UIC Class VI Program - Cogcc.state.co.us

Executive SummarySB21-264 tasked the Colorado Oil and Gas ConservationCommission (COGCC) with compiling a report toevaluate the resources needed for the state ofColorado to implement a safe and effective UICClass VI program. In order to better understand theresources necessary for a state program, this reportsummarizes the requirements of a successful ClassVI primacy application and outlines technical ClassVI project components to inform what regulatoryoversight may be appropriate. The report then detailsthe existing and recommended state resources for aClass VI program with a primary focus on resourcesavailable at COGCC and summarizes potential fundingsources for continued oversight of Class VI projects.In addition, there are legal, policy, and regulatorybarriers to consider for Colorado to implement a safeand effective Class VI program.If Colorado elects to seek primacy over Class VI wellsfor CO2 injection, the COGCC likely is the agency bestpositioned to effectively pursue and implement a safeand effective UIC Class VI program from an establishedtechnical expertise perspective. While the COGCCdoes have existing staff and processes that wouldserve as a resource for a Class VI program, additionalstaff, expertise, and resources will be required. Tosuccessfully coordinate the primacy process, at least1 FTE would be required as a Class VI coordinator.Immediate funding for staff training would be requiredin order to ensure an effective program. Leading upto gaining primacy or after obtaining primacy, theprogram will require additional funds for purchasinga modeling computer, licensing modeling software,updating the COGIS database to suit Class VI projects,and hiring at least 4 FTEs, including 3 UIC programpositions and a data management specialist. Oncethe quantity of potential Class VI projects is betterunderstood, staffing and resource requirements mayneed to be reevaluated.There are a variety of available options for funding astate UIC Class VI program including injection fundsand application and regulatory fees. State injectionfunds help meet the costs of a Class VI program,provide funding for long-term site care after siteclosure, and can be fully or partially funded througha fee based on the amount of CO2 injected. Byincorporating or creating multiple sources of funding,including per ton injection fees, processing fees, andfederal grants, state injection funds can help create asustainable and fully funded state UIC Class VI programin Colorado.The safe and effective implementation of a UIC ClassVI program in Colorado includes not only technicalprogram considerations, but also requires addressinglegal, policy, and regulatory barriers. Considerationsinclude state regulatory authority, pore spaceownership, aggregating property rights, liability issues,Class II wells, pipelines, and the need to promulgateClass VI rules. In order for the COGCC to seek andobtain Class VI primacy, the General Assembly wouldneed to grant the COGCC authority over all Class VIwells by amending the Oil and Gas Conservation Act.An important consideration for carbon storage inColorado is pore space including pore space ownership,split estates, competing uses, and the extent of porespace rights. As Class VI projects may span a largearea, aggregating property rights is essential andconsiderations should be given to unitization andeminent domain. Due to their unique duration as wellas the potential size of the storage area, Class VIprojects raise liability issues that policymakers shouldalso consider, including induced seismicity and longterm site stewardship. The COGCC looks forward tofurther discussions about these important topics withColorado policymakers and stakeholders. Additionalconsiderations and recommendations for CCUS in thestate of Colorado will be discussed in the ColoradoEnergy Office’s forthcoming CCUS Task Force Report.Requirements, Resources, Considerations and Recommendationsfor the State of Colorado to Implement a Safe and Effective UIC Class VI Program3

4Requirements, Resources, Considerations and Recommendationsfor the State of Colorado to Implement a Safe and Effective UIC Class VI Program

