Carbon Capture Utilization and Storage (“CCUS”) has recently become a hot topic in the energy industry. Employment and optimization of this technology have the potential to effect significant economic growth, including creating jobs and revenue in the way of tax credits and other financial incentives in the State of Louisiana and beyond. In terms of its pipeline infrastructure and geographic location, Louisiana, in particular, is poised to become a leader in CCUS in the coming years as this technology develops and as energy policies continue to transition. The 2023 Louisiana Legislative session included several proposed bills relative to CCUS which are discussed below.
Failed Bills
Many of the proposed bills in this legislative session are no longer viable after being referred to the committee since the session has ended.
HB 10 proposed to remove eminent domain authority of carbon dioxide storage facility operators in Louisiana, effectively removing language regarding eminent domain in La. R.S. 30:1104(C) and repealing La. R.S. 19:2(12) and La. R.S. 30:1108 in their entirety. On May 10, 2023, HB 10 was involuntarily deferred to the Committee on Natural Resources and Environment.
HB 35 proposed a prohibition on carbon sequestration projects in St. Helena Parish. On April 10, 2023, HB 35 was referred to the Committee on Natural Resources and Environment.
HB 308 proposed to establish a requirement for an environmental impact statement as part of the coastal use permit application process for certain uses of Lake Maurepas and the Maurepas Swamp Wildlife Management Area. On April 10, 2023, HB 308 was referred to the Committee on Natural Resources and Environment. There have been no updates on the status of this bill since its referral to the committee on April 10.
HB 312 proposed the removal of the strict liability provision and the legislative cap on the amount recoverable for noneconomic damages. On May 11, 2023, this bill was recommitted to the Committee on Civil Law and Procedure. There have been no updates on the status of this bill since its referral to the committee on May 11.
HB 453 proposed a requirement that carbon dioxide injected for geologic sequestration through a Class VI injection well be transported to and sequestered in a storage facility in the Gulf of Mexico. If passed, carbon sequestration would only be allowed in the Gulf of Mexico, and not within the state. On May 3, 2023, this bill was involuntarily deferred to the Committee on Natural Resources and Environment.
HB 454 proposed a requirement of a local election in order to approve carbon dioxide sequestration within a parish. On May 3, 2023, this bill was involuntarily deferred to the Committee on Natural Resources and Environment.
HB 120 proposed a prohibition of certain surface structures on Lake Maurepas and Lake Pontchartrain. This bill failed in the House on May 15, 2023.
HB 267 proposed the enactment of Section 2 of La. R.S. 30:1112, which would have established a moratorium of ten years on carbon dioxide sequestration projects on Lake Maurepas and the Maurepas Swamp Wildlife Management Area. This bill also failed in the House on May 15, 2023.
Passed and Pending Legislation
Despite the failure of many of the proposed bills, HB 571 passed and was signed by the Governor as Act 378, effective June 14, 2023. Proposed by Speaker Schexnayder, HB 571 adds new provisions to various statutes regarding carbon capture and sequestration and provides much of the framework and guidelines for CCUS in Louisiana.
First, La. R.S. 30:6(H) was added to require the commissioner of conservation to notify the governing authority of any parish included in a completed permit application for a Class V or VI well related to carbon sequestration. This notification to the local governing authority may be made by electronic mail. This notice requirement is also new language in La. R.S. 30:1105 regarding public hearings.
Additionally, Subpart A-3 of Part II of Chapter 2 of Subtitle I of La. R.S. 30:149 was added regarding the distribution of funds from the storage of carbon dioxide. This provision includes requirements for CCUS contracts with the State Mineral and Energy Board. In sum, any revenues paid to the Office of Mineral Resources must be immediately forwarded to the state treasurer to then remit the funds in accordance with the statute, which requires that 30% be given to the Louisiana Mineral and Energy Operation Fund, 30% be given to the governing authority where the permitted property is located and the remainder be deposited into the Louisiana General Fund. La. R.S. 30:209.2 was also added and it mirrors the addition to La. R.S. 30:149.
There were also additions made to subpart (4)(e) of Subpart A-4 of Part II of Chapter 2 of Subtitle I of La. R.S. 30:209 to require that notification be made to the governing authority of each affected parish when an operating agreement is entered into in which the state is to receive a share of revenue from the storage of carbon dioxide.
Additionally, La. R.S. 30:1104.1 was enacted to require an environmental analysis as part of the permit application for a Class VI injection well. The environmental analysis has to address specific questions set forth in the statute such as whether the potential and real adverse effects of the proposed activity have been avoided to the maximum extent possible. The environmental analysis should also include a cost-benefit analysis of the environmental impact costs in comparison to the social and economic benefits. Another question that should be addressed in the permit application is whether there are less invasive alternative sites and activities to the proposal and whether any mitigating measures can be taken to offer more protection to the environment.
La. R.S. 30:1107 was amended for clarity. La. R.S. 30:1107.1 is a new addition regarding reporting and record keeping for Class VI wells. This provision requires the owner or operator of a Class VI well to submit quarterly reports to the commission containing any changes to the physical and chemical characteristics of the carbon dioxide, monthly values for injection pressure, flow rate and volume, and annular pressure, and monthly and cumulative volume or mass of the carbon dioxide stream injected. Additionally, the owner or operator of a Class VI well must also provide a report within twenty-four hours of the occurrence of evidence that the injected carbon dioxide stream may endanger an underground source of drinking water, noncompliant with a permit condition, or malfunction of the injection system, or failure to maintain mechanical integrity.
