Louisiana Presses Pause on Class VI Permitting

No New Permits, For Now

Governor Landry’s Order imposes an indefinite moratorium on all new applications for Class VI UIC permits. Class VI UIC wells are used to inject and sequester carbon dioxide underground, preventing those emissions from reaching the atmosphere. Carbon capture and sequestration (“CCS”) projects are increasingly used by the energy industry to reduce carbon emissions from their operations.

Louisiana in particular has seen a steep increase in demand for Class VI well permits since being granted primacy by the U.S. Environmental Protection Agency (“EPA”) in 2023. Despite issuing its first Class VI permit last month, LDCE faces 32 pending permit applications for over 100 Class VI UIC wells — more than any other state. Indeed, the Order appears aimed at enabling LDCE to focus on the applications in front of it and specifically prioritize a select number of projects for processing.

The Order will also impact pending applications. It sets out a number of directives for LDCE to follow in assessing and issuing Class VI permits, including hewing closely to the state’s Class VI regulations, ensuring compliance with state and federal pipeline safety standards, and requiring agencies to work together on applications. The Order also requires LDCE to follow public engagement guidance that gives “substantial consideration” to local government comments, sets a policy giving increased consideration to landowner and local government concerns, and requires LDCE to consult with the state’s Department of Economic Development for projects with the potential for “significant economic impact.”

Challenges and Changes for CCS Projects

CCS projects have generally enjoyed bipartisan support. As we previously discussed, CCS projects drew large funding packages from the Biden administration, and EPA Administrator Lee Zeldin and Secretary of the Interior Doug Burgum have generally been supportive of the industry. The Trump administration has been quick to fast track granting state applications for primacy permitting authority over Class VI wells, granting primacy to West Virginia shortly after President Donald Trump took office and approving Arizona’s application for primacy over all classes of UIC wells on September 10, 2025.

But CCS projects have faced pushback too. Developers and lawmakers are seeing increased complaints from landowners. In response, Louisiana passed a law limiting the ability of CCS developers to use eminent domain for pipelines to transport carbon dioxide, and South Dakota banned it entirely. This opposition has led to delays and cancellations for pipeline projects, even where Class VI applications had been approved. At the federal level, the Department of Energy has also canceled billions of dollars of grants for CCS and other clean energy projects since January, including $3.7 billion in grants for mostly CCS and decarbonization projects in May and $7.6 billion in other clean energy grants in October,¹ and is poised to terminate billions of dollars in funding for regional clean hydrogen hubs and other projects later this month. These developments may slow the pace of CCS projects and permitting.

Recent changes in the tax code may also impact permitting for CCS projects. CCS activity had spurred in part because of financial incentives offered by the 45Q tax credit. The 45Q credit allows CCS developers to obtain a credit per metric ton of captured carbon and historically offered greater credit values for storage in geologic sequestration wells as opposed to storage in oil and gas fields or carbon reuse projects. President Trump’s “One Big Beautiful Bill Act” retains the credit, but now offers the same credit value for all carbon end-uses. With a level playing field, project developers may look to other carbon utilization methods to reap the benefits of the 45Q credit, though it remains to be seen how the EPA’s proposed repeal of the Greenhouse Gas Reporting rule may impact future monetization of 45Q credits.

What Comes Next?

While Louisiana is not processing new Class VI permit applications for now, it will continue to review the applications in front of it. Notably, Governor Landry’s Order does not apply to Class II UIC enhanced oil recovery wells, which are used to inject wastes associated with oil and natural gas production. Projects injecting carbon dioxide waste from oil and natural gas projects in Louisiana may still be able to file Class II permit applications and obtain 45Q credits. However, given the number of CCS and blue hydrogen projects already planned for the Gulf Coast, prolonged delays in Louisiana accepting and reviewing new Class VI applications raises significant uncertainties regarding the continued growth of the CCS industry, though there are some bright spots. We expect the federal government to continue to process state primacy applications, with approval of Texas’s application appearing imminent and Colorado poised to be next in line.

If you have any questions or would like to discuss the recent changes applicable to CCS projects, please reach out to your V&E team.

¹ U.S. Dep’t of Energy, Secretary Wright Announces Termination of 24 Projects, Generating Over $3 Billion in Taxpayer Savings (May 30, 2025), https://www.energy.gov/articles/secretary-wright-announces-termination-24-projects-generating-over-3-billion-taxpayer; U.S. Dep’t of Energy, Energy Department Announces Termination of 223 Projects, Saving Over $7.5 Billion (Oct. 2, 2025), https://www.energy.gov/articles/energy-department-announces-termination-223-projects-saving-over-75-billion.