On December 28, 2023, the U.S. Environmental Protection Agency (“EPA”) granted Louisiana primary enforcement authority (“primacy”) under the federal Safe Drinking Water Act’s (“SDWA”) Underground Injection Control (“UIC”) program to permit Class VI wells, which became effective on February 5, 2024. Class VI UIC wells are designed for the permanent geological sequestration of carbon dioxide and are integral to the carbon capture and sequestration industry’s aim of mitigating climate change. The decision to grant Louisiana primacy has been long awaited as a vital step in speeding up Class VI permitting. However, as if administrative delays issuing Class VI permits at the federal level and the slow approval of state primacy were not enough, now certain environmental groups appear determined to further stymie progress. On February 22, 2024, the Deep South Center for Environmental Justice and other petitioners filed suit seeking to have the EPA’s determination set aside and vacated under the Administrative Procedure Act (“APA”). Separately, across the country, a group of landowners have petitioned EPA’s Environmental Appeals Board (“EAB”) for further review of two Class VI Permits issued by EPA Region 5 at the beginning of this year in connection with a blue hydrogen and ammonia production facility in Indiana. See below for our analysis of these developments.

The State of CCS Permitting Generally

Currently, 42 Class VI applications remain pending with various EPA regions, many of them originally submitted in 2021. On the primacy front, Texas continues to move slowly towards primacy, with Arizona and West Virginia still in the “pre-application” phase of federal review. To date, EPA has only issued four Class VI permits out of Region 5, although Region 9 published a draft Class VI permit for review last year. Two of those four Class VI permits took six years to obtain. The most recent Class VI permits approved by EPA Region 5 took approximately two and a half years to approve from the date a complete application was submitted — but there can be significant back-and-forth with the agency before a Class VI application is deemed complete. EPA has reportedly set an internal target of two years to review and approve a Class VI permit application; however, the agency’s track record would suggest that even in the new “modern” area of CCS permitting, approximately three years may be a more reasonable estimate when EPA is the permitting authority to account for pre-application engagement and agency review.

States continue to be much more nimble when it comes to processing Class VI permit applications. North Dakota has approved a Class VI permit in as few as four months, averaging closer to nine months. Wyoming issued three Class VI permits at the end of last year, though those took a little more than a year to approve. Still, these states have demonstrated the ability to process Class VI permit applications on a faster timeline than EPA, reinforcing the belief that approving Class VI primacy at the state level will help spur CCS projects, which represent a vital component of many companies’ energy transition strategy. We have summarized select provisions (i.e., financial assurance, stakeholder notification, plugging and abandonment of oil and gas wells within area of review, groundwater monitoring, well integrity testing) of certain draft and final Class VI permits here.

Louisiana’s Primacy and Its Class VI UIC Well Program

Louisiana first submitted its application for primacy in early 2021, amending it in September 2021. Since that time, four public hearings occurred between 2021 and 2023, alongside EPA’s review of over 45,000 public comments received.¹ The entire review saga spanned more than two and a half years. It took five years for North Dakota’s primacy application to be approved. Wyoming’s primacy application took only eight months for EPA to approve — but even the Wyoming and North Dakota timelines are misleading to a degree since a primacy application often involves years of pre-application work with the EPA. In any case, it remains too early to tell whether or not two and a half years represents a new “average” timeline for EPA to review and approve a state’s primacy application. Still, Louisiana’s primacy process sheds some light on key areas of focus for EPA in a UIC primacy review.

Louisiana made several changes to its existing laws and regulations relating to CCS in an attempt to speed up its primacy approval and make its own proposed program more consistent with federal requirements. For example, the state passed Act 378 in response to concerns from EPA regarding liability transfer, which revised the state’s release of post-injection liability by placing responsibility on operators for fifty years (rather than ten), and imposing additional requirements for ongoing maintenance and integrity assurance. After the fifty-year period, liability only transfers to the state following the issuance of a certificate of completion. The fifty-year period is significantly longer than the other two states that also have primacy — Wyoming requires a minimum of twenty years and North Dakota only ten years.

Other requirements of Louisiana’s Class VI UIC well program include:

• New permits for each individual Class VI UIC well — the state will not issue areawide permits that cover multiple wells for a given project;
• Prohibition of the sequestration of carbon dioxide in salt cavern formations;
• Additional monitoring, reporting, and verification requirements;
• No waivers with respect to injection depth requirements.

