Regulating Shipping of Carbon Dioxide for Sequestration

Copyright © 2024 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org. A R T I C L E S REGULATING SHIPPING OF CARBON DIOXIDE FOR SEQUESTRATION by Carolina Arlota and Michael B. Gerrard Dr. Carolina Arlota is a nonresident fellow at the Sabin Center for Climate Change Law. Michael B. Gerrard is Andrew Sabin Professor of Professional Practice at Columbia Law School and founder and faculty director of the Sabin Center for Climate Change Law. SUMMAR Y A number of facilities intended for permanent sequestration of carbon dioxide are being developed in the United States. Several will be located on or near the coast of the Gulf of Mexico, making them easily accessible to ships. Meanwhile, in Europe there is substantial interest in capturing carbon dioxide from industrial operations, but currently inadequate sequestration facilities, and growing interest in shipping carbon dioxide for sequestration in the United States. This Article reviews the main U.S. federal laws applicable to transportation and geologic storage of carbon dioxide, including laws enacted to implement relevant international treaties. The Article also contextualizes its main f‌indings in light of the National Environmental Policy Act’s application to projects involving transportation and related storage of carbon dioxide. Finally, it considers paradigmatic state laws on the topic, namely those from Louisiana, North Dakota, Wyoming, and Texas. A number of large facilities intended for permanent sequestration of carbon dioxide are being developed in the United States. 1 Several of these will be Authors’ Note: The authors are grateful to Pria Deanna Mahadevan for her excellent edits on earlier drafts of this Article. They appreciate Prof. Romany Webb’s thoughtful comments throughout their writing. The authors also appreciate the excellent work of Hunter Jones and fellow ELR editors. This Article is based on Chapters 5 and 6 of their report titled “Legal Issues in Oceanic Transport of Carbon Dioxide for Sequestration.” The research was funded by Peter G. Livanos, chairman of EcoLog Ltd. The views presented here are those of the authors alone. onstrations of programs under the Energy Act of 2020), and related boost for CCS research and monitoring capabilities for storage under the U.S. Department of Energy (DOE) ( see Creating Helpful Incentives to Produce Seminconductors ( CHIPS) Act, Pub. L. No. 117-167, §10102, 136 Stat. 1366 (2022)). Meanwhile, additional federal funding for the transportation stages of the CCS chain, including shipping of carbon dioxide for storage in the United States, made headlines lately. See, e.g. , Press Release, DOE Oice of Energy and Carbon Management, DOE Announces $500 Million to Build a Safe and Reliable Carbon Dioxide Transportation System (May 2, 2024). 2. Global CCS Institute, Global Status of CCS 2023, at 29-32 (2023), https://www.globalccsinstitute.com/wp-content/uploads/2023/11/GSR23-Executive-Summary_PDF.pdf ( he United States is leading the global CCS landscape, with 73 CCS facilities operating, in construction, and in development. In Louisiana, the report notes the recent decision to build a Central Louisiana Regional Carbon Storage Hub (CENLA Hub); in Texas, the report highlights the construction of the Bayou Bend CCS project and the Costal Bend CCS project, the latter in Corpus Christi.). 3. his interest is poised to increase as carbon pricing within the European Union (EU) and, more broadly, within the European Economic Area rises under the European Union Emissions Trading System (EU ETS). he EU 1. hese developments beneited from recently enacted federal legislation, chief among them being the Infrastructure and Investment Jobs Act of 2021, which allocates $12 billion for new investment in carbon capture, use, and storage ( see Infrastructure and Investment Jobs Act, Pub. L. No. 117-58, 135 Stat. 1467 (2021)) , the Inlation Reduction Act of 2022, earmarking $ 369 billion to climate and energy funding over the next decade and creating additional tax incentives through enhancements to Internal Revenue Code § 45Q for direct air capture and carbon capture and storage (CCS) ( see Inlation Reduction Act, Pub. L. No. 117-169, 136 Stat. 1818 (2022), including funding for new programs and previously approved dem- located in Texas and Louisiana on or near the coast of the Gulf of Mexico, making them easily accessible to ships. 2 At the same time, there is substantial interest in Europe in installing equipment to capture carbon dioxide from certain industrial operations before it is emitted into the atmosphere, 3 but currently there are inadequate facilities 10-2024 ENVIRONMENTAL LAW REPORTER 54 ELR 10837 Copyright © 2024 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org. existing in Europe to sequester much of this carbon dioxide. 