House Natural Resources Committee Advances Pair of Carbon Capture and Sequestration Bills

Liability protections for a Vigo County CCS project and a state permitting process for future CCS projects passed the committee.
January 20, 2022

Indiana lawmakers have advanced a pair of bills seeking to establish the validity of carbon capture and sequestration projects in the state.

The House Committee on Natural Resources passed House Bill 1249, which gives a Vigo County carbon capture sequestration project special liability protections, and House Bill 1209, which sets the foundation for a state permitting process for CCS projects.

Carbon capture and sequestration is the process of capturing carbon dioxide emissions from power plants or industrial processes and injecting the carbon dioxide into rock formations deep underground.

CCS projects could prevent hundreds of millions of tons of carbon dioxide from entering the atmosphere and trapping heat, potentially reducing the severity of future climate change impacts.

But the technology has, so far, failed to live up to its potential.

The U.S. Department of Energy spent $1.1 billion on coal and industrial CCS demonstration projects between 2010 and 2017, and the 2021 Infrastructure Investment and Jobs Act appropriated $2.5 billion more for more CCS demonstration projects between 2022 and 2025.

Only three of 11 projects were completed in the DoE’s initial CCS investment, two located in Texas and one in Illinois, despite the DoE bypassing cost controls to keep projects afloat.

The three projects cost the U.S. $620.6 million to capture a total of 3.4 million metric tons of carbon dioxide a year, less than 1% of the country’s total 5.1 billion metric tons of yearly energy-related carbon dioxide emissions.

One of the three projects shuttered in 2020, reducing the carbon capture potential to 2 million metric tons of carbon dioxide a year.

CCS proponents, including the producers and users of fossil fuels responsible for a large portion of carbon dioxide emissions, argue that more investment from the government is necessary to make the projects financially viable and ultimately more effective at capturing carbon dioxide.

Critics argue that CCS projects and federal tax cuts that support the projects give coal plants and other carbon dioxide emitters a lifeline that could prolong the emissions the projects are meant to offset.

Indiana lawmakers decided to test the efficacy of carbon capture and sequestration in 2019 by authorizing a pilot project in Vigo County at Wabash Valley Resources LLC’s hydrogen and ammonia plant in West Terre Haute. The project was dependent on receiving an Underground Injection Control Class VI permit from the U.S. Environmental Protection Agency.

Nearly three years after the pilot project was approved by the state, the company has not yet received its permit and has not yet begun sequestering carbon dioxide, despite receiving dozens of millions of dollars in federal and private funding.

House Bill 1249, introduced by Rep. David Abbott, makes changes to the description of the pilot project and protects Wabash Valley Resources from lawsuits brought by people affected by the CCS project unless they can prove there was actual interference with the person’s use of their property or “direct and tangible” physical damage to a person’s property. A person would not be allowed to sue due to a “perceived risk” to their property, including a diminution of value of their property because of the CCS project.

Similar language was introduced as an amendment to a carbon market bill last year, but was removed when it threatened to sink the bill.

“We think this is a very important project. It's a pilot project. This means that we're going to shoot up the test rocket before we fly to Mars. So, we're using this as our as our test baby, so to speak, and we're going to learn from this. We're going to get an entrepreneurship going that’s invested millions of dollars that’s for a benefit that's going to help everyone in Indiana,” Abbott said when introducing the bill. “I think this is extremely important, and this liability issue is just a clarity. It's already established in statute. We're just making this more clear.”

The bill was opposed by the Indiana Department of Natural Resources, which said language in the bill could allow Wabash Valley Resources, as pilot project operator, to have liability immunity that other entities would not have and could allow the company to take land without compensating the owner.

“In effect, you are handing over a property to a private company without compensating the landowner. While the department is supportive of exploration in this field, we would prefer not to see this language Incorporated,” said DNR legislative and public policy director Caitlin Smith. “We believe that the pilot operators should have to acquire pore space and ownership and all other necessary property rights before sequestering carbon, and, as a pilot project operator, should not be afforded such broad sweeping liability protections at the expense of both landowners and state taxpayers in a field where we are still learning more about the potential short- and long-term consequences of these projects.”

Concerns about the unique liability protections and their effect on property rights caused agricultural groups like the Indiana Corn Growers Association, the Indiana Soy Bean Alliance and the Indiana Farm Bureau to oppose the bill in its current form.

“While we understand that CO2 storage or disposal is a growing commercial industry, it shouldn't take precedent over property rights. And, so, I think this bill could stand to be clearer on whether subsurface pore space is retained by the landowner, which, if it's not, would be a large shift away from Indiana’s historically landowner-friendly policies,” said Indiana Farm Bureau associate director of policy engagement Jeff Cummins.

If the CCS pilot project is allowed to take ownership of the pore space under land owned by someone else, that could have an effect on the landowner’s prospects of using their land to sell carbon credits on a carbon market.

The bill was also opposed by the Citizens Action Coalition, the Hoosier Environmental Council, and the NAACP Indiana State Conference.

Despite the concerns and opposition, the bill passed the committee by a narrow 7 to 5 vote.

House Bill 1209, authored by Rep. Ed Soliday, establishes the foundation for a permit program for CCS projects in the state.

If the bill becomes law, once CCS projects apply for and receive an UIC Class VI permit and purchases or leases rights to the pore space where carbon dioxide would be injected, the project operator can apply for a permit from DNR.

If the project is approved, the operator would have to pay 8 cents for every ton of carbon dioxide estimated to be injected into the storage facility underground. The money would go into a trust fund to defray DNR costs for the long-term monitoring and management of the facility.

The bill would also prohibit punitive damages in lawsuits when the CCS operator is in compliance with DNR permit requirements.

The bill is supported by fossil fuel operations in Indiana, BP and Countrymark.

“There are over 100 CCS projects under consideration globally, and these projects are going to compete against each other to determine which ones progress just like any projects in any investments that we do. Indiana has a distinct advantage in this competition. It has a subsurface potential that is unique in the United States and the world,” said Damien Bilbao, BP vice president of U.S. business development.

Researchers have found that the hundreds of depleted oil and gas fields found in Indiana since the late 1800s would be "optimal candidates" for carbon dioxide sequestration due to favorable porosity, structural depth, temperature and other features.

BP’s Whiting Refinery in northwest Indiana produces about 440,000 barrels of crude oil every day. According to EPA estimates, each barrel of crude oil produces .43 metric tons of carbon dioxide, or about 189,000 metric tons of carbon dioxide equivalent.

A single CCS project would only be able to capture and sequester about nine days’ worth of carbon dioxide produced by the Whiting Refinery’s oil every year.

House Bill 1209 passed the committee by a vote of 10 to two. Both bills will now be considered by the full House.

House Natural Resources Committee Advances Pair of Carbon Capture and Sequestration Bills