CCS
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
Comments: 0
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
Comments: 0
Part 2 in our series on Carbon Capture and Storage
If you’re a landowner, you may hold a valuable property interest that is gaining attention across the country: pore space. Pore space is the empty space between the particles of soil, sand, rock, and sediment beneath the surface of your land. It’s a geological formation that, if large enough, can store gas, brine water, and similar substances. Why the recent interest in pore space? It’s a necessity for Carbon Capture and Storage (CCS)—a technology that removes carbon dioxide (CO2) from emission sources and stores it in pore space far beneath the land’s surface.
We began this series on CCS with an overview of the technology and why it’s gaining traction in Ohio. See our first post on the Ohio Ag Law Blog. This second post focuses on legal issues related to pore space. The capacity to store CO2 in the pore space beneath the surface is a property interest that may have value to landowners—one that could be sold or leased to another party for CCS or other storage purposes. But before pore space transactions occur in Ohio, the General Assembly must address a few legal issues: clarification of pore space ownership, whether and how pore space interests can be severed and conveyed, and the relationship between a severed pore space interest and surface and mineral interests. Here’s why these are important legal needs.
- Ownership of pore space. A golden rule of property law partly answers the issue of pore space ownership in Ohio: the “ad coleum” doctrine. The doctrine states that the owner of land owns the rights above and below the land, from the sky to the earth’s core. The assumption under this common law rule, then, is that a landowner owns all subsurface pore space. But what if the pore space is created as a result of a particular activity, like mining? While a few court cases in Ohio have followed the ad coleum doctrine and recognized pore space ownership as an attribute of surface ownership, there have been inconsistent court rulings on the question of ownership of pore space resulting from mining activities. The rulings drive a need for the Ohio legislature to clarify pore space ownership issues, first by codifying the ad coleum doctrine and stating that a surface owner also owns the pore space beneath the surface. Second, statutory law could state whether the surface or mineral owner holds the right to pore space resulting from mineral extraction. If Ohio follows the general rule on mineral extraction adopted among other states, Ohio law would state that the surface owner retains the right to pore space after minerals are fully extracted.
- Severance, conveyance, and recording of pore space interests. Can a surface owner sever the rights to pore space and convey the interest to another party, as Ohio law allows with mineral interests? That’s another legal question in need of clarification in Ohio. The legislature could establish the right to sever pore space and adopt the same conveyancing and recording standards we utilize for tracking other property interests in Ohio.
- Conflicts with other property interests. Can pore space owners interfere with mineral and surface ownership interests by taking actions such as establishing a CCS well on the surface to store CO2 in the pore space? Which property interest has priority over the others if there is a conflict? Our courts can address legal questions as they arise but the Ohio legislature has the power to clear up the relationship between these property interests through statutory law. In particular, Ohio law should establish the priority of rights between the surface, pore space, and mineral interests and answer which is dominant over another when there is a conflict.
Will the legislature tackle these pore space issues that arise with the potential of CCS in Ohio? Possibly, but probably not until the next legislative session begins in January. There are currently proposals in both chambers of the legislature that simply declare an “intent to regulate carbon capture and storage technologies and the geologic sequestration of carbon dioxide for long-term storage,” House Bill 358 and Senate Bill 200, but those bills do not yet contain any detailed language and they will die if not passed by year’s end. With few days remaining in the legislative session this year, the bills are not likely to see any action. There will likely be new versions of the bills introduced next year, however, if the interest in CCS in Ohio continues. Hopefully, the proposals will answer our legal questions about pore space as a property interest of Ohio landowners.
Read the next blog post in this series, which reviews the CCS legislation under consideration in Ohio, at this link.
Tags: pore space, CCS, carbon, carbon capture, carbon injection, carbon lease, carbon sequestration
Comments: 0
Co-authored by Tyler Zimpfer, Law Fellow, National Agricultural Law Center
This is the first in a four-part series on Carbon Capture and Storage in Ohio. See Part 2 in this blog post, Part 3 in this blog post, and Part 4 in this blog post.
Many in Ohio agriculture are familiar with the terms “carbon sequestration” and “carbon credits.” The terms relate to efforts to reduce carbon in the atmosphere by capturing or “sequestering” the carbon. Ohio farmers have taken advantage of their ability to sequester carbon through practices like conservation tillage and cover crops, thus exchanging carbon sequestration practices or the generation of carbon credits for cash payments.
Now an additional form of carbon sequestration is emerging: Carbon Capture and Storage (“CCS”). CCS is a carbon sequestration technology that industries with large carbon dioxide (CO2) emissions are using to reduce their carbon “footprint.” CCS technology captures CO2 from airborne emissions and injects it into geologic formations beneath the land surface. Because CCS requires land and can reduce the “carbon index” of products like ethanol, the technology has implications for Ohio agriculture.
