Texas Progresses Toward CCS Primacy

(Supercharged) Cooperative Federalism

Given President Trump’s public emphasis on cooperative federalism, it should come as no surprise that the EPA under the current administration is improving its primacy review and approval process at an exponential rate (recall that the first Trump administration set a record when it approved Wyoming’s primacy application in just eight months, as compared to the nearly three years it took the Biden administration to approve Louisiana’s primacy application).  Texas originally applied for primacy back in December 2022, though neither the State nor the EPA took many steps to move the review along until now. The proposed decision continues to signal the current administration’s support for CCS projects. We have written before about the backlog of CCS permit applications stuck in limbo at EPA, and primacy has long been thought of as the solution to breaking the logjam.  EPA only recently issued the first Class VI permits for a project in Texas, and the EPA’s decision to approve primacy, once final, should help ensure Texas sees continued growth in this space.

CCS in Texas

EPA’s pending approval will significantly streamline permitting for CCS projects in Texas. Currently, projects must apply for a permit from both EPA and the Texas Railroad Commission (RRC). Once EPA approves a final rule granting Texas primacy, the RRC will be the one-stop-shop for CCS. While the Texas Commission on Environmental Quality (TCEQ) will have authority for permitting the non-injection and storage related aspects of a CCS project (for example, any air emissions resulting from the project), the only thing a CCS project needs from the TCEQ for a Class VI permit is a “Letter of Determination.” Class VI permit applicants must apply for and submit a Letter of Determination from the TCEQ to the RRC stating that the proposed injection well or storage facility “will not impact or interfere with any previous or existing Class I injection well, including any associated waste plume, or any other injection well authorized or permitted by the [TCEQ].” Class I wells are used for the injection of municipal and industrial wastes, including hazardous wastes. Given that a Class VI permit application requires an analysis of other wells within the area of the project regardless, and the generally remote locations of potentially favorable geologic formations best suited for CCS in Texas, timely obtaining a Letter of Determination from TCEQ should not be a major obstacle for most projects.

Few state agencies can be expected to match the RRC’s expertise given the large number of Class II wells approved in the State for CO₂ injection in connection with enhanced oil recovery and acid gas treatment at natural gas processing plants. The potential drag on timelines for approving Class VI applications at the RRC is resource and staffing constraints.

What Comes Next

Once published in the Federal Register, EPA will take comments, hold a public hearing on its proposed approval action, and then prepare a response to comments. Ideally, EPA’s final approval of Texas’s primacy application could occur by this Fall. To be clear, receipt of primacy does not mean EPA will have no role in approving Class VI permits in Texas. Pursuant to the MOU and federal UIC regulations, the EPA Region 6 Administrator must concur in any proposed RRC decision to issue a Class VI permit. In addition, given that RRC CCS rules do not expressly require a 50-year post-injection monitoring period, the MOU states that the RRC and the EPA must consult in instances where a shorter monitoring period is imposed.

There remains potential for certain parties to disrupt a speedy primacy approval. Last year, environmental groups petitioned EPA to revoke Texas’s authority to regulate Class II wells, alleging mismanagement of the program and failure to address threats to drinking water resources. Many viewed this as the opening salvo by environmental groups to frustrate Texas’s efforts to obtain primacy, and this could become an issue again during EPA’s comment period. Moreover, other environmental groups have sought to overturn EPA’s approval of primacy for Louisiana and West Virginia. Whether or not any groups will file legal challenges to any final approval from EPA remains to be seen; the Fifth Circuit promptly dismissed the legal challenge to Louisiana’s primacy approval on the grounds that the plaintiffs’ alleged injuries were too speculative to support standing to sue.

The financial incentive for CCS also remains strong: unlike many other tax credits created or expanded under the Inflation Reduction Act, to date there have not been any significant efforts to repeal 45Q, the tax credit available for CCS projects. Additionally, the “Big Beautiful Bill”—currently being considered by the U.S. Senate—would extend the timeline for transferability of 45Q credits. Taken together, the future for CCS in Texas appears bright (for now).