EPA Proposes to (Finally) Approve Louisiana to Issue CCS Permits

At long last, the U.S. Environmental Protection Agency (“EPA”) is poised to grant Louisiana authority to issue Class VI permits under the federal Safe Drinking Water Act’s (“SDWA”) Underground Injection Control (“UIC”) program for long-term carbon capture and sequestration (“CCS”). EPA’s proposed approval will be subject to a 60-day comment period following its publication in the Federal Register. Louisiana would be just the third state to receive authority from EPA to issue CCS permits. Administered through the Louisiana Department of Natural Resources (“LDNR”), a signature component of EPA’s approval is a robust incorporation of environmental justice (“EJ”) considerations into Louisiana’s proposed Class VI program.

Drivers for CCS

CCS is increasingly seen as critical for not just corporations but the global community to achieve net zero greenhouse gas emissions by 2050, a goal called for by the Paris Agreement to avoid potential adverse impacts from climate change. Except in limited circumstances, the UIC program requires a Class VI permit for CCS. Moreover, while less than a handful of Class VI permits have been issued to date, many energy companies continue to build an energy transition strategy that hinges on large scale deployment of CCS, which, when coupled with the significant federal economic incentives for CCS contained in the Consolidated Appropriations Act of 2021 and the Inflation Reduction Act, has generated significant interest in seeing EPA delegate authority to state permitting agencies that can approve these critical permits on faster timelines.

The Long Road to Primacy

Despite EPA finalizing the Class VI regulations over a decade ago, unlike other aspects of the UIC program, the Class VI program has not seen rapid adoption by the states, with North Dakota and Wyoming currently being the only states that have authority to issue Class VI permits.¹ EPA has also been slow to issue permits, with only two active permits for a project in Illinois having received Class VI permits to date. Meanwhile, dozens of other CCS applications are currently under review by EPA.

As noted above, there is increasing pressure from an environmental, social, and governance standpoint to take bolder action to address climate change and start removing greenhouse gases from the atmosphere, and the current slow pace of Class VI permit issuance not only frustrates that goal but also presents a significant barrier to investment decisions to spur the deployment of CCS. Primacy is therefore an essential gating item to the adoption of CCS.

A primacy application requires a number of complementary legislative, regulatory, and state executive actions. A complete primacy application will generally include the following:

1. The state’s legislative and regulatory requirements for Class VI wells.
2. Documentation demonstrating the public participation process in the development of the state legislative and regulatory requirements.
3. A letter from the state’s governor officially requesting primacy.
4. A state attorney general’s statement of enforcement authority.
5. Entering into a Memorandum of Understanding with EPA related to the state’s Class VI permitting program’s administration, implementation, and enforcement.

Preparing a primacy application can be a massive effort, but history demonstrates that plenty of work remains even after an application for primacy is submitted, and EPA’s focus on enhancing Louisiana’s Class VI primacy application with additional EJ measures provides clear signals on what the current administration expects to see before a state can expect approval.

Comparing Paths to Primacy

It remains difficult to accurately predict the timeline for EPA to approve a state’s application for primacy, but below are the limited data points we have to date.

The timelines provided above can also be misleading because there can be years of legislative and regulatory action at the state level prior to submitting an application for primacy. Even the date EPA deems program revisions to be officially submitted can significantly lag behind the date of the state’s actual submittal for federal review. For example, Louisiana originally prepared its primacy application in April 2021, and updated it in May 2021, but EPA did not deem the application as being officially submitted until September 2021. Despite the Biden administration’s statements of support for CCS, Louisiana’s application did not appear to benefit from any form of expedited or streamlined review.

Even under the most optimistic of timelines, parties should not expect a final rule granting Louisiana Class VI primacy until Fall 2023 at the earliest. In a departure from its prior approvals of North Dakota’s and Wyoming’s applications for Class VI primacy, EPA is requiring a public hearing on its proposed approval of Louisiana’s application, set for June 15, 2023.⁴ Also, EPA’s prior proposed actions to approve North Dakota’s and Wyoming’s Class VI primacy applications received barely or less than a dozen comments, almost all of which were in favor of granting primacy. It remains to be seen how the public will approach EPA’s proposed approval of Louisiana’s primacy application, but given increasing opposition to or concerns regarding CCS voiced by environmental groups and certain other stakeholders, it would not be surprising if there will be significant public comment.

Environmental Justice Concerns are Front and Center

If there are any lessons to be learned from EPA’s proposed approval of Louisiana primacy, it is that EJ cannot be ignored. EJ has been a central focus of the Biden administration’s approach to environmental regulation and enforcement, and EPA’s proposed approval of Louisiana’s Class VI primacy application follows a string of other executive actions focused on ensuring that EJ communities are not ignored when it comes to permitting CCS projects. Following a prior announcement outlining different federal initiatives to support the deployment of CCS, EPA released a letter to state governors on December 9, 2022, setting forth explicit expectations with respect to the EJ considerations in state CCS permitting decisions.

Louisiana generally agreed to incorporate all of the EJ measures highlighted by EPA in its December 9, 2022 letter into the state’s Class VI permitting program. These measures include:

1. An inclusive public participation process;
2. Incorporating EJ and civil rights considerations into permitting decisions;
3. Enforcement of Class VI program regulatory protections (e., site selection, well construction, monitoring, site closure); and
4. Incorporation of measures to mitigate impacts to EJ communities.

LDNR will require applicants to evaluate project sites using EPA’s EJScreen and to utilize qualified third-party reviewers to conduct additional evaluation of a Class VI application when communities with EJ concerns and/or other increased risk factors are identified. The results of the review will be used by LDNR to determine if an enhanced public comment period will be required. In addition, LDNR will require applicants to assess alternatives to the site location and propose mitigating measures to ensure adverse environmental effects are minimized.

What Comes Next in the Primacy Saga

According to EPA, Texas, West Virginia, and Arizona are in the “pre-application phase” for Class VI primacy. It remains unclear whether or not these states and EPA have gleaned enough lessons from the limited number of other Class VI primacy approvals to streamline applications. One thing is certain, Louisiana is well-positioned to become a CCS hub for a wide array of industries concentrated along the Gulf Coast. Whether or not a CCS “gold rush” in the state will materialize as a result of Louisiana’s pending primacy approval is yet to be seen, but other states that do not want to be left behind will need to consider what additional changes to their existing or proposed CCS regulations might be required to ensure EPA does not delay approval because of EJ-related concerns.

¹ With few exceptions, EPA has approved most states to directly issue all other classes of permits under the SDWA’s UIC program.

² Typically, under the federal Administrative Procedure Act, final rules become effective 30 days after publication in the Federal Register. However, this requirement can be waived, which EPA did in its prior approvals of North Dakota and Wyoming’s primacy applications.

³ The official date of the proposal will be the date of publication of notice of EPA’s proposed action in the Federal Register.

⁴ EPA’s proposed approval of those states’ primacy applications stated that a public hearing would only be held if requested during their respective comment periods, and none were.

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.