States should not weaken liability laws for CCS projects

Early this January, a geyser in West Texas started spewing tens of thousands of barrels of salty water a hundred feet into the air and coating the nearby land with salt deposits. It took about 10 days to discover the culprit was an old, dry oil well plugged in 1957 by Gulf Oil. By the next day, the Texas Railroad Commission had turned over the blowout and remediation to Chevron (who acquired Gulf Oil in the 1980s), who assumed full responsibility immediately and without question.

This is a normal cost of doing business in the oilfield in Texas and elsewhere — you break it, you pay for it.

Traditional regulatory and legal principles around liability are designed to hold operators accountable when they or those they are responsible for fail to live up to their responsibilities. Such rules encourage operators to do as good and thorough a job as technically feasible.

However, some states are weakening these rules for operators of carbon sequestration and storage projects. If this quiet trend continues, the integrity of these projects, their climate benefits and their public acceptance could be significantly threatened.

Storing carbon dioxide deep underground is one of many strategies we will need to meet our collective, global net-zero goals and prevent the worst impacts of climate change. Echoing the outcomes of numerous experts and models, the White House Council on Environmental Quality acknowledges we will need to permanently sequester “significant quantities of carbon dioxide” in the not-too-distant future. If sites are appropriately selected, designed, operated and monitored, the IPCC concludes it’s likely that more than 99% of stored carbon will be retained over at least 1,000 years.

That’s an important “if,” and being held liable for failures is a strong motivator for owners and operators to get it right.

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Carbon storage projects collect comprehensive data to characterize a potential storage site, including different potential leakage pathways. Operators follow complex testing, monitoring, reporting and verification plans to ensure the CO2 stays where it is intended and gather data necessary (even after injection is completed) to prove up models that help to indicate it will stay long term. Once a storage operator meets a set of robust criteria, including modeling based on high-quality data that demonstrates long-term containment of the CO2, regulators can approve the “closure” of the injection site. For most sequestration projects, this might not happen for decades.

This is where so-called “liability relief” comes into play.

The Environmental Protection Agency’s federal rules and regulations for carbon storage wells (Class VI) function similarly to state oil and gas law. As noted in EPA’s Class VI rule preamble, an operator may be held liable for regulatory noncompliance under certain circumstances even after site closure is approved — “such as where the owner or operator provided erroneous data to support approval of site closure” or as necessary to protect health if a leak threatens an underground source of drinking water. EPA’s Class I rules for hazardous waste disposal wells work the same way — even though the waste is required to stay put for 10,000 years.

Technical experts know that if operators do competent work, the CO2 will stay sequestered. There’s no reason for a state to relieve operators of normal liability risks unless the state is trying to encourage incompetent work. Texas — which has not changed liability rules — seems to understand this. Wyoming, however, recently adopted legislation that undermines this important feature by absolving operators of liability (both civil law liability and ongoing regulatory requirements) as soon as a “closure certificate” is in place, even if it is later discovered that closure requirements have not been met. The liability and cost of failed storage facilities and associated remediation would then fall to the state.

Why would a state take on such risk for its citizens?

The argument is that investors won’t back the carbon storage business if there’s a long period of uncertain liability or risk. However, this thinking is simply unfounded. In 2009, Texas adopted its own statute that expressly provides that storage site operators in state waters will retain liability for their mistakes. The law onshore is the same. Despite the absence of liability relief, at least two dozen CCS projects are currently in the pipeline in Texas.

At the end of the day, carbon sequestration is a long-game solution for climate, and operators and those that regulate these projects must be wholly committed to long-term stewardship to ensure projects meet their goals. Modification of liability rules as part of a government-run long-term stewardship program can make sense, but only where that “relief” does not run the risk of incentivizing subpar projects. In other words, states should not create moral hazard in their efforts to craft liability provisions aiming to attract investment — creating a situation where operators lack incentive to decrease their exposure risk because they will not face significant consequences if projects eventually fail or have negative effects.

In the European Union’s framework for CCS, authorities have authority to reopen liability in cases of deficient data, negligence, failure to exercise due diligence and more. When states in the U.S. (and the investors and operators encouraging them) weaken liability rules, EPA should step in and reconsider whether such states should have primary enforcement authority for carbon storage wells on grounds that the state’s approach to long-term stewardship does not align with EPA’s precedent. Further, federal tax dollars intended to support CCS projects may be better spent in states that haven’t made these changes.

If carbon storage is to live up to its potential as a valuable tool in our net-zero toolbox (and we need it to), operators must be long-term stewards of their projects. In addition, our regulatory system must hold them to that high standard and expectation. So-called liability relief for CCS upends a century of legal practice relating to oil and gas and other subsurface projects, and it puts the very potential of CCS projects at risk.

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