IntroductionWith the passage of SB21-264, the Colorado Oil andGas Conservation Commission (COGCC) was tasked withcompiling a report “to evaluate what resources areneeded to ensure the safe and effective regulation ofthe sequestration of greenhouse gases, as that term isdefined in section 25-7-140(6), C.R.S., and to identifyand assess the applicable resources that the commissionor other state agencies have.” In addressing this task,the COGCC has compiled the following report, whichsummarizes the requirements and resources necessaryto achieve primacy and implement a safe and effectiveUnderground Injection Control (UIC) Class VI programin Colorado.As Colorado moves to address climate change and meetclean energy goals, the path forward will necessarilyinclude multiple strategies applied simultaneouslyin order to reduce greenhouse gas emissions. Thegeologic sequestration of carbon dioxide (CO2) in thesubsurface is an important, emerging tool for reducingemissions around the nation and meeting climate goals.Specifically, carbon capture utilization and storage(CCUS) is a critical strategy for mitigating emissionsin advanced and developing economies.1 Further, theavailability of “firm” low carbon resources, includingflexible power plants with carbon capture and storage(CCS), may be an important factor in containing thecost of power sector decarbonization.2Colorado has an estimated CO2 sequestration potentialof over 720 billion tons, according to the ColoradoGeological Survey. The storage potential is primarilyin the Denver Basin, Cañon City Embayment, PiceanceBasin, and Sand Wash Basin.3 A significant quantity ofthe storage potential in Colorado is classified as “verylow storage cost” due to the location of carbon sourcesin relation to existing infrastructure including pipelinesand UIC Class II operations paired with suitable geologyfor permanent storage.4 Considering these factors, thegeologic sequestration of CO2 through injection into thedeep subsurface has the potential to become prevalentin Colorado.Through the enforcement of the Safe Drinking WaterAct (SDWA), the Environmental Protection Agency (EPA)regulates Class VI wells, which inject CO2 into deeprock formations for long-term underground storage.The SDWA requires the EPA to develop minimum federalrequirements for injection practices that protect publichealth and prevent contamination of undergroundsources of drinking water (USDWs) for different classesof injection wells. The EPA has established federalrequirements for Class VI wells, referred to as theClass VI Rule.5The EPA is authorized to review and approve state UICprogram applications for primacy, which means thestate is the regulatory entity for a particular class ofinjection wells. A state may seek primacy over all orsome classes of injection wells. If Colorado elects toseek primacy over Class VI wells for CO2 injection, theCOGCC is the agency best positioned to effectivelypursue and implement a safe and effective UIC ClassVI program. Due to its existing UIC Class II primacy andexperience with oil and gas operations, the COGCC hasa variety of existing staff, resources, and processesthat would be beneficial in efficiently and effectivelyimplementing a Class VI program. In addition to theCOGCC’s resources, collaboration with other agencieson Class VI projects would be essential to a safe andeffective Class VI program.This report summarizes the requirements of a successfulClass VI primacy application and outlines technicalClass VI project components to better understandthe resources required for a state to implement aUIC Class VI program. Following the synopsis of thetechnical aspects of a program, the report detailsthe existing and recommended state resources for aClass VI program and summarizes potential fundingsources for continued oversight of Class VI projects.Finally, the report reviews potential legal, policy, andregulatory considerations for the safe and effectiveimplementation of a UIC Class VI program in Colorado,including regulatory authority, pore space ownership,aggregating property rights, liability issues, Class IIwells, and pipelines.The COGCC’s intent in compiling this report is toprovide the information necessary to evaluate theexisting and additional resources required for the stateof Colorado to safely and effectively implement a UICClass VI Program.1 Gosnell G, Singer L, Carbon Capture, Utilization, and Storage: What it is and Whyit’s Part of a Comprehensive Climate Solution, Payne Commentary Series: Explainer,September 13, 2021. S-climate-solution.pdf2 Sepulveda N., Jenkins J., Sisternes F., Lester R., The Role of Firm Low-CarbonElectricity Resources in Deep Decarbonization of Power Generation, Joule, Volume 2,Issue 11, November 21, 2018, pg 2416, https://doi.org/10.1016/j.joule.2018.08.006.3 Young G., Lintz V., Widmann B., Bird D., Cappa J., CO2 Sequestration Potential ofColorado, Colorado Geological Survey Resource Series 45, 2007, pg 1-13.4 Abramson E., McFarlane D., Brown J., Transport Infrastructure for Carbon Captureand Storage: Whitepaper on Regional Infrastructure for Midcentury Decarbonization,Great Plains Institute, June 2020, pg 17, Figure 13, Accessed October 2021. 20/06/GPI RegionalCO2Whitepaper.pdf5 40 C.F.R. § 146.81 - 40 C.F.R. § 146.95. bchapter-D/part-146/subpart-HRequirements, Resources, Considerations and Recommendationsfor the State of Colorado to Implement a Safe and Effective UIC Class VI Program5

