Bureau of Land Management Issues Guidance on Authorizing Carbon Sequestration on Public Land

Latham & Watkins LLPThe guidance sends a signal that carbon capture and sequestration remains a focus of the current administration’s decarbonization efforts.

On June 8, 2022, the US Department of the Interior’s (Interior) Bureau of Land Management (BLM) issued new guidance[1] that outlines the use of federal public lands for geologic sequestration of carbon dioxide (CO2). This widely anticipated guidance updates previous interim guidance on exploration and site characterization for CO2 sequestration that BLM issued in 2012.

BLM’s new guidance is part of the federal government’s broader decarbonization strategy that includes a focus on carbon capture, utilization, and storage (CCUS). A previous Latham post summarized recent guidance from the White House that described the role CCUS will play in the administration’s efforts to address hard-to-decarbonize industries to promote clean US manufacturing. This guidance built off the White House Council on Environmental Quality’s report to Congress outlining a framework for how the US can accelerate CCUS technologies and projects in a way that is efficient, orderly, and responsible, summarized in this post.

Policy and Instructions for Authorizing Rights-of-Way

Federal lands overlay well over 100 million acres of technically suitable storage capacity for CO2 sequestration, with BLM-managed lands overlaying a majority of this area.[2] BLM’s new guidance, National Instruction Memorandum (IM) No. 2022-041,[3] provides guidelines for the agency to use in authorizing rights-of-way (ROWs) for the use of public lands for site characterization, transportation, injection, capture, and permanent storage of CO2. This includes authorization for use of pore space managed by BLM when surface facilities, such as injection wells, are located on private or state-owned lands or lands managed by another federal agency.

The IM states that BLM will issue ROWs under Title V of the Federal Land Policy and Management Act of 1976 (FLPMA) and its implementing regulations at 43 C.F.R. Part 2800 to authorize any carbon sequestration project on federal lands. These ROWs will address construction, operation, maintenance, and termination of carbon sequestration surface facilities. If a competitive interest exists for use of a specific area for carbon sequestration, BLM may use the process provided in its regulations at 43 C.F.R. § 2804.23 to issue ROWs on a competitive basis. ROW grants will be issued for a minimum 30-year renewable term, unless the applicant requests a shorter term; however, for site testing and characterization, BLM may issue short-term, non-renewable FLPMA Title V ROW authorizations.

All ROW authorizations for carbon sequestration will contain stipulations that require the ROW holders to avoid interference with any operations authorized under the Mineral Leasing Act of 1920, and prevent damage to all other potentially recoverable mineral resources and other surface and subsurface authorized uses. Sequestration projects will further need to conform to the land and realty allocations within applicable Resource Management Plans (RMP) issued under FLPMA. Interestingly, the IM notes that public lands currently open for ROWs may not require an RMP amendment, although the terms and conditions of each RMP should be reviewed for conformity.

Applicants for sequestration projects will need to file a Plan of Development along with their applications for facilities on federal lands (SF-299)[4] in accordance with 43 C.F.R. § 2804.25, execute a cost recovery agreement for cost reimbursement, and post an appropriate bond. BLM will complete appropriate exploration and site characterization studies, including any mineral potential reports, and the agency will review any applicant-prepared characterization studies to determine surface and pore space ownership, geologic boundary limits, and formation impermeability for plume containment before authorizing any CO2 sequestration. An adequate monitoring plan will also be required to determine if any of the injected CO2 is escaping from the pore space or otherwise migrating from the storage complex. While the IM is silent with respect to liability issues, hold harmless clauses that favor the government are likely to be required for sequestration projects, absent further policy development and risk-sharing.

ROW holders will be required to pay annual rents for the ROW surface acreage within the proposed project area, based on appraised values, market studies, or BLM’s approved schedules, such as the linear ROW or the small site schedules. Further, BLM will assess charges for injecting actual amounts of CO2 into federal pore space and use and occupancy of the pore space on a per unit basis. These charges, which have not yet been established, will be determined in consultation with Interior’s Appraisal and Valuation Services Office.

