POWER February 2022 - 29

CARBON CAPTURE & SEQUESTRATION
California, Louisiana, and North Dakota,
this is well short of the 29 projects that
EPA anticipated in 2010 based on thenexisting
climate policies.
Project Development Takes Time
Several hurdles continue to
slow the
implementation of carbon sequestration
in the U.S. First, acquiring the subsurface
rights to sequester CO2
underneath
hundreds and thousands of acres can
be difficult and time-consuming. Without
a way to deal with potential property
owner holdouts, such as through eminent
domain or compulsory unitization or
amalgamation, a single property owner
can effectively stop a project from moving
forward. Some states have taken action
to address this issue. North Dakota,
for example, enacted legislation in 2009
under which the North Dakota Industrial
Commission (NDIC) can amalgamate
unwilling landowners if the owners of at
least 60% of the subsurface to be utilized
for sequestration have consented. Last
year, the NDIC approved the first amalgamation
for carbon sequestration. Enacting
such processes in other jurisdictions is
critical for advancing CCS in a timely way.
Projects in the western U.S. will likely
encompass property owned by the federal
government, which includes nearly
half the land in that region. In 2011, the
U.S. Bureau of Land Management (BLM)
issued guidance for authorizing site characterization
work for carbon sequestration
projects on federal lands within its
jurisdiction. However, that guidance has
expired, and the more critical piece-
the path for authorization of actual carbon
sequestration as opposed to just
site characterization work-was never
addressed by the BLM. While these
uncertainties are not insurmountable,
uncertainties discourage private investment
and tackling them will take time,
which is in short supply with respect to
2050 net-zero goals.
In addition to acquiring the rights for
the sequestration site itself, rights-ofway
will be needed to transport the CO2
from sources to the sequestration sites.
More than 4,000 miles of CO2
pipelines
already exist in the U.S., primarily to
transport CO2
for purposes of enhanced
oil recovery. More pipelines will be needed
to realize net-zero emissions goals,
but unlike siting natural gas pipelines,
there is no federal authority for siting
CO2
pipelines. While such siting authority
is not without its own issues, when
accompanied by the ability to acquire
rights-of-way through eminent domain, it
February 2022 | POWER
can be vital to moving projects forward
in a timely way.
Unfortunately, acquiring the necessary
property rights for a sequestration
project is not the only significant hurdle
to broadly using carbon sequestration to
help achieve 2050 net-zero goals. Permitting
timelines for carbon sequestration
projects are also not well-aligned with
that 2050 timeline. For example, just two
states-North Dakota and Wyoming-
have primacy with respect to the Class
VI wells (Louisiana has a pending application
with the EPA). As a result, the EPA
presently is responsible for permitting
Class VI wells in every state other than
North Dakota and Wyoming.
Federal permitting (including authorizations
to use federal land) involves a host
of federal environmental statutes, such
as the National Environmental Policy Act
(NEPA). While the review processes required
by those statutes are not without
merit, they can take an inordinate amount
of time. For example, according to information
released by the Council on Environmental
Quality last year, the average
time to complete the environmental impact
statement process under NEPA is
four and a half years, with it commonly
taking more than six years. Years spent
in permitting is not a luxury that a 2050
net-zero goal-to say nothing of more
immediate goals-can afford. The recent
Infrastructure Investment and Jobs Act
included provisions to expedite federal
permitting of " major projects. " Streamlining
permitting on both federal and state
levels for climate change critical projects
should be a key priority.
Financial Incentives Available
Although site acquisition and permitting
timelines remain key hurdles, significant
progress has been made in the last few
years with respect to tax and regulatory
financial incentives for carbon sequestration.
In 2008, Congress enacted Section
45Q of the Internal Revenue Code, which
provided a $20 federal income tax credit
for every metric ton of CO2
sequestered
for purposes not related to enhanced oil
recovery. However, in the decade that
followed, Section 45Q tax credits were
generated only in connection with enhanced
oil recovery, even though that tax
credit was half as much. In the last few
years, Congress has sweetened the Section
45Q pot for geologic carbon sequestration
in several ways. The tax credit has
been increased to $50 starting in 2026,
and smaller projects can take advantage
of the tax credit, provided that construcwww.powermag.com
2.
California's greenhouse gas emissions
have decreased over the past decade, but
the state will not meet its net-zero goals on
schedule if the current trend continues. Courtesy:
Stoel Rives
tion commences by the end of 2025. (A
further supplement is possible but uncertain
as of early January when this article
was written, as both the Build Back
Better Act approved by the U.S. House of
Representatives and the Senate Finance
Committee's version would further enhance
the Section 45Q tax credit and
push out the construction commencement
deadline to the end of 2031.)
Carbon sequestration became a tool
under California's Low Carbon Fuel Standard
(LCFS) when CARB issued its CCS
protocol in 2018 to facilitate incorporating
carbon sequestration into fuel production
under the LCFS. Prices for California LCFS
credits, which refineries use to achieve
compliance with the LCFS program and
reflect one metric ton of reduced emissions,
averaged $199 in 2020. There is
a longtail cost for carbon sequestration
projects to participate in LCFS credit generation,
namely a monitoring obligation
that stretches for 100 years after injection
ceases, but CARB's CCS protocol has
helped stoke CCS development interest
that was previously rather dormant.
With carbon sequestration projects
being permitted and developed in California,
Louisiana, and North Dakota, carbon
sequestration is moving forward in
the U.S. notwithstanding these site acquisition
and permitting timeline hurdles.
However, as the broad utilization of carbon
sequestration is critical to realizing
net-zero emissions by 2050, removing
or lowering these hurdles is a climate
imperative that policymakers on both
federal and state levels need to consider
and take action to address. ■
-Eric L. Martin is a partner with Stoel
Rives focused on natural resource
development with an emphasis on
property issues and transactions.
Michael N. Mills is a partner with Stoel
Rives focused on oil and gas, environmental,
land use, regulatory compliance, property
tax, and litigation matters.
29
http://www.powermag.com
POWER February 2022

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