Carbon capture, sequestration, utilization, and storage (CCUS) will be essential in meeting the Biden administration’s net zero GHG emission goals, as the chair of the White House Council on Environmental Quality (CEQ) acknowledges that “[t]o reach the President’s ambitious domestic climate goal of net-zero emissions economy-wide by 2050, the United States will likely have to capture, transport, and permanently sequester significant quantities of carbon dioxide.” 87 Fed. Reg. 8808 (Feb. 16, 2022). Congress and the Biden administration have taken actions to support CCUS deployment. With the bipartisan Infrastructure Investment and Jobs Act (IIJA), Congress signaled strong interest in accelerating CCUS as a national decarbonization strategy by providing billions of dollars of new investments to support the industry. Building on this strategic commitment, CEQ recently issued new guidance on the responsible deployment of CCUS technologies, including direction on incorporation of environmental justice and equity considerations, meaningful public engagement and Tribal consultations, and support for union-job creating projects. Additionally, the Environmental Protection Agency (EPA) is developing proposed rule revisions to improve transparency on CCUS activities, the Department of Energy (DOE) is committing $5 million for university training and research related to carbon management, and the Federal Permitting Improvement Steering Council is facilitating a collaborative CCUS project review among its member agencies.
Nonetheless, CCUS projects still face several regulatory obstacles in the United States. There are no CCUS-specific federal environmental laws or regulations, but instead the precise mix of environmental permits and reviews needed for a particular project must be determined by the project-specific details. Below we highlight some of the major federal environmental laws that may apply to CCUS projects.
- National Environmental Policy Act (NEPA) – NEPA requires federal agencies undertaking a “major Federal action” to evaluate the environmental effects of the action. The policy goals of NEPA are achieved through “‘action-forcing’ procedures that require that agencies take a ‘hard look’ at environmental consequences.” Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 350 (1989). CCUS projects with a federal nexus (e.g., federally funded or occurring on federal lands) may trigger NEPA. CCUS projects in the United States may receive federal funding, whether they are in development or fully operational. NEPA is triggered if federal funding involves significant federal control or influence over the use of funds. However, CCUS projects with minimal federal funds and no agency control over the project’s outcome are not subject to NEPA. DOE takes the lead on NEPA for many CCUS projects in the United States due to the agency’s primary role in CCUS project funding.
Recently, the federal government has taken actions to facilitate NEPA reviews for CCUS projects. On February 16, 2022, the CEQ published in the Federal Register new interim guidance that the White House said is intended to “facilitate sound and transparent environmental reviews for CCUS projects.” The guidance builds on CEQ’s June 2021 CCUS report, and, among other things, it “encourages agencies to prepare publicly available life cycle analyses of carbon capture and utilization and carbon dioxide removal projects.” Whether the guidance creates efficiencies or delays is yet to be seen.
Importantly, CEQ’s NEPA regulations are in flux. On April 19, 2022, CEQ published the first of two phases of rulemakings to reform and modernize its NEPA regulations. CEQ’s first regulation undoes some of the key changes put in place in 2020 under the former administration, authorizing federal agencies to more broadly consider the effects of major federal projects. CEQ has not clarified whether the revised regulations will require agencies to adjust current NEPA reviews but instead stated that “agencies have sufficient discretion to apply their existing NEPA procedures in a manner not inconsistent with CEQ’s regulations.” CEQ also noted that the “rule will not delay any projects or reviews underway and will not add time to the NEPA process.” That being said, at this point, it is unclear how CEQ’s new NEPA regulations will impact future CCUS projects. CEQ’s second NEPA regulatory revision is expected later this year, which could further muddy the water.
- Clean Water Act (CWA) – To protect the nation’s waters, the CWA requires a National Pollutant Discharge Elimination System (NPDES) permit before any pollutant can be discharged from a point source into a water of the United States. CCUS projects will require NPDES permits to discharge process wastewater or stormwater associated with the projects. In addition, pursuant to Section 404 of the CWA, the Army Corps of Engineers issues permits for discharge of dredge or fill materials into jurisdictional waters. Section 404 requires a permit for any utility line crossing that requires the discharge of dredge or fill materials into US waters. This includes “any pipe or pipeline for the transportation of any gaseous, liquid, liquescent or slurry substance for any purpose.” Therefore, a Section 404 permit (general or individual) may be required for a CCUS project or pipeline that is close to or crosses water or wetlands.
