Written by Peggy Kirk Hall, Attorney and Director, Agricultural & Resource Law Program
A bill authorizing the capture and storage of carbon dioxide via underground storage wells has passed the Ohio House of Representatives. The nearly unanimous vote by the House now advances H.B. 170 to the Ohio Senate.
We’ve reported previously on the prospect of Carbon Capture and Storage (CCS) coming to Ohio. CCS is one part of a strategy to reduce airborne CO2 emissions. It’s of high interest to hard-to-abate emission sources, such as ethanol, steel, chemical, and concrete production facilities. Rather than reducing the CO2 in their emissions, CCS allows such sectors to capture CO2 from emissions and store the CO2 in pore spaces far beneath the land’s surface. But landowners must be willing to lease their “pore space” for CO2 storage. If passed, then, CCS legislation will create pore space leasing opportunities and challenges for Ohio landowners.
Refer to our Ag Law Blog posts explaining CCS and discussing how CCS requires landowners to lease “pore space.” We also reviewed the first CCS bills in Ohio, proposed last legislative session, in a third blog post. Those bills did not pass, and H.B. 170 represents a new version of the proposals, developed after additional consideration by interested parties.
What’s in H.B. 170?
H.B. 170 sets up a state regulatory framework that authorizes the storage of capture carbon dioxide into subsurface “pore space” via Class VI injection wells, which are regulated by the U.S. EPA under the federal Safe Drinking Water Act’s Underground Injection Control Program. The bill addresses several
- Agency authority and rules. Delegates regulatory authority over CCS to the Ohio Department of Natural Resources Division of Oil and Gas Resources Management and directs the Chief to adopt rules that carry out the legislation.
- “Pore space” interests. Defines “pore space” as the subsurface cavities and voids that are suitable for use as storage areas for CO2, outlines procedures for severing and conveying pore space, clarifies the relationship between pore space, surface rights, and mineral interests, and limits the liability of pore space owners for the injection of CO2 into their pore space.
- CCS projects. Lays out the components of “carbon sequestration projects,” which includes “storage facilities” operated by “storage operators” who inject CO2 into pore space via injection wells.
- “Pooling” of pore space. Authorizes the pooling or “statutory consolidation” of pore space for carbon sequestration projects if the storage operator obtains the consent of owners of at least 70% of the pore space and establishes rights and responsibilities for statutory consolidation.
- Project completion and closure. Provides procedures for “certificates of project completion” that apply to the closure of storage facilities and a transfer of responsibility and liability to the State.
- Fees and penalties. Establishes fees for storage facilities and funds to pay for current and post-closure care program costs and sets civil and criminal penalties for violation of CCS regulations.
- Limitations on damages. Limits claims for damages dues to injection or migration of CO2 to claims that establish direct physical injury to persons, animals, or property, limits claims to diminution of value caused by the injection or migration and prohibits punitive damages in such cases.
What’s next for CCS?
The Ohio Senate now has its turn to consider H.B. 170. The Senate President referred the bill to the Senate Energy Committee, which already has a CCS bill before the committee. The Senate’s version of CCS, S.B. 136, was introduced last March but has not received any hearings.
S.B. 136 mirrors the version of H.B. 170 first introduced in the House. But amendments to H.B. 170 occurred in the House Natural Resources Committee that created differences between the two bills. It will be up to Energy Committee Chair Brian Chavez to determine which bill to advance, if any.
For a comparison of the original introduced bills (H.B. 170 and S.B. 136) and the substitute bill for H.B. 170 that passed the House of Representatives, refer to this synopsis by the Legislative Service Commission that highlights the differences.
H.B. 170 is a step toward “primacy”
Ohio is already on its way toward seeking approval from the U.S. EPA to regulate Class VI injection wells within the state, a concept referred to as “primacy.” State-based regulation of the well permitting program would speed up the permitting process for CCS, according to proponents of primacy. However, the state regulatory program must be at least as stringent as federal requirements before the U.S. EPA will delegate the Class VI program to the state. H.B. 170 and its resulting regulations will be reviewed by the U.S. EPA when Ohio submits its application for primacy to the U.S. EPA.
To date, only five other states have obtained primacy over Class VI wells. Six other states are currently in the process of applying for such approval. By obtaining primacy, Ohio could be ahead of many states in encouraging CCS development, proponents state.
Implications for Ohio landowners: pore space leasing
We’ve heard that some companies are already out with offers of “pore space leases” to Ohio landowners. Some are offering around $25 per acre for the right to use pore space for CCS. But now is the time for caution. The legislation is necessary to clarifying legal interests in pore space and how CCS development will occur in Ohio—both important issues landowners need to know before entering into pore space leases. A third important issue in need of clarification is the value of pore space, and it’s still too early to have firm answers to that question. Experience from oil and gas leasing teaches us, however, that early lease payment offers tend to be lower than later offers.
Landowners who want to move forward now on pore space leases, however, would be wise to work with an attorney. Some attorneys across the state are already reviewing and negotiating pore space leases on behalf of the landowners. Contact the agricultural law team for help with identifying attorneys knowledgeable in this area.
Watch for more resources on CCS and pore space leases coming to our program soon.