carbon capture and storage
A bill authorizing the capture and storage of carbon dioxide via underground storage wells has passed the Ohio House of Representatives. The nearly unanimous vote by the House now advances H.B. 170 to the Ohio Senate.
We’ve reported previously on the prospect of Carbon Capture and Storage (CCS) coming to Ohio. CCS is one part of a strategy to reduce airborne CO2 emissions. It’s of high interest to hard-to-abate emission sources, such as ethanol, steel, chemical, and concrete production facilities. Rather than reducing the CO2 in their emissions, CCS allows such sectors to capture CO2 from emissions and store the CO2 in pore spaces far beneath the land’s surface. But landowners must be willing to lease their “pore space” for CO2 storage. If passed, then, CCS legislation will create pore space leasing opportunities and challenges for Ohio landowners.
Refer to our Ag Law Blog posts explaining CCS and discussing how CCS requires landowners to lease “pore space.” We also reviewed the first CCS bills in Ohio, proposed last legislative session, in a third blog post. Those bills did not pass, and H.B. 170 represents a new version of the proposals, developed after additional consideration by interested parties.
What’s in H.B. 170?
H.B. 170 sets up a state regulatory framework that authorizes the storage of capture carbon dioxide into subsurface “pore space” via Class VI injection wells, which are regulated by the U.S. EPA under the federal Safe Drinking Water Act’s Underground Injection Control Program. The bill addresses several
- Agency authority and rules. Delegates regulatory authority over CCS to the Ohio Department of Natural Resources Division of Oil and Gas Resources Management and directs the Chief to adopt rules that carry out the legislation.
- “Pore space” interests. Defines “pore space” as the subsurface cavities and voids that are suitable for use as storage areas for CO2, outlines procedures for severing and conveying pore space, clarifies the relationship between pore space, surface rights, and mineral interests, and limits the liability of pore space owners for the injection of CO2 into their pore space.
- CCS projects. Lays out the components of “carbon sequestration projects,” which includes “storage facilities” operated by “storage operators” who inject CO2 into pore space via injection wells.
- “Pooling” of pore space. Authorizes the pooling or “statutory consolidation” of pore space for carbon sequestration projects if the storage operator obtains the consent of owners of at least 70% of the pore space and establishes rights and responsibilities for statutory consolidation.
- Project completion and closure. Provides procedures for “certificates of project completion” that apply to the closure of storage facilities and a transfer of responsibility and liability to the State.
- Fees and penalties. Establishes fees for storage facilities and funds to pay for current and post-closure care program costs and sets civil and criminal penalties for violation of CCS regulations.
- Limitations on damages. Limits claims for damages dues to injection or migration of CO2 to claims that establish direct physical injury to persons, animals, or property, limits claims to diminution of value caused by the injection or migration and prohibits punitive damages in such cases.
What’s next for CCS?
The Ohio Senate now has its turn to consider H.B. 170. The Senate President referred the bill to the Senate Energy Committee, which already has a CCS bill before the committee. The Senate’s version of CCS, S.B. 136, was introduced last March but has not received any hearings.
S.B. 136 mirrors the version of H.B. 170 first introduced in the House. But amendments to H.B. 170 occurred in the House Natural Resources Committee that created differences between the two bills. It will be up to Energy Committee Chair Brian Chavez to determine which bill to advance, if any.
For a comparison of the original introduced bills (H.B. 170 and S.B. 136) and the substitute bill for H.B. 170 that passed the House of Representatives, refer to this synopsis by the Legislative Service Commission that highlights the differences.
H.B. 170 is a step toward “primacy”
Ohio is already on its way toward seeking approval from the U.S. EPA to regulate Class VI injection wells within the state, a concept referred to as “primacy.” State-based regulation of the well permitting program would speed up the permitting process for CCS, according to proponents of primacy. However, the state regulatory program must be at least as stringent as federal requirements before the U.S. EPA will delegate the Class VI program to the state. H.B. 170 and its resulting regulations will be reviewed by the U.S. EPA when Ohio submits its application for primacy to the U.S. EPA.
To date, only five other states have obtained primacy over Class VI wells. Six other states are currently in the process of applying for such approval. By obtaining primacy, Ohio could be ahead of many states in encouraging CCS development, proponents state.
Implications for Ohio landowners: pore space leasing
We’ve heard that some companies are already out with offers of “pore space leases” to Ohio landowners. Some are offering around $25 per acre for the right to use pore space for CCS. But now is the time for caution. The legislation is necessary to clarifying legal interests in pore space and how CCS development will occur in Ohio—both important issues landowners need to know before entering into pore space leases. A third important issue in need of clarification is the value of pore space, and it’s still too early to have firm answers to that question. Experience from oil and gas leasing teaches us, however, that early lease payment offers tend to be lower than later offers.
Landowners who want to move forward now on pore space leases, however, would be wise to work with an attorney. Some attorneys across the state are already reviewing and negotiating pore space leases on behalf of the landowners. Contact the agricultural law team for help with identifying attorneys knowledgeable in this area.
Watch for more resources on CCS and pore space leases coming to our program soon.