Additional Permits and Environmental Review

In addition to BLM authorizations, ROW holders will also need to obtain all additional permits required for geological sequestration projects, including underground injection control (UIC) permits to comply with the Safe Drinking Water Act of 1974.[5] UIC permits are issued either by the US Environmental Protection Agency or state or tribal agencies that have obtained primacy under the UIC program. The IM states that BLM should request that a ROW applicant provide any permits associated with the proposed project issued by other agencies at the time of application, or upon receipt of the permits.[6] Notably, mature oil and gas fields injecting CO2 for enhanced oil recovery will not be considered as permanent sequestration projects for the purposes of the IM.

The IM also notes that BLM may prepare a programmatic environmental review under the National Environmental Policy Act (NEPA) to evaluate possible standard practices to facilitate expedited environmental review of carbon sequestration projects on federal lands. Further, carbon sequestration projects may be eligible for treatment as a covered project under the Fixing America’s Surface Transportation (FAST-41) Act, 42 U.S.C. § 4370m et seq., which provides a process for coordination and streamlining of federal environmental reviews and permits required for eligible infrastructure projects.

Pore Space Ownership

The IM specifically addresses the important issue of pore space ownership. The general “American rule,” followed by most jurisdictions in the US, is that in cases of split mineral and surface estates, pore space ownership resides with the surface owner. However, pore space ownership is not clear in some circumstances. For example, the Alaska Supreme Court interpreted an Alaskan statute to find that subsurface pore space and storage rights belonged to the state — not the surface owner — where mineral rights were reserved to the state.[7] Federal lands, where the government owns both the surface and the subsurface, are attractive from a pore space perspective because the developer of a CCUS project has fewer landowners with which to negotiate rights for the use of that pore space when injecting CO2, particularly if a large storage complex is needed to support high volumes of CO2 sequestration. In cases of split estates, where the federal government owns only the surface estate or only the mineral estate, the IM recognizes that the question of pore space ownership may arise. The IM notes that, typically, pore space is owned by the surface owner, although it may be separately conveyed, in recognition that private mineral reservations or other (including fragmented) interests may exist at an injection site, complicating pore space ownership. A title review of pore space ownership should be conducted early in the project evaluation and ROW process, and any questions about pore space ownership will be reviewed by BLM, in coordination with the Interior Solicitor’s Office.

Conclusion

This IM underscores the federal government’s commitment to decarbonization and transition to clean energy, and demonstrates that geologic sequestration will continue to play a significant role in BLM’s priorities. The IM also represents a critical step toward Interior’s broader authorization of use of federal lands for carbon sequestration, including soon-to-be-issued regulations governing the permitting of carbon sequestration projects on federal submerged lands offshore the US.

Latham & Watkins will continue to monitor BLM’s efforts to promote the use of public lands to support the federal government’s decarbonization goals.

Endnotes

[1] https://www.blm.gov/press-release/blm-issues-geologic-carbon-storage-policy-public-lands.

[2] T. Righetti, et al., “The Carbon Storage Future of Public Lands”, 38 Pace Envtl. L. Rev. 181, 189-90 (2021) (citing US Geological Survey study; arguing generally for the need for federal policy and legal development to promote CCUS projects on federal lands), available at https://digitalcommons.pace.edu/cgi/viewcontent.cgi?article=1847&context=pelr. This area does not include federal ownership of split estates. Id. at 192.

[3] https://www.blm.gov/policy/im-2022-041.

[4] https://www.gsa.gov/forms-library/application-transportation-utility-systems-telecommunications-and-facilities-federal.

[5] See 40 C.F.R. § 144.31(a); see also id. at Part 146, Subpart H (establishing criteria and standards for UIC programs to regulate CO2 geologic sequestration injection wells); id. at § 144.1(g) (defining scope of UIC permit program).

[6] CCUS projects are also subject to Clean Air Act regulatory Subpart RR greenhouse gas reporting requirements. 40 C.F.R. § 98.441.

[7] City of Kenai v. Cook Inlet Natural Gas Storage Alaska, LLC, 373 P.3d 473 (Sup. Ct. Ak. May 6, 2016).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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