Energy, Regulatory Developments, Sustainability

California Enacts Carbon Capture Laws

Three bills recently signed into law by California Governor Gavin Newsome are expected to clear the path for the state to meet its stringent carbon reduction/neutrality goals in 2030, 2038, and 2045. The bills address new regulation of carbon capture, utilization, and storage (CCUS) and carbon dioxide (CO2) removal (CDR) projects in the state.

Senate Bill No. 905

Senate Bill 905 includes the requirements for the California Air Resources Board (CARB) to:

  • Establish a Carbon Capture, Removal, Utilization, and Storage Program to evaluate the efficacy, safety, and viability of CCUS and CDR technologies.
  • Facilitate the capture and sequestration of CO2 from those technologies.
  • Ensure that CCUS and CDR projects include specified components such as monitoring activities.
  • Adopt regulations to implement the program and, in developing the program, to consult with the Geologic Carbon Sequestration Group.
  • Adopt regulations for a unified permit application for the construction and operation of CCUS and CDR projects to expedite the issuance of permits or other authorizations for the construction and operation of those projects.
  • Require relevant state agencies to use the unified permit application when issuing permits or other authorizations for a CCUS or CDR project.
  • Develop a centralized public database to track the deployment of CCUS and CDR technologies and the development of CCUS and CDR projects throughout the state.

“In addition to permitting procedures, CARB must publish a framework for governing agreements regarding two or more tracts of land overlying the same geologic storage reservoir or reservoirs. The agreements will set out to manage, develop, and operate CCUS or CDR projects. SB 905 ensures that title to any geologic storage reservoir for CO2 is vested in the owner of the overlying surface estate (unless it has been severed and separately conveyed),” says Reed Smith LLP in a Lexology article.

Before beginning work, CCUS project operators must provide a minimum of 60 days’ written notice of the project to each owner of a surface, subsurface, or storage reservoir estate that is adjacent to a geologic storage complex or a geologic storage reservoir that is included in the project.

CCUS project operators are also required to:

  1. Maintain financial responsibility for a specified period of time.
  2. Show proof to the state board that there is binding agreement among relevant parties that drilling or extraction that may penetrate the geologic storage reservoir is prohibited for at least 100 years after the last date of injection of CO2 into a geologic storage reservoir.
  3. Create an air monitoring and mitigation plan, and submit the plan to CARB.

Senate Bill No. 1314

Senate Bill 1314 prohibits operators from injecting a concentrated CO2 fluid produced by a CO2 capture project or a CO2 capture and sequestration project into a Class II injection well for purposes of enhanced oil recovery, including the facilitation of enhanced oil recovery from another well.

Those opposed to CCUS projects have concerns that these types of injections increase pressure in storage locations close to oil and gas reserves and create instability.

Assembly Bill No. 1757

California has “shown a growing interest in utilizing forests and other underutilized lands as ‘carbon sinks’ to absorb and permanently store CO2 already in the atmosphere,” adds Reed Smith.

Assembly Bill 1757 requires the Natural Resources Agency (NRA), in collaboration with CARB and other specified state entities, to determine on or before January 1, 2024, an ambitious range of targets for natural carbon sequestration and for nature-based climate solutions that reduce greenhouse gas emissions for 2030, 2038, and 2045 to support state goals to achieve carbon neutrality and foster climate adaptation and resilience.

The bill would require these targets to be integrated into the California Climate Change Scooping Plan. The NRA is also required to review and update the Natural and Working Lands Climate Smart Strategy to achieve these targets.

The NRA and CARB must jointly establish an expert advisory committee to inform and review modeling and analyses for natural and working lands, to advise state agencies on implementation strategies and standardized accounting, and to provide recommendations on addressing barriers to efficient implementation of the provisions of the bill.

The bill would require the NRA to publish data on its website on progress made in achieving these targets.

“The NRA must update the techniques for natural carbon capture to include: planting trees and shrubs, using compost and cover crops on farmland, creating green spaces in urban areas and restoring wetlands,” continues Reed Smith.

By January 1, 2025, CARB must develop standard methods for state agencies to consistently track GHG emissions and reductions; carbon sequestration; and, where feasible and in consultation with the NRA and the Department of Food and Agriculture, additional benefits from natural and working lands over time. In estimating and tracking GHG emissions and reductions and carbon sequestration from natural working lands, CARB must account for GHG emissions and reductions of CO2, methane, and nitrous oxide related to natural and working lands and the potential impacts of climate change on the ability to reduce GHG emissions and sequester carbon from natural and working lands.

“The value of this bill may depend in part on whether CARB expands its palette of approved ‘compliance offset protocols,’” Reed Smith advises. “At present, CARB has approved three potentially relevant protocols:

  1. rice cultivation projects
  2. urban forest projects
  3. U.S. Forest projects.

“The scope of potential projects envisioned under AB 1757 could warrant CARB approving additional protocols. Historically, that has been a controversial process in terms of varying views as to what type of project warrants a state-approved protocol, which ultimately could allow an industrial source to emit additional CO2 because it has generated or purchased offsets under a protocol.”

Although these actions establish definitive regulatory controls, they also provide certainty for CCUS and CDR project operators.

The regulations are expected to become effective on January 1, 2023.

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