US - Carbon Capture, Utilization, And Storage – Louisiana Obtained State Primacy For Class VI Wells.

On December 28, 2023, the U.S. Environmental Protection Agency (EPA) signed a final rule granting Louisiana primary responsibility over Class VI wells in its state under the Underground Injection Control (UIC) Program, which regulates the injection and long-term storage of carbon dioxide (CO2) into deep rock formations. Louisiana is now the third state to obtain primacy over UIC Class VI wells.

Background on UIC Program

Pursuant to the UIC program, EPA has promulgated regulations and established minimum federal requirements for six classes of injection wells (Class I to Class VI). EPA has designated each well class based on the type and depth of the injection activity and the potential for the injection activity to impact underground sources of drinking water. For instance, “Class II wells are used only to inject fluids associated with oil and natural gas production” for purposes of either disposal, enhanced oil recovery (EOR), or hydrocarbon storage; and Class III wells “are used to inject fluids to dissolve and extract minerals;” and Class IV wells are “shallow wells used to inject hazardous or radioactive wastes into or above a geologic formation that contains” an underground source of drinking water.¹ In 2010, EPA established Class VI, the most recently created UIC well class, for wells used to inject CO2 into deep subsurface geologic formations for long-term underground storage—a process known as “geologic sequestration.” While there are approximately 180,000 active Class II wells throughout the United States, there are only two active Class VI wells in the United States, six Class VI wells in the pre-construction phase, and a rapidly growing list of pending applications to obtain Class VI well permits.²

Central to the role of CCUS in the U.S. energy transition is the tax credit provided under section 45Q of the Internal Revenue Code (the § 45Q credit), which was expanded and enhanced by the Inflation Reduction Act of 2022. The § 45Q credit is based on the annual metric tonnage of carbon oxide captured by a qualifying facility and subsequently (i) used in EOR and disposed of in secure geological storage, (ii) disposed of in secure geological storage, or (iii) utilized outside of EOR. With non-EOR utilization technologies still in their nascent phases, EOR and secure geological storage—both of which require compliance with applicable UIC or other regulations³—are currently the dominant routes through which the § 45Q credit is being claimed. To qualify for the § 45Q credit, in addition to applicable UIC or other regulations, the well must also comply with applicable reporting requirements under 40 CFR part 98 subpart RR (or, in the case of a well that is used in EOR, specified EOR-related International Organization for Standardization standards endorsed by the American National Standards Institute).⁴

State Primacy of UIC Program

EPA’s UIC program requirements were designed to be adopted by states, territories, and tribes, which is known as obtaining “primacy” or obtaining primary enforcement authority over the UIC programs. Primacy is not mandatory or vested as a matter of right; rather, states, territories, and tribes must complete a rigorous application and review process with EPA. States, territories, and tribes may apply for and obtain primacy for all well classes, Classes I–V, or individual well classes, such as Class VI only. EPA may grant primacy for all or part of the UIC program (i.e., individual well classes). States seeking UIC primacy must demonstrate to EPA that the state has jurisdiction over underground injection; regulations that meet the federal UIC requirements and will be effective in preventing endangerment to underground sources of drinking water; and the necessary administrative, civil, and criminal enforcement penalty remedies.⁵

EPA has approved UIC primacy programs for well Classes I–V in 31 states and three territories. Florida and Idaho have EPA-approved UIC primacy for well Classes I, III, IV, and V. EPA retains direct implementation authority for Class II wells in those states. Currently, EPA implements the UIC program for all well classes in nine states and two territories.⁶ Importantly, when EPA approves primacy, it still retains oversight authority.

Since the inception of Class VI in 2010, states have been slow to apply for primacy, which was likely fueled by low demand for Class VI permits and the lengthy primacy application and review process. With EPA’s recent approval of the Louisiana Class VI program, three states now have primacy for Class VI wells: North Dakota, Wyoming, and Louisiana. North Dakota applied for primacy in 2013, which EPA approved in 2018. Wyoming formally applied in 2019 and was approved in 2020, but that process was preceded by years of dialogue with EPA Region 8. As discussed further below, Louisiana formally applied in April 2021 and was approved in December 2023. North Dakota, Wyoming and Louisiana are the only three states that have primacy for all well Classes I–VI. While EPA directly implements the Class VI program in all other states, territories, and on tribal lands, demand for Class VI wells is increasing and several states have started or expressed interest in obtaining primacy for Class VI wells.

Louisiana Primacy Update

Louisiana submitted its voluminous Class VI primacy application in April 2021.⁷After years of review and communication with the state, on April 28, 2023, the EPA released a proposed rule to approve the Louisiana application to implement a UIC program for Class VI wells within the state and accepted public comments through July 3, 2023. EPA received 41,622 public comments from interested stakeholders either opposing or supporting the grant of primacy. EPA summarized and responded to the substantive comments. Finally, on December 28, 2023, EPA issued a final rule granting Louisiana primacy for UIC Class VI wells.

There are roughly 22 applications for Class VI well permits in Louisiana already pending with the EPA.⁸ With the approval of Louisiana’s Class VI program, Louisiana will take over the review of these applications. To ensure a smooth transition, the EPA’s Region 6 and LDNR have worked cooperatively on EPA’s review of Class VI permit applications for proposed projects in Louisiana over the months leading to this Class VI primacy approval decision, to help prepare LDNR in the event that EPA ultimately decided to approve LDNR for Class VI primacy. EPA stated that it stands ready to provide additional support as needed, including technical support, site-specific analysis, and access to the experience and knowledge of the many EPA staff in the regions, headquarters, and the Office of Research and Development.⁹

A significant benefit of a state-run UIC program is the speed at which the state can review and approve Class VI permits. Since receiving UIC Class VI primacy in 2018, North Dakota has already reviewed and approved four Class VI wells on a speedy timeline: North Dakota approved the Class VI permit applications on average eight months after receiving a complete application, whereas the federal program has taken approximately three to six years.¹⁰In December 2023, Wyoming issued its first three Class VI permits after a 10-month review period, which is relatively short compared to the federal process.¹¹It is expected that Louisiana will be able to process the pending 22 applications quickly compared to the federal process.