Carbon Sequestration

Carbon Sequestration SSL Draft

The SSL Committee published a draft of Wyoming Chapter 30 of 2008 about Carbon Sequestration in the 2010 SSL Volume. This draft Act expands upon the Wyoming legislation by including eminent domain provisions about construction and operation of such a facility, including installation of pipelines to transport carbon dioxide. This Act also addresses long term liability by transferring ownership of such facilities to the state 10 years (or other time period adopted by rule) after a facility closes. Finally, the Act establishes a Carbon Dioxide Geologic Storage Trust Fund, funded by fees and penalties, to provide for long-term operation and maintenance of facilities.

This draft Act is based on Louisiana Act 517, which, in turn, was based on model legislation proposed by the Interstate Oil and Gas Compact Commission ("IOGCC"), as modified to fit the state‘s regulatory structure and other existing legislation. Significant facets of the Act are as follows:
  • The Act treats CO2 not as a waste, but as a commodity;
  • The Act is drafted in broad terms and grants the Commissioner of Conservation jurisdiction over "all persons and property necessary to administer and enforce effectively the provisions concerning geologic storage of carbon dioxide;"
  • The Act grants permitting authority to the state regulatory agency for the purpose of regulating the facility and protecting against CO2 pollution or migration; and
  • The Act empowers a storage operator, after obtaining approval from the state regulatory agency, to exercise the right of eminent domain in order to acquire all surface and subsurface rights necessary for the operation of the storage facility.
This Act provides for policy and jurisdiction of the commissioner of conservation over the geologic storage and withdrawal of carbon dioxide. The Act authorizes the state commissioner of conservation to do the following:
  • regulate the storage of carbon dioxide and the transmission of carbon dioxide to such storage facilities;
  • issue certificates of public convenience and necessity for such facilities and associated pipelines;
  • adopt rules, regulations, or orders to prevent the escape of carbon dioxide into other strata; to prevent the pollution of fresh water by oil, gas, salt water or carbon dioxide;
  • provide for closure of abandoned wells;
  • make inquiries, investigations, and inspection and take such actions that are necessary to enforce new law;
  • make drilling records;
  • take steps to prevent blowouts, caving, and seepage;
  • identify ownership of wells used in the storage or transportation of carbon dioxide;
  • regulate conversion of recovery operations to storage facilities;
  • require the placement of meters to prevent waste;
  • require closure of abandoned or unused sites; and
  • adopt rules and regulations to collect fees.
This draft legislation provides that only a storage operator is responsible for performance required by the Act. The Act generally provides that the injected carbon dioxide will "at all times be deemed the property of the party that owns such carbon dioxide, whether at the time of injection, or pursuant to a change of ownership by agreement while the carbon dioxide is located in the storage facility…and in no event shall such carbon dioxide be subject to the right of the owner of the surface of the lands or of any mineral interest therein…." This generally occurs ten years after the cessation of injection operations, unless a different time period is specified in the rules. At such time, the commissioner will issue a certificate of completion of injection operations, upon a showing by the storage operator that the reservoir is reasonably expected to retain mechanical integrity and the carbon dioxide will reasonably remain emplaced. Upon issuance of the certificate, both liability for, and ownership of, the remaining project, including the stored carbon dioxide, transfers to the state.
 
The legislation provides that prior to using a reservoir and prior to the exercise of eminent domain the commissioner shall have a hearing and find that such use is suitable and feasible; will not contaminate other formations containing fresh water, oil, gas, or other commercial mineral deposits; and will not endanger lives or property. It provides that no reservoir or any part of which is producing or is capable of producing oil, gas, condensate, or other commercial mineral in paying quantities, shall be subject to such use, unless all owners have agreed to the use. It provides that no reservoir shall be subject to such use unless either the volumes of original reservoir gas and condensate content therein which are capable of being produced in paying quantities have all been produced or such reservoir has a greater value or utility as a reservoir for storage, and at least three-fourths of the owners have consented to such use in writing. If the commissioner finds that a proposed reservoir has not been fully depleted of commercially recoverable hydrocarbons, the commissioner shall determine the amount.

The Act authorizes the commissioner to issue orders to ensure that carbon dioxide reduced to possession and then injected into such a reservoir remains the property of the owner of the carbon dioxide, not the surface or mineral rights owner, and to issue orders to protect the reservoir.
 
