Current Administration and congressional climate proposals depend heavily on geological sequestration to reduce CO2 emissions from coal-fired power plants and other major sources and tend to presume that sources in every state will have access to nearby underground storage capacity.  This is the third post in a three-part series reviewing obstacles to a 50-state sequestration strategy and suggesting the need for a national infrastructure to support medium to long-range transport of CO2.

• Part 1: The Porosity Problem
• Part 2: Not Under My Back Yard (NUMBY)

Part 3: 50 States, 50 Hurdles

A fifty-state sequestration strategy will require not only state-by-state access to geologically-suitable subsurface storage capacity and some minimum level of buy-in from state residents and property owners , but also state and municipal governments to codify, fund and implement the supporting legal, regulatory and oversight infrastructure needed to regulate long-term underground injection and storage as an approved land use.  While many state and local governments are struggling to manage and maintain their existing portfolio of governmental functions (issues like healthcare, education and core environmental programs), some are likely to balk at advancing carbon capture and sequestration (CCS) policy to the front of their legislative and regulatory agendas.  At a May 2009 hearing by the Senate Energy and Natural Resources Committee, a  Wyoming state legislator, reflected some of the issues states face in regulating the carbon capture and sequestration industry.  These comments may be particularly trenchant given that Wyoming is one of the first states to codify a comprehensive CCS legislative framework—

• Ownership of pore space as a distinct property right.  Most states have well-established rules relating to allocation of ownership of surface rights versus mineral rights at a given site, a function of the country’s long history of extractive industry (mining, oil and gas production, etc.).  Geologic sequestration introduces a different and less common subsurface property interest-interest in underground pore space as a storage commodity.
• Dominance of surface, mineral, and pore space estates.  Just as the interests of surface property owners and mineral right owners can sometimes clash, the addition of a third form of property right creates the need for rules of priority- particularly between the interests of mineral right owners and pore-space owners
• Site Permitting and Regulation.  EPA is currently establishing federal regulations for underground injection and sequestration of CO2 under its Safe Drinking Water Act authority.   EPA has acknowledged, however, that it lacks authority to address all issues raised by CCS.  Moreover, even recent legislative proposals that would augment EPA’s authority may not address siting issues subject to state and local jurisdiction. 
• Long-term liability for sequestered carbon.  The issue of financial and legal liability for the site, particularly during the decades or centuries after a CCS project has ceased active operations, is currently unresolved.  EPA has ignored the issue in the context of its federal rulemaking, citing a lack of authority.  Given the long time horizon of sequestration storage (centuries to millennia absent development of new uses for sequestered CO2), the prospect of unlimited liability for future problems is a significant source of uncertainty and risk for project managers and host states. 
• Unitization standards or eminent domain.  Liquid CO2, once injected into subsurface pore space, does not respect legal boundaries and ownership divisions.  To address situations where site developers are unable to negotiate terms with other affected subsurface pore space owners to support a project, governments need to establish procedures for unitizing or pooling groups of properties and the associated property interests to accommodate the subsurface scope of a project-sometimes against the objection of some owners. 

While Wyoming has been a leader in the development of CCS-related legislation, it is not the only state addressing these issues.  Recent studies by the National Conference of State Legislatures and the  Interstate Oil and Gas Commerce Commission  reported that at least 31 states were considering legislation addressing CCS issues.  To date, however, only a handful have put actual legislative or regulatory standards in place, including Kansas, Massachusetts, North Dakota, Oklahoma, Texas, Utah and Washington.  (Illinois, home to the recently reinstated FutureGen project, recently passed new CCS legislation that was sent to the governor for signature on June 26, 2009).

Oil and gas states have lead the effort to develop state sequestration policies.  States with well-developed oil and gas industries have numerous advantages when it comes to crafting state and local CCS policies.  Existing oil and gas laws provide policymakers with a starting point, if not a template, for sorting through complicated issues of property ownership, liability and land-use management raised by CCS.  Oil and gas states are more likely to have encountered and considered some of the unique policy associated with underground CO2 injection in the context of already-occurring enhanced oil or gas recovery activities or natural gas storage within their borders.  This experience and familiarity with subsurface property rights and responsibilities, at both the voter and policymaker level, may reduce the political complexities of introducing a new layer of rights and obligations.  Finally, oil and gas states, as natural homes for future geologic sequestration projects, likely see a greater value in developing the regulatory infrastructure needed to support what may become an important new industry, particularly as their oil and gas reserves dwindle.

The lack of CCS standards or experience with the types of issues faced in the other states shows a flaw in the assumption that each state will be ready to attend to its own geologic sequestration needs any time soon.   State lawmaking and regulatory processes can be time-intensive, especially where the public’s attitude is mixed regarding a potential policy.   Indeed,  states like California and New York may face particular challenges in developing legislation and in promulgating implementing regulations due to the extensive public participation and environmental review requirements established under state law.   

Moving Forward

Ultimately, the challenge in a 50-state sequestration strategy will not be spurring the first 10 to 20 states to action-that is already happening, in part because these states see economic benefits to being early movers.  The challenge will be in making the last10 to 20 states CCS ready.  The natural variability of carbon storage potential from one region to another, and the political and legal practicalities of siting and regulating CCS facilities, suggest that not all states will have local CO2 storage infrastructure, at least at a cost and/or a time-frame needed to meet proposed emissions reduction goals.  If policymakers want to rely on carbon capture and storage mandates as part of a nation-wide strategy to reduce CO2 emissions, medium to long-distance transport of the captured CO2 is certain to be a necessary component.  CO2 transport policy can no longer be ignored in the unfolding energy and climate debate. 

For further information about this topic, please contact Akin Gump.