Why injecting CO2 underground is a legal morass

Source: By Shelby Webb, E&E News • Posted: Monday, April 17, 2023

a photo collage illustration showing a power plant and a cross section of ground with CO2 in the ground area

POLITICO illustration by Claudine Hellmuth/Photos by iStock

Texas is the Wild West when it comes to injecting carbon dioxide emissions into the earth.

The Lone Star State has yet to pass laws regulating such long-term storage for CO2 emissions. And that’s the way rancher Ashley Watt likes it.

Watt has been working for months to ink a deal with an energy company that wants to inject carbon dioxide into the geologic formations that lie beneath her land in West Texas. But she is ready to walk away if the Texas Legislature passes a new bill that would allow companies to pass on their liability to the state 10 years after their injections end.

“Are we willing to bet the proverbial and literal ranch on this carbon capture working?” she said. “There’s real consequences to that carbon in the ground — are we willing to take that bet?”

As oil and gas companies rush to build carbon sequestration projects — in hopes of taking advantage of increased tax credits in the Inflation Reduction Act — states are scrambling to answer questions about how to regulate the new industry.

The climate law’s incentives encourage carbon capture, as part of the Biden administration’s goal to achieve net-zero emissions by midcentury. Companies hope to inject that captured CO2 in unprecedented quantities deep underground into the tiny holes within rocks and geologic formations known as the pore space.

But who owns that pore space? What happens to companies hoping to extract oil or gas on the same land? And who pays for remediation if injecting millions of tons of CO2 into the earth creates problems?

Only a handful of states, including North Dakota, Wyoming, Louisiana and Mississippi, have laws on the books that clearly tackle some of these issues.

The carbon sequestration industry has only just begun to take off, with numerous carbon sequestration projects waiting for EPA approval before their operators can begin construction. Only two states — North Dakota and Wyoming — can authorize permits for carbon dioxide sequestration wells. Projects in other states have to wait out the EPA backlog.

But when the federal government starts approving more of these projects — and gives more states the authority to permit them — project operators, landowners and oil and gas producers will begin to run up against a series of thorny legal issues.

“It’s a clusterfuck,” said Ted Borrego, an oil and gas industry lawyer and an adjunct professor of law at the University of Houston who teaches courses on advanced oil and gas contracts. “I hate to use legal language like that, but it gets into some oddball issues.”

The ownership issue

North Dakota has had carbon sequestration laws on the books since 2009, said Reice Haase, deputy director of the North Dakota Industrial Commission.

Those who own the surface land also own the pore space beneath, according to statute. Carbon sequestration project developers must receive approval from those that own 60 percent of the pore space by acreage.

That issue of ownership has bred some controversy among landowners, Haase said. One large landowner, for example, could own 60 percent of the land above a geologic formation that a project operator would like to use for carbon storage. That one person’s approval could greenlight the project, even if potentially dozens of landowners who own the remaining 40 percent don’t want carbon dioxide stored beneath their property.

“When we codified it originally in 2009, it wasn’t as controversial. It wasn’t until recently that landowners started speaking up,” he said. “It’s a landowner versus landowner issue.”

Some landowners have called for that 60 percent figure to be increased, Haase said. Wyoming requires approval from those that own 80 percent of acreage, while Texas’ proposed legislation would set that figure at 67 percent, revising it up from 60 percent after complaints.

Landowners have less of a say in some other states. Louisiana law authorizes carbon storage operators to exercise eminent domain “to acquire surface and subsurface rights” for their projects once they obtain state permits and a certificate of public convenience and necessity from the commissioner of the Office of Conservation.

Then there’s the issue of how carbon injection rights interact with mineral rights. For some pieces of property, one person may own the surface land while someone else owns the rights to extract minerals from beneath the ground. That mineral rights owner can lease those rights to companies to extract oil and gas or other minerals that have laid there for eons.

Issues of mineral rights are especially important in major energy-producing states such as Texas, Oklahoma and New Mexico.

In Texas, for example, mineral rights have almost always trumped landowner rights, Borrego said. Surface owners there cannot impede mineral rights owners from accessing what lies beneath the property and often are legally required to allow companies to construct well pads and pump jacks.

But Kentucky is the only state that specifies that mineral rights owners, along with surface owners, own a property’s pore space. Some Texas courts have found the same, although the issue of ownership remains unsettled there.

Some oil and gas companies argue that carbon dioxide injections could complicate or prevent their efforts to produce crude or natural gas.

Bruce Gates, founder and president of Ageron Energy, says carbon dioxide can quickly corrode even some of the strongest pipes used for extracting oil and gas. At one of his company’s wells in McMullen County, about 85 miles south of San Antonio, a mix of carbon dioxide and hydrogen sulfide chewed a large hole in a steel pipe with an inch-thick protection wall within 12 hours, he said.

He said when carbon dioxide mixes with ancient salt water deep underground, it can create corrosive carbonic acid. And the earth beneath much of Texas is full of the extra briny, ancient seawater.

Carbonic acid is “fairly weak” compared to other chemical compounds, like hydrochloric acid, but it alone can still cause corrosion issues with steel and polymers, said Hugh Daigle, a petroleum engineering professor with the University of Texas, Austin.

“This is certainly a concern for the injection wells where CO2 is actually being injected,” he said.

