While the Inflation Reduction Act (IRA) creates opportunities for investors to fund carbon capture, utilization, and sequestration/storage (CCUS) projects and provides Internal Revenue Service (IRS) Section 45Q tax credits at a rate of $85 per ton of carbon dioxide (CO2) captured and stored, the regulatory red tape for permitting in the sector remains daunting.
The White House Council on Environmental Quality (CEQ) estimates more than 1,000 carbon capture facilities will be needed to trap as much as 1.7 billion tons of CO2 per year to achieve net-zero emissions by 2050. This is 10 times the amount of current projects, reports Bloomberg Law.
“And there’s still nothing on the horizon to distill federal requirements spanning some 15 laws into a cohesive regulatory roadmap to speed carbon capture deployment,” said Matt Fry, the Great Plains Institute’s state and regional policy manager for carbon management, according to Bloomberg Law. “The reality is, no matter what the project is, you have to meet the criteria of all those laws … It is a tangled web.”
Permitting requirements
The CEQ report to Congress on CCUS identifies the following types of permits, permissions, and requirements necessary for CCUS projects:
| Authorization | Authority | Type of Agency |
| Land use | Local government, federal government (public lands) | City council, federal land manager (U.S. Forest Service (USFS), Bureau of Land Management (BLM), etc.) |
| Discharges to surface water | State and/or federal government | State department of environmental quality, U.S. EPA |
| Discharge of dredge or fill materials to waters of the United States | State and/or federal government | U.S. Army Corps of Engineers and/or relevant state office (Florida, Michigan, and New Jersey) |
| Endangered species | State and/or federal government | State environmental or natural resources department, U.S. Fish and Wildlife Service, National Oceanic and Atmospheric Administration (NOAA) fisheries |
| Greenhouse gas reporting | State and/or federal government | State environmental department, U.S. EPA |
| Air permits | State and/or federal government | State environmental department, U.S. EPA |
| CO2 pipeline safety | State and/or federal government | State and federal departments of transportation |
| Siting CO2 pipelines | Local, state, and federal government | State transportation department or utility commission, federal land management agencies |
| Pore space ownership and mineral rights | Local, state, and federal government (if federal lands) | Determined by state-specific law, federal agency managing federal lands to be used |
| CO2 injection (and sequestration) permitting | State and/or federal government (some states have primacy for Class VI permitting) | State environmental department, U.S. EPA |
Navigating all these regulations is challenging, and each process is time-consuming. For example, a Class IV well permit from the EPA is required for injecting CO2 into underground wells. This process currently takes 4 to 6 years.
Some states are stepping up to streamline this process by seeking “primacy” from the EPA to take over the Class IV permitting process from the federal government. North Dakota and Wyoming are the only two states to have achieved primacy on Class IV wells to date. Louisiana and Texas are reported to be taking steps to receive primacy permitting jurisdiction. Primacy applications typically take 5 years for approval, but states can request expedited consideration in hopes of shortening that time frame.
NEPA and environmental justice concerns
The National Environmental Policy Act (NEPA) empowers environmental groups to legally challenge environmental assessments.
“NEPA remains ‘the overriding environmental statute’ posing an obstacle to wide-scale carbon capture deployment, said Hunter Johnston, a partner with Steptoe & Johnston LLP who navigates requirements for carbon capture projects,” according to Bloomberg Law.
Proposed interim guidance released by the CEQ in February 2022 states that “successful widespread deployment of responsible CCUS will require strong and effective permitting, efficient regulatory regimes, meaningful public engagement early in the review and deployment process, and measures to safeguard public health and the environment. Agencies have already taken actions in the past decade to develop a robust CCUS regulatory framework to protect the environment and public health across multiple statutes.”
The Biden administration is also expected to receive pushback on CCUS from environmental justice (EJ) advocates, who fear the projects will place further burdens upon EJ communities.
“Biden should have addressed those issues head-on in the [interim] guidance, Johnston said, by making the case ‘that carbon capture and sequestration is beneficial to society at large’ for all, including disadvantaged communities that already suffer disproportionately from climate impacts,” adds Bloomberg Law.
Short staffing
Brent Lewis, chief executive of Colorado-based carbon capture and storage developer Carbon America, said another problem with permitting in the sector is the understaffing within the EPA, meaning the Agency is not equipped to handle an anticipated permitting rush from companies trying to capitalize on funding opportunities and tax credits, says Upstream.
“We anticipate there will be a bit of a rush from developers for sequestration sites and most of these sites are going to have to be reviewed and approved by the EPA. There will be a bottleneck,” Lewis stated. “Lewis described the CCS sector as ‘very complicated’ with three interdependent asset classes — capture, transportation and storage — each with their own challenges. ‘Stringing all those together is extremely challenging.’”
Analysts predict the CEQ will soon develop a better road map to streamline the CCUS permitting process. Congress is also expected to be called upon to enact legislation that will make the process more efficient.