Louisiana Is About to Become a CCUS Hotspot? Probably, not so fast
In late April, the Environmental Protection Agency (EPA) announced its preliminary approval of Louisiana’s application for primacy over Underground Injection Control (UIC) program that would allow the Louisiana Department of Natural Resources (LDNR) to issue Class VI well permits. Upon the completion of public consultations and processing of comments, the EPA would be ready to issue a final rule, likely in the second half of 2023. The move will significantly streamline regulatory procedures and enable shorter timelines for carbon storage project approvals. However, there are growing concerns about the impacts of CCUS projects on the environment and local communities, which prompted lawmakers to introduce legislation that would tighten the regulatory framework for carbon storage in the state.
Local opposition persists
Under the Climate Action Plan, adopted in Louisiana in 2022, CCUS is an integral component of the state’s strategy to cut emissions from existing industrial facilities and from new low-carbon projects, such as blue hydrogen and ammonia plants. However, while the authorities are committed to developing a new industry, the residents of the parishes, where proposed projects would be located, are wary of their effects on the environment. The project at the center of the public debate is the $4.5-billion Louisiana Clean Energy Complex by Air Products that would produce hydrogen from natural gas and sequester 95% of associated CO2 emissions under Lake Maurepas. The opposition is driven by concerns about the safety of the proposed storage facility and overall project’s impact on the ecosystem of the lake and the livelihood of the locals. In October 2022, the council of rural Livingston Parish approved a one-year moratorium on well-drilling and seismic testing on its territory, effectively blocking the company’s access to Lake Maurepas. Air Liquids successfully challenged the moratorium in the Middle District Court of Louisiana, which granted the company a preliminary injuction against the council’s decision in December 2022.
To address mounting concerns about the safety of the storage facility and carbon dioxide pipelines, Air Liquids initiated meetings with the residents of affected parishes to provide more information about the project. However, activist groups continue to question the environmental impacts of the potential carbon transportation and storage infrastructure, and recently announced projects are likely to face similar challenges. Those include blue ammonia plant in Donaldsonville, Louisiana by CF Industries, and a storage project 29 km north of Lake Maurepas by Oxy Low Carbon Ventures, which would ensure geologic sequestration of CO2 captured from multiple industries along the Gulf Coast. The scale of the backlash against proposed projects suggests a higher degree of litigation risk at any subsequent stage of project development in the absence of a robust public awareness campaign, benefit-sharing agreements, and regulatory action to reinforce safety controls.
Proposed legislation could pose obstacles to carbon storage
Currently, there are eight House bills in the Louisiana State Legislature that are intended to address the concerns of the local residents. House Bill 571 would amend the 2009 Geologic Sequestration of Carbon Dioxide Act by changing the timeline of a certificate of completion issuance from 10 to 50 years after the cessation of CO2 injection, significantly extending an operator’s liability period to monitor and control the storage facility. In addition, the proposed legislation would establish a revenue-sharing mechanism, according to which 30% of revenue would be remitted to the Mineral and Energy Operation Fund; another 30% to the affected parish (if there is more than one parish, the funds would be distributed proportionally to the amount of property located in each parish); and the rest of revenue would be sent to the general fund. Moreover, the state government would be obligated to notify parish authorities whenever a company applies for a Class VI permit, and public hearings would be organized in each parish that could be affected by a proposed project.
Three other bills, if passed, would be particularly burdensome for carbon storage project operators and are likely to erode any competitive advantage that Louisiana would obtain from having Class VI primacy. House Bill 454 would require any CCUS project proponent to submit an application to the parish government, which would organize a referendum to decide whether the proposed project should move forward; the company would also cover the cost of the referendum. In the meantime, House Bill 312 would remove statutory cap for liability claims against CCS entities and impose strict liability for all damages. Under the existing legislation, companies can be liable for up $500,000 in damages per incident if it involves wrongful death or serious physical injury, and the draft law would eliminate this limitation. Furthermore, House Bill 308 would require the preparation of an environmental impact statement (EIS) for drilling a Class VI well or building a CO2 pipeline under Lake Maurepas or in the Maurepas Swamp Wildlife Management Area. This specific provision would likely result in project delays, given the scale of the analysis necessary to complete an EIS.
Three other bills under consideration would impose different types of restrictions that could affect the development of CCUS projects in Louisiana. House Bill 10 would remove the authority of CO2 storage facility operators to use eminent domain to acquire property rights or rights without the property owner’s consent. The proposal is not unique for Louisiana as the use of eminent domain represents a significant concern for landowners across multiple states with potential CO2 pipelines, yet the latest legislative efforts to limit this right failed in Iowa, North Dakota, and South Dakota. In addition, there is a proposed complete ban on carbon storage projects in the St. Helena Parish (HB35), and a 10-year moratorium (HB267) on the construction of carbon storage facilities or CO2 pipelines on or beneath Lake Maurepas and the Maurepas Swamp Wildlife Management Area.
Finally, House Bill 435 would require carbon capture projects to store CO2 beneath the Gulf of Mexico, which essentially means that the industry in Louisiana would depend on the ability of the federal government to implement offshore carbon storage regulations and process project applications in a timely manner. The state authorities will likely be able to facilitate offshore storage projects in the three-mile area, which falls within their jurisdiction. Unless there is enough storage capacity in state waters, the operators would have to rely on storage projects in the neighboring states, which would likely entail the construction of extensive CO2 pipeline networks.
The number of the CCUS-related legislative proposals indicates that the public campaigns organized by activist groups are somewhat successful as they have drawn the attention of lawmakers. It is unlikely that all the bills will be passed, but CCUS developments are likely to remain a high-profile issue in the public space, and the risk of legislative and regulatory changes is expected to remain elevated over the medium term.