Perhaps most significantly, EPA included several environmental justice (“EJ”) requirements, such as an EJ review process, as part of its Memorandum of Agreement between the agency and Louisiana. The EPA defines EJ as “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” Of particular focus is the protection of historically “overburdened communities” — “minority, low-income, tribal or indigenous populations or geographic locations in the United States that potentially experience disproportionate environmental harms and risks.” On December 9, 2022, and January 11, 2023, EPA sent letters to state governors supporting EJ for primacy applications and to incorporate EJ into their Class VI UIC programs. In keeping with this, Louisiana’s primacy approval includes specific EJ provisions which, per EPA, “are now a clear benchmark for any state that seeks Class VI primacy in the future.”² Requirements include:

• Consideration of EJ impacts in permitting determinations, such as environmental hazards, exposure pathways, and susceptible subpopulations;
• Enhanced public participation process, designed for inclusivity
• Incorporation of mitigation measures (e.g., monitoring, notification, installation of pollution controls) ensuring that Class VI UIC well projects do not increase the environmental impacts on overburdened communities.

Following the granting of primacy, Class VI UIC well applications will now be reviewed by the Louisiana Department of Natural Resources (“LDNR”), which will need to evaluate any applications in line with the state’s regulations and EJ requirements. States seeking or intending to seek primacy may face pressure from the EPA to bolster long-term liability requirements and their approach to engaging with and assessing impacts to EJ communities in connection with CCS permitting decisions.

CCS-Related Legal Challenges

As noted above, a number of groups are now suing EPA over its decision to grant Louisiana’s primacy authority. On February 20, 2024, the Deep South Center for Environmental Justice, Healthy Gulf, and Alliance for Affordable Energy filed a petition in the U.S. Court of Appeals for the Fifth Circuit seeking to vacate EPA’s determination under the APA. Challenges such as this are well understood — upon a finding by the court that the contested agency action falls short of the APA’s substantive or procedural requirements, the court “shall” set aside the unlawful agency action.³

Although the petitioners’ initial court filing is sparse, a July 2023 comment letter provides additional insights into the groups’ concerns. At a high level, the groups argue that some of the requirements of Louisiana’s Class VI UIC well program are less stringent than federal requirements, that its application did not meet key requirements (e.g., demonstrating that the state has the sufficient expertise or staff to carry out the program), that the state has a “bad track record” with other well programs, and degradation of EJ concerns if the state has control over permitting. The petitioners likely face a high bar, given that the comments were overwhelmingly in favor of granting Louisiana primacy, and that the state took affirmative steps to address EPA’s concerns.

The separate landowner suit filed with the EAB relates to two CCS permits for wells to be used in connection with a blue hydrogen and ammonia project. In addition to claims that the permits do not meet the requirements of the APA and the federal Safe Drinking Water Act (“SDWA”), the petitioners in this challenge also claim that EPA failed to comply with the National Environmental Policy Act (“NEPA”). EPA has long relied on the “functional equivalence doctrine” to claim that its permitting actions under the SDWA are exempt from NEPA because EPA’s own requirements and those of the SDWA are functionally equivalent to NEPA. This view has been upheld by the U.S. Court of Appeals for the 8^th Circuit and the EAB in various UIC challenges.⁴

Key Takeaways

EPA’s granting of primacy to Louisiana is a major step for the growth of the carbon capture and sequestration industry within the state. At base level, with primacy comes the removal of a major bottleneck in the permitting process — the EPA itself — as oversight shifts from the federal to the state level. It is expected that Louisiana, through the LDNR, will act more efficiently than its federal counterpart, issuing permits with greater speed. Notwithstanding Louisiana’s success, rapid development of carbon capture and sequestration projects could be halted by additional legal challenges from parties seeking to delay the emergence of this industry, especially those in oil and gas producing states which view the low-carbon industry as detrimental to further growth. While these challenges may ultimately be found to be weak on the merits, they still inject additional uncertainty and risk into the CCS permitting process.

¹ https://www.epa.gov/uic/primary-enforcement-authority-underground-injection-control-program-0#Louisiana

² Id.

³ 5 U.S.C. § 706(2).

⁴ See Western Nebraska Resource Council v. EPA, 943 F.2d 867 (8^th Cir. 1991); see also Memorandum from Sarah Barnham, to File, NEPA Functional Equivalence of UIC Permitting and Aquifer Exemptions under the SDWA for the Dewey Burdock Project (Oct. 3, 2020), available at https://downloads.regulations.gov/EPA-R08-OW-2019-0512-0226/attachment_263.pdf.