- National Historic Preservation Act (NHPA) – The NHPA and its implementing regulations require federal agencies to consider the effects of their federal and federally assisted or licensed “undertakings” on historic properties, which is broadly defined. If the lead agency determines that a CCUS project is the type of activity that has the potential to effect historic properties, then it must consult with the appropriate State Historic Preservation Office, Tribal Historic Preservation Office, and any Indian tribe that attaches religious and cultural significance to identified historic properties. Similar to NEPA, the obligations under the NHPA are generally procedural in nature and are aimed at consultation to avoid or mitigate impacts from the proposed projects.
- Endangered Species Act (ESA) – The ESA is a substantive statute designed to protect from extinction species that are designated as threatened or endangered and their designated critical habitat. CCUS projects may require certain ESA consultations to review any potential impacts to protected species and their critical habitat. If the project has a federal nexus, the ESA requires the lead federal agency to ensure that its actions are not likely to jeopardize the species or adversely modify its critical habitat. Section 7 of the ESA requires that the agency consult with the US Fish and Wildlife Service or the National Marine Fisheries Service (depending on the species impacted) to determine the impacts of the CCUS activity on protected species or their critical habitat. If there is not a federal nexus, CCUS project proponents may be required to consult with the US Fish and Wildlife Service or the National Marine Fisheries Service under Section 10 of the ESA and may be required to develop a habitat conservation plan.
- Clean Air Act (CAA) – Depending on their size and location, CCUS projects may have to obtain certain CAA permits. A CAA Title V operating permit is required for a “major source,” which has actual or potential emissions at or above the major source threshold for certain air pollutants. The Title V operating permit generally does not add new requirements for the facility but instead contains emission limitations and other conditions to assure compliance with all CAA requirements, and it requires that certain procedural requirements be followed. Prevention of Significant Deterioration (PSD) permits are required for new major stationary sources or major modifications for pollutants if the project is located in attainment or unclassifiable with the National Ambient Air Quality Standards (NAAQS). Nonattainment NSR (NNSR) permits are required for new major stationary sources or major modifications in areas that do not meet one or more of the NAAQS. A minor NSR permit is required for any new or modified source of air pollutant that emits lower than the major NSR emission thresholds and, thus, is not subject to PSD or NNSR permitting requirements. Carbon dioxide leakage from a CCUS project could result in violations of its applicable CAA permits.
- Underground Injection Control Act – The Safe Drinking Water Act requires the EPA to establish rules to protect underground sources of drinking water. In furtherance of this mandate, EPA developed the Underground Injection Control (UIC) program, which sets rules for operating underground injection wells. EPA has promulgated regulations and established minimum federal requirements for six classes of injection wells. CCUS projects fall within two primary UIC well classes: (1) Class II wells, which are those used exclusively to inject fluids that are associated with oil and natural gas production (storage of carbon dioxide is generally incidental to such operations); and (2) Class VI wells, which are those used to inject carbon dioxide into deep geologic formations for the purpose of storing carbon dioxide. EPA has developed Class VI program rules to address the permanent storage of carbon dioxide and siting, construction, operation, testing, monitoring, and closure. EPA has delegated regulatory authority to many states to administer the UIC program for all or certain class wells. To date, EPA has authorized two states’ primacy applications for the Class VI program: North Dakota in 2018 and Wyoming in 2020. According to EPA’s website, the agency has authorized two applications for Class VI UIC wells and has 14 currently pending. Carbon dioxide leakage from a CCUS project could result in violations of its applicable UIC permit.
CEQ’s recent CCUS guidance notes that the IIJA provides significant new funding for EPA’s Class VI UIC Program. CEQ states, “To facilitate effective permanent sequestration, … the IIJA provides additional funding for implementation of [EPA’s Class VI UIC] Program, including funds that could enable increased staff capacity and training at agencies with geological sequestration permitting authorities, and providing grants for States with UIC Class VI primary enforcement authority (primacy) or to States seeking primacy.” To date, Class IV well applications can take up to six years for EPA to process. With this additional funding, we could start to see additional states seeking primacy, more efficient and timely agency action (such as more timely Class VI application processing), and more deployment of CCUS technologies throughout the United States.
This Legal Update provides a glimpse of the federal environmental laws that could impact CCUS projects. As CCUS continues to play a critical role in achieving climate goals, the regulatory landscape that impacts these projects will likely continue to evolve.
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