Tags: CCS, carbon capture and storage, carbon sequestration, class VI injection
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Part 3 in our series on Carbon Capture and Storage
As expected, proposed legislation to allow for carbon capture and storage wells (CCS) was introduced this week in the Ohio General Assembly. The legislation opens the door for CCS underground injection wells to store captured carbon dioxide in “pore space” or cavities far beneath the land’s surface. As we explained in Part 1 and Part 2 of our CCS series, CCS technology removes carbon dioxide from the atmosphere to reduce greenhouse gas emissions and can also trigger final production in an oil or gas field. If passed, the new law would affect agricultural landowners, who could be asked to lease their “pore space” for CCS projects.
The identical CCS bills introduced in the Ohio House of Representatives and Senate are H.B. 170, sponsored by Rep. Monica Robb Blasdel (R-Columbiana) and Rep. Bob Peterson (R-Sabina) and S.B. 136, sponsored by Sen. Tim Schaffer (R-Lancaster) and Sen. Brian Chavez (R-Marietta). The proposal varies in several places from a bill introduced late last year, the result of “fine tuning” by interested parties over the winter, according to Rep. Blasdel.
The proposed legislation includes clarification of the pore space property interest, a regulatory framework and fees for injection wells, consolidation or “pooling” provisions, well closure procedures, and liability provisions for carbon dioxide migration.
Clarification of “pore space” as a real property interest
Currently, Ohio does not have statutory laws that recognize pore space as a real property interest. The proposal would change that by recognizing that the owner of surface lands and water also owns “all pore space in all strata below the surface lands and waters.” The definition of “pore space” is “subsurface cavities and voids, whether natural or artificially created, that are suitable for use as a sequestration space for carbon dioxide.”
The proposal also addresses conveyancing of pore space, stating that a conveyance of surface ownership also conveys the pore space interest unless the pore space is expressly reserved or severed from the surface interest. This means a landowner could sever pore space rights and convey those separate from the surface, as Ohio law currently allows with minerals. A severed pore space interest would have priority over the surface interest. The proposal also addresses the relationship with mineral interests, stating that severed mineral or oil and gas interests would be dominant over pore space rights.
Regulatory framework for CCS injection wells
The proposed legislation would place state regulatory authority over CCS storage facilities in Ohio’s Division of Oil and Gas Resources Management in the Ohio Department of Natural Resources (ODNR). Note that the federal Safe Drinking Water Act also requires CCS injection wells to have a Class VI injection well permit from the U.S. EPA, although with the passage of the proposed bills, Ohio hopes to receive approval from the EPA to administer the state’s Class VI permit program.
The bills directs ODNR to adopt rules for CCS. At a minimum, the rules must include:
(1) Requirements for the operation and monitoring of a carbon dioxide well;
(2) Safety concerning the drilling and operation of a carbon dioxide well;
(3) Spacing, setback, and other provisions to prevent storage facilities and storage operators from impacting the ability of owners of oil and gas interests to develop those interests;
(4) Protection of the public and private water supply, including the amount of water used and the source or sources of the water;
(5) Fencing and screening of surface facilities of a carbon dioxide well;
(6) Containment and disposal of drilling and other wastes related to a carbon sequestration project;
(7) Construction of access roads for purposes of the drilling and operation of a carbon dioxide well;
(8) Noise mitigation for purposes of the drilling of a carbon dioxide well and the operation of such a well, excluding safety and maintenance operations;
(9) Liability insurance to pay damages for injury to persons or property caused by the construction or operation of the storage facility;
(10) Liability insurance coverage of at least fifteen million dollars to cover bodily injury and property damage caused by the construction, drilling, or operation of wells, including environmental coverage.
(11) A surety bond sufficient to cover corrective actions, plugging, post-injection site care prior to receipt of a certificate of project completion, and emergency or remedial response.
The proposed law also states that ODNR may require a CCS storage well operator to deploy a seismicity monitoring system to determine seismic activity in the carbon storage area and requires a well operator to show that owners of oil and gas will not be adversely affected by the well. Both the well operator and the well owner would pay fees to ODNR for the amount of carbon dioxide stored in the well.
Consolidation or “pooling” of pore space
If a well operator can’t obtain the consent of all pore space owners within a proposed storage area, the legislation would allow the operator to apply for “consolidation” if the operator has consent from at least 75% of the pore space owners. The remaining percentage of pore space owners could be “forced” into the project if ODNR determines that the consolidation is “reasonably necessary to facilitate the underground storage of carbon dioxide.” Provisions would also address how to compensate the pore space owners.
Well closure
After carbon injections into a storage facility have ended and a period of 50 years passes, a storage operator may apply for a certificate of closure. If the operator can establish full regulatory compliance and that there is no potential of migration or threat to public health or the environment, the state may issue a certificate of project completion that releases the operator from regulatory requirements and transfers the primary responsibility and liability for the stored carbon dioxide to the state. An operator could remain liable, however, under several circumstances, such as criminal acts, providing deficient or erroneous information, or violating duties.
Liability
The proposal clearly protects owners of pore space and owners of surface or subsurface property interests from liability relating to the injection of carbon dioxide into a storage facility. It also limits any claims for damages against a storage operator to instances where the claimant can prove that the carbon dioxide injection or migration obstructed the free use of property, or caused direct physical injury to an individual, animal, or real or personal property. The bill prohibits awarding of punitive damages if the storage operator acted in compliance with the required permit, and limits damages for personal or real property to the “diminution” or loss of value of the property.
Read an update on the progress of Ohio's CCS legislative proposals in Part 4 of our CCS series here.
Tags: carbon capture and storage, CCS, carbon dioxide, pore space
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