Colorado and Wyoming Formalize Cross-Border Carbon Storage Coordination

In May 2026, the Wyoming Department of Environmental Quality (“WYDEQ”) and the Colorado Energy and Carbon Management Commission (“ECMC”) executed a Memorandum of Understanding (“MOU”) that establishes a framework for interstate cooperation on the permitting of injection wells used for geologic sequestration of carbon dioxide. These carbon capture and storage (“CCS”) activities are regulated as “Class VI” Underground Injection Control well projects under the Safe Drinking Water Act and its associated regulations.

The MOU applies to Class VI projects in which the Area of Review, any monitoring well or other Class VI facility, or any corrective action or post-injection site care activities are proposed within one mile of the Colorado–Wyoming border. Which agency will have permitting authority turns on the location of the Class VI injection well; the state in which the injection well is located is the permitting agency, while the neighboring state is the “impacted agency.” The MOU lays out a collaborative regulatory system in which the permitting agency notifies the impacted agency and shares project specifics, including well locations, the Area of Review, anticipated CO₂ injection volumes, and relevant geologic and hydrologic data. This provides the impacted agency with an opportunity to provide the permitting agency with recommendations for conditions of approval or to request consultation on data gaps, monitoring responsibilities, or risk mitigation strategies. Whether or not the permitting agency will ultimately treat such “recommendations” as binding or controlling with respect to the permit conditions it imposes is yet unknown.

The MOU is non-binding, and does not create third-party rights for applicants or impact either state’s formal regulatory authority or sovereign immunity. The hope is that this framework speeds up permitting, supports technical exchange between regulators, and reduces uncertainty for developers as CCS activity expands across the Rocky Mountain region. CCS project developers, operators, and investors active in the region should expect that any Class VI project with a footprint within one mile of the state line will likely involve a collaborative regulatory effort, even though the lead state retains permitting authority. The new notification and consultation steps may add a layer of process, but they are also designed to surface and resolve cross-border technical concerns earlier in the permitting cycle, hopefully reducing the risk of late-stage objections or conflicting conditions of approval.

It remains to be seen whether the framework will support efficient coordination or simply add another party to the Class VI permit decision-making process for cross-border projects. Each state will have its own approach to permitting injection wells and concerns related to CCS. Wyoming was the first state ever to receive Class VI primacy back in 2020, but has only recently begun issuing permits. The U.S. Environmental Protection Agency proposed to approve Colorado’s application for Class VI primacy in March 2026, though given the current administration’s track record of approving applications, Colorado will likely obtain Class VI primacy before the end of 2026. With the MOU in place, the ECMC will be well-positioned to leverage Wyoming’s permitting experience as it reviews pending and future Class VI applications. The MOU also continues a pattern of cross-border environmental cooperation between the two states, which signed an MOU in 2023 to coordinate on direct air capture activity and development, and joined New Mexico and Utah in 2022 to develop a regional clean hydrogen hub.

Investors performing diligence on regional CCS assets should factor in the new coordination process when assessing project scheduling, and developers should anticipate that information shared with the impacted agency may become part of the administrative record and subject to disclosure under the Colorado Open Records Act and the Wyoming Public Records Act, with limited confidentiality protections. Operators should ensure that their monitoring plans, corrective action protocols, emergency and remedial response plans, and financial assurance instruments are structured to address cross-boundary risks, as those topics are specifically identified as consultation subjects under the MOU. The MOU contemplates that additional states may be added in the future for projects crossing other borders, and similar frameworks may follow with neighboring jurisdictions as the Rocky Mountain region develops into a CCS hub.

We will continue to monitor developments related to CCS. For counseling on permitting strategy, regulatory compliance, and transactional diligence for CCS projects in the region, reach out to your Vinson & Elkins contacts.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.