In this first post on CCS, we’ll lay out the background of CCS and what’s driving interest in it. Future posts will explain legal hurdles for bringing CCS to Ohio, how CCS relates to ethanol and the potential growth of the sustainable aviation fuels market, and how Ohio landowners could be affected by CCS.
What is Carbon Capture and Storage?
CCS is a process that captures carbon dioxide from an emitting source and permanently stores it underground in geologic formations referred to as “pore space.” Though some are hearing of CCS for the first time, CCS technology has existed for decades, as have many studies on its safety, sustainability, and the amount of carbon that can be stored in different formations and regions. The Environmental Protection Agency (“EPA”) finalized a rule regulating geologic sequestration in 2010 pursuant to the agency’s authority under the Safe Drinking Water Act.
CCS involves three separate steps – capture, transport, and storage. CO2 is captured and separated from other gases at industrial facilities or directly from the atmosphere. After captured, the CO2 is then compressed for transportation. The compression forces the CO2 to act like a liquid. CO2 is most commonly transported via pipelines but can also be moved by ship to offshore wells. Once the CO2 arrives at the intended destination, it is injected into rock formations, often a mile or more underground, where it spreads throughout the pore space of the formation in a plume. The CO2 is then permanently stored in the geological formation. CCS technology is also used for “enhanced oil recovery,” because CO2 injection can recover untapped oil reserves in a partially-depleted oil field. When used for enhanced oil recovery and storage, the technology is referred to as “carbon capture utilization and storage” or CCUS. The image below illustrates different types of CCS.
Source: Congressional Budget Office
Regulation of CCS wells
CO2 injection wells are regulated under the federal Safe Drinking Water Act by the EPA through the Underground Injection Control (UIC) Program. The category of wells relevant to CO2 for geological storage is “Class VI” wells. The primary purpose of the Class VI regulations is to protect underground sources of drinking water and prevent leakage, explosions, and contamination. Much attention is currently focused on CCS technology due to a recent Archer Daniels Midland (ADM) suspended the injection of CO2 at a site in Illinois after discovering a potential leak due to corrosion in a monitoring well. While there is no report of water contamination, the EPA found ADM violated federal safe drinking water rules by failing to follow an emergency response plan after detecting the leak.
Why so much interest in CCS?
CCS is expected to be an important strategy of industries that struggle with decarbonization or net-zero greenhouse gas emission goals. CCS can reduce CO2 emissions for hard-to-abate sectors that don’t have other methods for reducing their emissions, such as refineries and cement, steel, and chemical manufacturing
A more recent (and arguably more prominent) factor driving CCS is the current federal tax incentive. The 2022 Inflation Reduction Act (IRA) expanded the tax credit known as “Section 45Q,” first enacted in 2008 and extended in 2018. A company that captures and stores a certain threshold of CO2 every year is eligible for the tax credit. The IRA made several changes to the Section 45Q tax credit to further promote CCS and make it more lucrative and accessible, such as increasing the value of the credit by 70% to $85 per metric ton; lowering the annual capture amount required for eligibility by at least 50% for most facilities; and allowing transferability of the tax credit. With the significant changes in the IRA, researchers expect an increase in CCS projects across the United States.
Can we do CCS in Ohio?
No, not without legislation. Two legal changes are necessary to enable CCS technology in Ohio. (1) Ohio law must define and clarify property rights to the pore space in geological formations beneath land surfaces, and (2) the state must allow the establishment of CCS injection wells in Ohio. We explain these two requirements in our second post in this series on CCS, available at https://farmoffice.osu.edu/blog/carbon-capture-and-storage-legal-issues-pore-space.
For more background information on CCS and Section 45Q, see:
- Congressional Research Service, Carbon Capture and Sequestration (CCS) in the United States, https://crsreports.congress.gov/product/pdf/R/R44902
- Congressional Budget Office, Carbon Capture and Storage in the United States, https://www.cbo.gov/publication/59832#_idTextAnchor007
- Ohio Department of Natural Resources, Carbon Capture, Utilization, & Storage, https://ohiodnr.gov/discover-and-learn/safety-conservation/about-odnr/geologic-survey/energy-resources/carbon-capture-utilization-storage
- Congressional Research Service, The Section 45Q Tax Credit for Carbon Sequestration, https://crsreports.congress.gov/product/pdf/IF/IF11455
Tags: carbon capture, CCS, sequestration, 45Q, pore space, carbon injection, carbon storage
Comments: 0
