Texas Issues New Rules to Facilitate Greater State Control Over Carbon Capture Project Permitting

The Railroad Commission of Texas (RRC) recently finalized amendments to the state’s injection well permitting program for geologic sequestration of carbon dioxide. These amendments bring the Texas regulations closer in line with federal standards under the Safe Drinking Water Act’s Underground Injection Control (UIC) Program, administered by EPA. Closer alignment with EPA rules is expected to help expedite EPA’s processing of Texas’ forthcoming application for the RRC to take over primary enforcement authority (“primacy”) for carbon sequestration wells (known as “Class VI” wells in the UIC Program). Prior to approving Texas’ application, EPA must verify that Texas’ proposed program is no less stringent than federal standards—a process which can likely be accomplished more swiftly with regulations containing similar or identical language.

Application for Primacy

The Texas legislature initially mandated that the state pursue Class VI primacy when it established a permitting framework for carbon capture and sequestration (CCS) projects in 2009, see Senate Bill 1387, 81st Texas Legislature, R.S., 2009. Despite this mandate, little progress was made towards a Texas primacy application between 2009 and 2021, when the legislature again stepped in to give the RRC sole jurisdiction over onshore and offshore CCS projects, see House Bill 1284, 87th Legislature, R.S., 2021.

To implement HB 1284, the RRC in May of this year proposed the current regulatory amendments and submitted them to EPA along with a Memorandum of Agreement, Federal/State Regulatory Comparison, and Program Description. This package brought Texas into the “pre-application” phase of seeking Class VI primacy, where interested states may consult with EPA for guidance while preparing the remaining components of the primacy application. These components include certification by the Texas attorney general, a formal request letter from the Texas governor, and documentation of the state’s public participation process.

State primacy is quite common in the UIC program. A total of 43 states have primacy over at least one class of injection well, with 41 states holding primacy over oil and gas (“Class II”) wells and 31 states, including Texas, holding primacy for all classes of injection wells other than Class VI. However, to date only two states have obtained primacy for Class VI wells: North Dakota in 2018 and Wyoming in 2020. The process from application to approval took five years for North Dakota, while Wyoming’s application was approved in just over nine months. Louisiana has had a Class VI primacy application pending since April 2021, and delays in the processing of Louisiana’s application have resulted in high-level political involvement, including disruption of Senate confirmation for EPA nominees. Texas joins West Virginia and Arizona as states currently in the “pre-application” phase.

Primacy may benefit states seeking to scale up CCS development because it could lead to expedited approval of injection permits, and allows states to specifically tailor permitting requirements so long as they meet federal minimum standards. Since the Class VI program was established in 2010, EPA has issued permits to only two applicants nationwide, with approval taking 26-40 months. In comparison, North Dakota—which received its first permit application in 2021—has already issued permits to two applicants and published a draft permit for a third.

Obtaining primacy would also unlock federal funding for the state. The 2021 Infrastructure Investment and Jobs Act appropriated $50,000,000 in grant funding to states with Class VI primacy to assist with the costs in establishing and operating a state UIC program.

States Leading the Way

The Texas regulatory amendments are the latest in a flurry of state-level activity to support development of CCS projects. So far in 2022 Indiana, West Virginia, Utah, and California have enacted significant new CCS legislation, while Wyoming adopted substantial amendments to its existing CCS statute. Significant state-level activity in this field is likely to continue in the near future, especially as the industry reacts to recent expansions of federal tax credits for CCS and other incentives in the Inflation Reduction Act.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.