4 Moreover, pressure is increasing for countriesand developed countries, in particularto curb their emissions under international treaties, 5 with the Intergovernmental Panel on Climate Change (IPCC) having long established carbon capture and storage (CCS) as “ an option in the portfolio of mitigation actions for stabilization of atmospheric greenhouse gas concentrations.” 6 herefore, there is interest in the possibility of using ships to transport carbon dioxide that has been captured in Europe to the United States for sequestration. In that context, this Article reviews the main U.S. federal laws applicable to the transportation and geologic storage of carbon dioxide, including laws enacted to implement relevant international treaties to which the United States is a Party or treaties with which the United States must comply under customary international law, despite not being a Party . 7 It also considers paradigmatic state laws on the ETS is regulated under Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community and Amending Council Directive 96/81/EC, 2003 O.J. (L 275) 32. his ETS is considered the basis of the EU’s climate policies. See Lorenzo Squintani et al., Regulating Greenhouse Gas Emissions From EU ETS Installations: What Room Is Left for Member States? , in Climate Law in EU Member States: Towards National Legislation for Climate Protection 67, 67-70 (Marjan Peeters et al. eds., Edward Elgar 2012). Related to the EU ETS is the Carbon Border Adjustment Mechanism of the European Union, more commonly known as the CBAM. he EU ETS and the CBAM share a common objective of pricing greenhouse gas (GHG) emissions from the same sectors and goods by using speciic allowances or certiicates. Both systems are regulatory in nature and are based on the need to curb GHG emissions, as is required by the binding environmental target under EU law. Regulation 2023/956 of the European Parliament and of the Council of 10 May 2023 Establishing a Carbon Border Adjustment Mechanism, 2023 O.J. (L 130) 52, item 20, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.L_.2023.130.01.0052.01.ENG&toc= OJ%3AL%3A2023%3A130%3ATOC [https://perma.cc/Z993-UPND]. 4. Stephen Rassenfoss, Europe Wants to Export Its CO 2 ; he Question Is: Who Wants It? , J. Petroleum Tech. (Jan. 15, 2023), https://jpt.spe.org/europe-wants-to-export-its-co2-the-question-is-who-wants-it (highlighting that Europe overall lacks vast storage capacity, except for a few countries such as Denmark, Iceland, and Norway). 5. See, e.g. , United Nations Framework Convention on Climate Change art. 2, May 9, 1992, S. Treaty Doc. No. 102-38, 1771 U.N.T.S. 107 (aiming at stabilizing GHG emissions “at a level that would prevent dangerous anthropogenic interference with the climate system,” while providing that the Parties “should protect the climate system for the beneit of present and future generations of humankind, on the basis of equity and in accordance with their common but diferentiated responsibilities and respective capabilities,” id . art. 3(1)). See also Paris Agreement to the United Nations Framework Convention on Climate Change art. 2, Dec. 12, 2015, T.I.A.S. No. 16-1104, which has as its main goal to keep the rise in global average temperature “well below” 2° Celsius (°C) (3.6° Fahrenheit (°F)) above pre-industrial levels, while advancing eforts to cap the temperature increase to 1.5°C (2.7°F) above pre-industrial levels. 6. IPCC, IPCC Special Report on Carbon Dioxide Capture and Storage Prepared by Working Group III of the Intergovernmental Panel on Climate Change 3 (Bert Metz et al. eds., 2005) (his was the irst report from the IPCC exclusively on CCS. From the outset, the report established that widespread application of CCS was contingent on technical maturity, costs, overall potential, difusion, and transfer of the technology to developing countries and their capacity to apply the technology, regulatory aspects, environmental issues, and public perception). According to this seminal report, which predicted the economic attractiveness of carbon dioxide transported by ships, CCS could potentially reduce the overall mitigation costs while increasing lexibility regarding achieving GHG emission reductions. Id . at 21-30. 7. Statute of the International Court of Justice art. 38(1), Apr. 18, 1946, 33 U.N.T.S. 993. Article 38(1) reads in part as follows: topic, namely those from Louisiana, North Dakota, Texas, and Wyoming. his review is based on activities related to geological carbon sequestration, speciically the storage of carbon dioxide in underground geologic formations. 8 It does not address the subsurface injection of carbon dioxide for enhanced oil recovery . he Article builds on our previous research on the existing requirements imposed under international law. 9 As it focuses exclusively on U.S. federal and subnational laws that may be relevant to international transport of carbon dioxide for permanent...