The Act directs the commissioner to issue a compliance order or commence a civil action for violations of the Act. Compliance orders must state with specificity the nature of the violation, a time for compliance and, in the event of noncompliance, assess a civil penalty. The civil penalty may be no more the $5,000 per day per violation. No penalty may be assessed until the violator has been give notice and an opportunity to respond. The commissioner or, if requested, attorney general shall prosecute all civil cases arising out of a violation of new law.

This Act authorizes the commissioner to issue certificates of public convenience and necessity or certificates of completion of injection operations after a public hearing.

The Act provides that it shall not cause any storage operator or carbon dioxide transmitter to become, or subject to the duties, liabilities, or obligations of, a common carrier or public utility or increase their tax liability absent a change in existing law.
 
The Act authorizes a storage operator that has been issued a permit and a certificate of public necessity to exercise eminent domain to construct, operate, and modify a storage facility or lay, maintain, and operate pipelines for the transportation of carbon dioxide to storage, "including but not limited to surface and subsurface rights, mineral rights, and other property interests necessary or useful for the purpose of constructing, operating, or modifying a carbon dioxide facility." However, as a condition precedent, the commissioner, must have determined that the reservoir sought to be used is suitable and feasible for such use and meets all regulatory requirements after public hearing in the parish where the facility is to be located. The eminent domain authority is to be exercised pursuant to the procedures found in existing law. The legislation provides that the commissioner is not a necessary or indispensable party to an eminent domain proceeding and has the right to be dismissed at the expense and cost of the party that named the commissioner.
 
As mentioned above, this Act provides that after 10 years, or other time established by rule, after cessation of operations the commissioner shall issue a certificate of completion of injection operations by showing the reservoir is expected to retain integrity, at which time
ownership is transferred to the state and the storage operator and all generators of the carbon dioxide shall be released from any and all duties under new law and any and all liability. However, the Act directs that the last operator or owner shall not be released of liability if a Carbon Dioxide Geologic Trust Fund has been depleted. The last operator liability can avoid liability if a Site Specific Trust Fund is established. Such release of liability shall not apply to any such owner, operator, or generator that intentionally and knowingly concealed or misrepresented material facts related to the integrity of the storage facility or composition of any injected carbon dioxide. The legislation directs that after issuance of the certificate of completion of injection operation any performance bonds shall be released and the monitoring or remediation of the site shall become the responsibility of a Carbon Dioxide Geologic Storage Trust Fund.
 
This Act provides that the state shall not assume or have any liability by the act of assuming ownership of a storage facility after the issuance of the certificate of completion of injection operations. It limits the civil liability of an owner or operator of a storage facility or such transmission pipeline, or generator of the carbon dioxide for non-economic damages to $250,000 per occurrence; however, in an action for wrongful death, permanent and substantial physical deformity, loss of use of limb or organ systems; or permanent physical or mental injury that prevents independent care and prevents life-sustaining activities non-economic damages shall not exceed $500,000. If the liability caps provided for in the Act are found unconstitutional, such damages shall not exceed $1,000,000.
 
The Act directs the commissioner to levy a per tonnage of carbon dioxide stored fee on operators up to a maximum of $5,000,000. The rate of collecting the fee shall be determined by the commissioner based on the formula F x 120 < M, where "F" is the per unit fee, "120" is the minimum number of months over which the fee is collected, and "M" is the maximum payment of $5,000,000. The commissioner shall suspend the collection of the fee once the storage operator's balance in the fund equals $5,000,000 and will resume once the balance falls below that amount. It provides for a regulatory fee payable to the commissioner in the form and schedule set by the commissioner not to exceed $50,000 for FY 2010-2011 and thereafter. The Act provides for an application fee in the form and schedule set by the commissioner not to exceed 8½% above the amount charged on July 1, 2010.

The Act provides for the following uses of the Fund:
  • operational and long-term inspecting, testing, and monitoring of sites;
  • remediation of mechanical problems associated with remaining wells and surface infrastructure;
  • repairing mechanical leaks;
  • administrative cost of the commissioner not to exceed $750,000 per year;
  • payment of fees and cost associated with site specific accounts; and
  • payments of fees and cost to acquire insurance
This Act authorizes the commissioner to enter into agreements and contracts for the following purposes:
  • research and development in carbon sequestration technology and methods;
  • monitor sites;
  • remediate mechanical problems;
  • repair leaks; and
  • contract with a private legal entity.
The legislation directs the commissioner to keep an accurate accounting of the Fund and to report to the legislature about effectiveness of the Fund and the program.

The Act also provides for site-specific accounts that are established for long-term maintenance and restoration when a storage facility is transferred from one party to another.
 
Submitted as:
Louisiana
Status: Enacted into law in 2009.
 

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