Carbon Market Bill Now Tied to Legal Protections for Unproven Carbon Capture Project

Senate Bill 373 originally set the foundation for a carbon market clearinghouse in Indiana, but could now protect a state-authorized carbon capture and sequestration company from lawsuits.
April 8, 2021

An amendment attached to a bill originally intended to establish the foundations for a carbon market registration program in Indiana threatens to sink the bill in its current form.

Senate Bill 373 seeks to establish a carbon market registration program that facilitates carbon market trading in the state and to allow the President Benjamin Harrison Conservation Trust Fund to take part.

An amendment introduced by Rep. Alan Morrison and approved by the House Natural Resources Committee could now offer legal protections to an ammonia and hydrogen manufacturing company vying for the right to participate in a pilot program to store carbon underground.

Wabash Valley Resources LLC plant in Vigo County.

Morrison’s amendment would allow Wabash Valley Resources LLC, a company authorized by the state Legislature to drill into the ground and inject carbon dioxide for storage, to use a rare permit issued by the U.S. Environmental Protection Agency as a legal protection. The permit would offer legal protection known as an affirmative defense in some civil lawsuits brought against the company.

The Class VI permit is required to begin storing carbon underground and has not yet been issued to the company by the EPA.

The defense would give landowners who sue Wabash Valley Resources an additional barrier to overcome in order to prove their claims.

“This amendment is giving them release for a liability from that if that CO2 goes underneath some property that was not expected, or even expected, that they cannot be sued for perception or stigma reasons,” Morrison told the House Natural Resources Committee. “And what they're looking for, what we're looking for with this amendment is to not be sued for something that you didn't do. Now, if there's actual property damage, or physical damage, lawsuits can still be brought and people can still be held liable for them. But just the actual existence of this product 8,000 feet below your property is not a reason to be able to be sued.”

Critics of the bill said the amendment allows the private company to store carbon dioxide underneath Hoosier properties without compensation and insulates the company from liability.

How carbon capture and sequestration works.

Many environmental, conservation and advocacy groups that supported the original bill’s intent said they could not support the bill with Morrison’s amendment.

“First and foremost, we are putting the cart way ahead of the horse. We have no understanding whatsoever of the impact on our environment, on our water sources, on our community related to the long-term storage of the underground storage of carbon dioxide in this supercritical, highly pressurized state,” testified Citizens Action Coalition executive director Kerwin Olson. “Furthermore, I would think, from a policy perspective, we should be very, very concerned that a project would need this type of immunity in order to move further.”

Carbon capture and sequestration is the process of capturing carbon dioxide produced from industrial sources, then injecting it into subsurface rock more than a mile underground for storage.

The carbon sequestration process could extend the viability of fossil fuels as a power source for industrial generators by reducing the amount of carbon dioxide that enters the atmosphere, trapping heat and changing the earth’s climate.

Nominally, carbon gas is captured from production facilities, compressed until it is a dense liquid, then injected at high pressures into geological formations more than a mile underground, where it is stored forever.

Environmental groups are concerned the carbon sequestration at the Vigo County facility could set off seismic activity. The plant sits atop a tectonic hot spot known as the Wabash Valley seismic zone. USGS

But the pressure build-up resulting from the carbon sequestration injection process can cause earthquakes, and the liquid carbon dioxide and other liquids used to inject it can leak out of the sequestration area.

High concentrations of carbon dioxide can be lethal to humans and animals.

The EPA has said that those risks can be reduced through proper management and siting, but the risks would still exist.

Groups who testified at the committee hearing said a Class VI permit could not guarantee there would be no threat to the environment or personal property, and thus the legal protections in the amendment were not warranted.

“We think this liability provision is very overly broad and not warranted. Second, compliance with the class six permit requirements does not guard against all possible negative impacts to the environment, to private property and to health,” testified Tim Maloney, senior policy director for the Hoosier Environmental Council.

“[The EPA] identified specific policy areas related to geologic sequestration that are beyond the agency's authority, including but not limited to capture and transport of CO2, managing human health and environmental risks other than drinking water endangerment, determining property rights and transfer of liability from one entity to the other. So even if we have faith that EPA will do a thorough job in their review of the Class VI permit, that doesn't guarantee that all impacts will be evaluated and considered.”

The Indiana Legislature in 2019 passed a bill that provided a pathway for Wabash Valley Resources LLC, a company that produces ammonia for fertilizer and hydrogen, to receive a permit to drill and store carbon underground through the Indiana Department of Natural Resources.

The company would, along with other requirements, need to receive a Class VI permit from the EPA order to inject carbon dioxide underground. Only two EPA Class VI well permits are active in the U.S.

The permit requires applicants to, among other things, detail the geologic setting of the site where injection will occur, provide evidence of financial responsibility, prepare testing and monitoring plans and prepare strategies for the site in the event it is closed down.

The permitting process is lengthy, and the company has not received the permit two years after the passing of the bill and nearly a year and a half after receiving a drilling permit from DNR.

Nalin Gupta, managing partner for Wabash Valley Resources, told the committee his company recently secured a $400 million federal loan that is contingent on getting the amendment passed.

He told the committee that the placement of carbon dioxide thousands of feet below ground would affect landowners as little as an airplane flying overhead would.

“How many of us would actually sue an airplane that flies over your head thousands of feet,” Gupta testified. “That is what we are asking, to the extent we are 8,000 feet below your property that has no use. There is no reduction in enjoyment of your property, then we should be allowed to conduct that activity. However, to the extent that we do something that causes a nuisance, then then let us take the judicial process and prove your case, and there is no indemnification that we seek for that. But today, our funding is contingent on us getting this amendment passed.”

Two previous carbon capture and sequestration projects in Indiana were proposed but later failed.

Duke Energy planned a carbon capture and sequestration project at its Edwardsport Station, but the plan was abandoned due to its high cost.

A carbon sequestration project at a coal gasification plant in Rockport was also abandoned.

The bill passed the House Natural Resources Committee with Morrison’s amendment and an amendment that would establish a study committee before any action is taken to establish the carbon market infrastructure.

The bill was then transferred to the House Judiciary Committee, where it passed 9 to 3.

The bill will now be considered by the full House of Representatives.

Carbon Market Bill Now Tied to Legal Protections for Unproven Carbon Capture Project