Seeking and Obtaining Primacyfor a Class VI ProgramUnder the Safe Drinking Water Act and the EPA’s ClassVI Rule, the EPA is authorized to review and approvestate UIC program applications for primacy. The EPAprovides detailed guidance for states interested inpursuing UIC Class VI primacy.6 The EPA encouragesstates to seek primacy to increase permitting speedby distributing the permitting and enforcementresponsibilities to qualified states.State interest in Class VI primacy is growing as climategoals have become more ambitious and geologicsequestration projects are moving forward. NorthDakota and Wyoming have Class VI primacy, andNorth Dakota is actively working on Class VI permits.Louisiana has submitted a primacy application. Texas,Arizona, and West Virginia are in the pre-applicationphase, and additional states are exploring options for aUIC Class VI program.7Interest in geologic sequestration projects is increasingthroughout the nation although currently only twostates have Class VI primacy. The EPA may be limited inthe amount of time and resources to commit to futurepermitting projects from states without primacy. Withthat in mind, states with primacy may be positionedto process permit applications at a comparativelyaccelerated rate. Seeking and obtaining state primacycould therefore play an important role in the successof future Class VI projects in the state of Colorado.Currently Colorado only has primacy over UIC Class IIwells through a SDWA section 1425 primacy program,which is implemented by the COGCC. States with onlyClass II primacy can apply for independent primacyfor UIC Class VI wells under SDWA section 1422. Toapply for Class VI primacy, states are required toset up a regulatory framework that will ensure theprotection of USDWs. The application must show thatthe state’s statutes and rules are at least as stringentas all federal requirements. The application must alsosupport the capability of the state to implement asafe and effective UIC Class VI program. The COGCChas an established record of regulating in a manner at6 EPA.gov, Underground Injection Control (UIC) Program Class VI Primacy Manual forState Directors, April 2014, Accessed October 2021. cuments/epa816b14003.pdf7 Carbon Capture Coalition, Class VI Wells: Permitting & Primacy for Secure, Long-TermStorage of CO2, April 2021, Accessed October 2021. ads/2021/06/Class-VI-backgrounder.pdf8 EPA.gov, Underground Injection Control (UIC) Program Class VI Primacy Manual forState Directors, supra note 6, pg 8.6least as stringent as the federal government, and oftenexceeding federal requirements for the protection ofpublic health, safety, and welfare, the environment,and wildlife resources. Moreover, the COGCCcoordinates closely with Colorado’s Water QualityControl Division when implementing regulations toprotect groundwater.States that seek to obtain Class VI primacy must beable to demonstrate that the state UIC program willsatisfy a number of federal requirements. A state UICClass VI program is required to develop regulationsthat ensure the protection of USDWs, includingrequirements for permitting, siting, construction,operation, testing, monitoring, plugging, and siteclosure of Class VI injection wells. The generalrequirements for a state UIC Class VI Program includehaving the legal authority to implement all permitrequirements, the necessary procedures for a statecompliance evaluation and enforcement program,regulations that are at least as stringent as federalrules, and statewide jurisdiction over the undergroundinjection projects for which it is responsible.8 The EPArecommends pre-application meetings and discussionin order to ensure that a primacy application containsall required information.Components of a PrimacyApplication for a New SDWASection 1422 UIC ProgramUnder SDWA Section 1422 and 40 C.F.R. § 145.22, astate seeking UIC Class VI primacy must submit anapplication that includes the following six components.1. Governor’s letter requesting program approval2. Program description describing how the stateintends to carry out its responsibilities3. Attorney General’s statement4. Memorandum of Agreement with the EPA5. Applicable state statutes and regulations6. Demonstration of the state’s public participationactivitiesRequirements, Resources, Considerations and Recommendationsfor the State of Colorado to Implement a Safe and Effective UIC Class VI Program

