VI permits already pending with EPA, Louisiana is likely the next state to obtain primacy for UIC Class VI wells. Louisiana submitted its voluminous Class VI primary application in April 2021.10 After years of review and communication with the state, EPA has finally determined, subject to public comment, that the application meets all statutory and regulatory requirements and Louisiana can administer a Class VI permit program consistent with the Safe Drinking Water Act and UIC regulations. In addition, EPA reviewed Louisiana’s approach to environmental justice, which has been a key initiative for the Biden administration and found that Louisiana’s primacy application fully and appropriately integrates environmental justice and equity considerations into its UIC Class VI program. Subject to public comment, EPA is proposing to issue a final rule approving Louisiana’s application to implement the UIC Class VI program within the State, except for on Indian lands.11 EPA will accept comments on the proposal through June 26, 2023. In addition, EPA will be holding a public hearing on June 15, 2023.
1 See, e.g., 87 Fed. Reg. 8808 (Feb. 16, 2022) (The chair of the White House Council on Environmental Quality (CEQ) acknowledges that “[t]o reach the President’s ambitious domestic climate goal of net-zero emissions economy-wide by 2050, the United States will likely have to capture, transport, and permanently sequester significant quantities of carbon dioxide.”).
3 Class II Oil and Gas Related Injection Wells | US EPA.
4 For a list of pending Class VI application, see Class VI Wells Permitted by EPA | US EPA.
5 Letter from Industry Coalition to EPA (March 14, 2023), Coalition-Letter-to-EPA-re-CCUS.pdf (pachamber.org).
6 Treas. Reg. § 1.45Q-3(b)(1), (2).
7 Treas. Reg. § 1.45Q-3(b)(1), (2).
8 Primary Enforcement Authority for the Underground Injection Control Program | US EPA.
9 Primary Enforcement Authority for the Underground Injection Control Program | US EPA.
10 Microsoft Word - Cover Page (louisiana.gov).
11 Underground Injection Control in EPA Region 6 (AR, LA, NM, OK, and TX) | US EPA.