La. R.S. 30:1109 has both new and amended language regarding the cessation of storage operations and a limited liability release. This amendment changed the time period from ten years to fifty years for applicability of this provision after cessation of injection into a storage facility; thus, this provision is applicable fifty years after cessation of injection or on a site-specific basis by application of the rules regarding the time frame for a storage operator’s post-injection site care and site closure plan. Then, the commissioner issues a certificate of completion of injection operations after meeting the requirements in the list, which has been updated in this Act. The list now reads (a) The reservoir is reasonably expected to retain mechanical integrity; (b) The carbon dioxide will reasonably remain emplaced; (c) The storage facility does not pose an endangerment to underground sources of drinking water, or the health and safety of the public; (d) The current storage operator has complied with all applicable regulations related to post-injection monitoring and the issuance of the certificate of completion of injection operations; and (e) The storage facility has been closed in accordance with all applicable regulations related to site closure.
La. R.S. 30:1110 is a provision regarding the Carbon Dioxide Geologic Storage Trust Fund that was also amended by Act 378. This provision was amended to clarify some of its previous language and require that the secretary of the Department of Natural Resources (under the previous version, this was the treasurer of the state of Louisiana) shall certify to the commissioner the date on which the balance in the fund for a storage facility equals or exceeds five million dollars. Under the previous version of the statute, the phrase “storage operator” was used throughout. That phrasing has been replaced with “storage facility.” Subpart “g” was added to allow for a storage operator to receive a certification from the secretary of the Department of Natural Resources once they have contributed ten million dollars to the fund, they do not have to continue contributing unless the fund falls below eight million dollars for that operator.
La. R.S. 30:1112 is also a new provision created by Act 378 regarding notice of geologic storage agreements and recordation. This provision allows for a notice of geologic storage agreement, signed by the grantor who executed the agreement in lieu of recording the agreement. Further, the statute provides that recordation of the notice makes the agreement and any subsequent amendment or modification effective as to third persons. There are specific requirements for what the notice must contain. Additionally, a modification of an agreement is not effective as to third parties unless the parties record a signed amendment to the notice that describes the change. The grantee of any recorded notice of geologic storage agreement must also notify the governing authority of the parish in which the instrument is recorded within thirty days after recordation.
La. R.S. 56:30.5 is a new enactment regarding notice to parish governing authorities. This provision requires an applicant seeking a permit to conduct geophysical or geological surveys for carbon sequestration to notify the parish governing authority where the proposed survey is to be conducted.
Finally, Senate Concurrent Resolution No. 63 proposed by Senator Cloud provides for a task force to study and propose recommendations regarding the impact of carbon capture and sequestration projects on communities across the state. This resolution is pending at the Committee on Natural Resources since its referral on June 2, 2023.
Primacy
The Safe Drinking Water Act (“SDWA”) passed by Congress in 1974 protects the public health by regulating the nation’s public drinking water supply. Part of the SDWA requires that the EPA develop statewide Underground Injection Control (UIC) programs to regulate the injection of fluids (including carbon dioxide) to protect underground sources of drinking water (USDWs). The SDWA directs the EPA to establish requirements that all states must meet to be granted primary enforcement responsibility or “primacy” for implementing a UIC program.
UIC programs generally consist of six classes of injection wells. Each well class is based on the type and depth of the injection activity and the potential for endangerment of a USDW. Class I wells are used to inject hazardous and non-hazardous wastes into deep, isolated rock formations. Class II wells are used exclusively to inject fluids associated with oil and natural gas production. Class III wells are used to inject fluids to dissolve and extract minerals. Class IV wells are shallow wells used to inject hazardous or radioactive wastes into or above a geologic formation that contains a USDW. Class V wells are used to inject non-hazardous fluids underground. Class VI wells are used for injection of carbon dioxide (CO2) into underground subsurface rock formations for long-term storage, or geologic sequestration. When used as part of carbon capture and storage and carbon dioxide removal projects, geologic sequestration of carbon dioxide promises a reduction in the amount of carbon dioxide in the atmosphere.
The State of Louisiana received primacy for Class I, II, III, IV, and V injection wells under the Safe Drinking Water Act (SDWA) in 1982. In the fall of 2021, after more than two years of preparation and coordination with the EPA, the Louisiana Department of Natural Resources, Office of Conservation submitted its primacy application to the EPA for the administration of Class VI Injection wells. Finally, in the spring of 2023, the EPA published a proposed rule to grant Louisiana primacy over regulation of Class VI Wells under its already established Underground Injection Control Program. The EPA accepted public comment on Louisiana’s application until July 3, 2023. There have been no further developments since the comment period closed.
During the 2023 legislative session, House Resolution No. 229 by Representative Coussan and Senate Resolution No. 123 by Senators Cortez, et al were passed to encourage the EPA to take necessary actions to timely review and grant Louisiana’s application for primacy over Class VI injection wells.
Should the EPA grant the request for primacy, Louisiana would not be the first state to have obtained such authority. The EPA has already granted primacy for Class VI wells to North Dakota and Wyoming. Louisiana is, however, ahead of all other states in the application process, since its application is at the rulemaking level, while other states like Texas and West Virginia are still in the pre-application phase.
Article authored by James (Rusty) McCay, II and Kate Brasseux.
James "Rusty" McCay brings a wealth of experience on oil and gas title matters, as well as Louisiana regulatory issues. He also advises on complex real estate and land use cases, including eminent domain matters. Rusty’s previous experience includes positions at the State of Louisiana Department of Transportation and Development and the Louisiana Department of Justice.