State Action on Carbon Capture Continues in Louisiana, Arkansas, Colorado, and Wyoming

Several states have taken significant actions to further develop their legal frameworks for carbon capture and sequestration (CCS) in the first half of 2023. This post provides updates on Louisiana, Arkansas, Colorado, and Wyoming. More detailed information on state CCS legislation is available on Arnold & Porter’s state-by-state CCS tracker, a collaboration with Columbia Law School’s Sabin Center for Climate Change Law.

Louisiana Amends Existing CCS Framework

Louisiana has been extremely active in 2023. In May, EPA proposed to approve Louisiana’s long-pending application to assume primary enforcement authority (primacy) for CCS projects under the federal Underground Injection Control (UIC) program. Once finalized, this shift is expected to accelerate the processing of over 30 Class VI permits pending in Louisiana. Meanwhile, the Louisiana legislature made several noteworthy amendments to its statutory framework for CCS this session. These include:

• Requiring Class VI permit applicants to complete and submit an environmental analysis, including a cost-benefit analysis, review of alternatives, and identification of mitigation measures
• Introducing new reporting requirements on owners or operators, including quarterly reports and a requirement to notify the state within 24 hours of any malfunctions, endangerment of drinking water, or failure to maintain mechanical integrity
• Extending the default period in which the owner or operator retains liability for a closed storage facility from 10 years to 50 years, introducing new environmental criteria for liability to be transferred to the state, and exempting from state transfer any liabilities that arise from noncompliance with injection regulations
• Adding notice requirements to inform parish officials of Class VI applications
• Adjusting the process for the State Mineral and Energy Board to engage in CCS operating agreements, and how any revenues from such agreements will be distributed among state agencies

In addition, a number of proposals designed to block or hinder CCS development were rejected by the legislature, including bills which would have prohibited on-shore CCS, prohibited CCS in certain parishes, removed eminent domain authority for CCS operators, and required a parish election to approve any CCS projects.

Arkansas Expands Underground Gas Storage Statute to Include Carbon Oxides

Arkansas has adopted a more limited approach to regulating CCS activity. Unlike Louisiana, which established a comprehensive legislative framework for CCS, Arkansas has expanded an existing law regulating the underground storage of natural gas to now regulate carbon oxides as well. This expansion is still significant, as it now authorizes CCS operators to exercise eminent domain authority to acquire property for a storage facility. The approach taken by these Arkansas amendments also mirrors legislation enacted in Alabama last year.

Colorado and Wyoming Reach Bipartisan Governor’s Agreement Promoting Direct Air Capture

At the annual meeting of the Western Governors’ Association, Governors Mark Gordon (R-WY) and Jared Polis (D-CO) announced a memorandum of understanding (MOU) to promote the direct air capture (DAC) industry across their states. DAC is a subset of CCS technologies, which capture emissions directly from the ambient atmosphere rather than from a specific emissions source. The MOU highlights the states’ unique and complementary capabilities for developing a regional DAC hub, including suitable geology, early-stage investment, established clean energy policies, and a workforce skilled in the necessary fields. The MOU also commits the states to collaborating on DAC-related funding awards from the U.S. Department of Energy, identifying infrastructure needs and potential future markets for the DAC industry, developing standards to measure sequestration, and empowering local, tribal, and state stakeholders as the DAC industry develops.

For Colorado, the governor’s agreement follows a more lukewarm endorsement of CCS by the state legislature. In January, the Colorado Oil & Gas Conservation Commission (COGCC) published a comprehensive legislative proposal which recommended clarification of pore space ownership, a process to aggregate ownership interests, a long-term stewardship process to transfer ownership and responsibility of closed CCS facilities to the state, environmental justice protections, and initiatives to coordinate siting of carbon dioxide pipelines. But the legislature declined to enact such a wide-ranging framework this session, instead passing a much more limited bill that authorizes COGCC to seek Class VI primacy, but leaves unaddressed many key questions for CCS development.

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Arnold & Porter is closely monitoring state legal developments regarding CCS. For more information on any of the issues discussed above, please visit Arnold & Porter’s state-by-state CCS tracker, hosted by the Columbia Law School’s Sabin Center for Climate Change Law, or contact any of the attorneys listed on this Advisory.

© Arnold & Porter Kaye Scholer LLP 2023 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.