He said oil and gas companies have experience with carbonic acid, especially when they drill through earth that has already had carbon injected into it for enhanced oil recovery. The key to avoiding issues, Daigle said, is knowing carbonic acid is there and choosing the right drill bits, pipes and casings to try to mitigate corrosion.

That could be more difficult for smaller companies. Gates said it would be prohibitively expensive for his company to extract oil and gas from below pore space filled with CO2.

“Even with wells with 10 percent carbon dioxide, natural amounts, you have to do special stuff and use special pipe just to keep your pipe from being eaten up — and that’s with 10 percent,” Gates said. “With 100 percent? I can’t imagine.”

Oil and gas support

Still, Texas’ most influential oil and gas lobby — the Texas Oil and Gas Association — firmly supports laws they say will help to start and expand the carbon sequestration industry, as have other major oil and gas groups across the country.

Todd Staples, president of the Texas Oil and Gas Association, said the proposed Texas bill — S.B. 2107 — creates protections for mineral rights owners. It would require that CO2 storage “not endanger or injure any oil, gas, or other mineral formation in any material respect,” or that there be an arrangement between the carbon dioxide sequestration project operator and the mineral rights lessee or owner.

That regulatory certainty is needed for the industry to grow and flourish, Staples said. If there’s an absence of it in Texas, he said, carbon sequestration companies may look elsewhere for their projects.

“I talked to one company that is pursuing a project in Louisiana because they’ve already passed a regulatory framework and are providing certainty. Texas hasn’t,” he said. “Will some [projects] occur here anyway? Probably so. Will having a predictable and fair and equitable policy in place facilitate benefits to landowners and many others alike? I think so. Our goal is to not have the Texas economy miss out on the vast number of jobs this industry can bring to the state.”

Gates disagreed and said the statute flips the state’s long-held deference to mineral rights’ lessees and owners on its head.

“They want to support a fledgling industry that doesn’t exist yet, without regard to the money maker — the cash cow — that has made Texas as rich as it is,” Gates said. “I don’t think that’s intentional, but don’t think [lawmakers] have thought this through.”

But the oil and gas industry has a strong reason to support S.B. 2107: It sets a time limit on their liability for anything that goes wrong with CO2 sequestration wells.

The Texas bill would allow operators to pass on their liability to the state 10 years after their injections end. Similar laws are already in place in North Dakota and Wyoming.

Under S.B. 2107, Texas would require companies that sequester carbon dioxide to pay a fee per ton that would feed into a liability fund, which the state’s oil-and-gas regulator would use to remediate any issues or compensate anyone affected by problems.

Wyoming assumes ownership and liability 20 years after injections end, and North Dakota assumes that responsibility after 10 years. In both cases, companies must show their injection sites follow state laws, do not have issues of leakage and are in relatively good shape, among other stipulations.

‘Why hand it out?’

Environmental groups and landowners have raised concerns over the risk of injecting vast quantities of carbon dioxide deep underground. They point out that injections of this quantity and depth have never been done before — and that previous incidents relating to carbon dioxide transportation and injection prompt reasons for concern.

In February 2020, for example, a pipeline carrying compressed carbon dioxide mixed with hydrogen sulfide ruptured near the small town of Satartia, Miss. The gas released was heavier than air; a U.S. Department of Transportation investigation later found that the gas took longer than expected to dissipate because of weather conditions and topography.

Local first responders were unaware of the rupture but received reports of a “green gas” with a “rotten egg smell” overtaking the town. Two hundred people were evacuated, and 45 people were sent to local hospitals, including two people who initially “passed out” when they investigated the green plume near their home.

Federal investigators said the incident cost a total of $3.95 million for remediation, emergency costs and other expenses.

Scott Anderson, senior director of energy for the Environmental Defense Fund’s Texas branch, said his organization supports carbon capture and sequestration. But passing liability to the state could present more than legal problems, he said.

“We’re worried it will diminish public support for CCS,” he testified at a Texas Senate hearing on S.B. 2107.

Staples, of the Texas Oil and Gas Association, said incidents like the one in Mississippi are especially rare in carbon sequestration. For decades, companies across Texas and the country have injected carbon into existing oil wells to squeeze more oil out of the earth.

“The concerns about the safety of carbon dioxide storage are not substantiated with the facts and history of 50 years of success storing carbon dioxide,” Staples said. “I think the scientific review process is extensive and thoughtful, especially in the development of how the monitoring and oversight will occur.”

The wells used in enhanced oil recovery, however, are in shallower ground than those proposed for permanent carbon sequestration.

Watt, the West Texas rancher, is skeptical that companies or the state would be up to the task of remediating and investigating problems related to carbon dioxide sequestration.

Her property in West Texas is already home to a handful of orphaned wells and other previously plugged wells that she says have started to leak. Watt said the company that owns the plugged wells has unsuccessfully tried to get the Texas Railroad Commission — which oversees the state’s oil and gas industry — to fix them with public funds.

The Railroad Commission voted against fixing one of the wells last month after their inspector found no visual evidence of issues, rejecting soil samples collected by Watt and photos and videos she submitted showing the well leaking.

In Watt’s view, companies will pursue carbon sequestration — given the financial incentives — even if the state doesn’t promise to take over future liability.

“There’s going to be carbon sequestration in Texas, regardless of the long-term liability transfer,” Watt said. “So why hand it out?”

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