Governor’s LetterClass VI primacy applications must include a letterfrom the governor requesting the approval of the UICprogram. The letter should include a reference toSDWA Section 1422 and express that the state is willingand able to administer the program in the application.Program DescriptionThe program description is a core component of anapplication and contains several required sectionsdescribing how the state intends to administer theUIC Class VI program. The federal requirements for aprogram description are listed in 40 C.F.R. § 145.23.The program description must demonstrate that thestate’s UIC Class VI program is at least as stringentas the federal standards with a primary focus ofprotecting USDWs. The minimum required elements ofa program description are outlined below in Table 1.The EPA also recommends that the state includeinformation on how the state will implement thefinancial responsibility requirements, although this isnot explicitly stated in the rule.In addition to the elements listed in the federal rule,the EPA recommends that the permitting authoritiesdemonstrate in their application that they have therequired in-house expertise or access to contractorsupport to effectively administer the program. Thisexpertise should include the ability to evaluate andverify multiple types of information. Expertise in thefollowing areas is recommended.91. Site characterization—geology, log analysis,geochemistry, etc.2. Computational modeling—reservoir models forevaluating the area of review (project extents)3. Well construction and testing—well engineering,log analysis, well construction, etc.9 EPA.gov, Underground Injection Control (UIC) Program Class VI Primacy Manual forState Directors, supra note 6, pg 10-11.Table 1. Elements of a Program Description per 40 C.F.R. § 145.23Program Element and Description1A narrative of the scope, structure, coverage, and processes of the state program. A general overview ofthe proposed state program including staff expertise and processes pertaining to the Class VI program.2A description of the organizational structure of the agency administering the program. This includesa description of program staff, organization charts, and estimated costs and sources of funding forimplementing the program for the first 2 years.3A description of permitting, administrative, and judicial review procedures.4Copies of the current forms in use by the state or any available drafts or outlines of new forms.5A description of the state’s compliance tracking and enforcement program.6A schedule for issuing Class VI permits within 2 years after program approval.7A statement of the state’s priorities for issuing Class VI permits and the number of Class VI permits thatwill be issued during the first 2 years of program operation.8A description of how the state will meet the mechanical integrity testing requirements for Class VI wells.9A description of the state’s procedures to notify owners or operators of existing injection wells of therequirement to apply for and obtain a Class VI permit.10A description of how the state will establish and maintain an injection well inventory.11A description of aquifers, or parts thereof, which the UIC Program Director has identified under40 C.F.R. § 144.7(b) as exempted aquifers and a summary of supporting data.12A description of the state’s procedures for notifying any states, tribes, and territories of Class VI permitapplications where the AoR crosses jurisdictional boundaries and the procedures for documenting theseconsultations.Requirements, Resources, Considerations and Recommendationsfor the State of Colorado to Implement a Safe and Effective UIC Class VI Program7

4. Finance—financial responsibility5. Policy and regulatory information6. Enforcement and compliance7. Emergency and remedial response plans—riskanalysis8. InspectionsAttorney General’s StatementThis statement is a certification that the laws ofthe state provide adequate authority to carry outthe program described in the application. Thestatement shall include citations to specific statutes,regulations, and judicial decisions that support thestate’s authority. The statutes and regulations must belawfully adopted by the time the statement is signedand must be fully effective by the time the program isapproved.Memorandum of Agreement with theRegional AdministratorA memorandum of agreement (MOA) with the EPAis required for all new primacy applications. TheMOA establishes the arrangement between thestate and the EPA in regards to the administration,implementation, and enforcement of a state UIC ClassVI program. The agreement should clearly outline therole of the state and when the EPA will and will not beinvolved.Applicable State Statutes and RegulationsA copy of all applicable state statutes and regulationsis required in order to facilitate the applicationapproval process. The EPA uses a regulatory crosswalkto compare and confirm that state regulations areat least as stringent as federal requirements. Thecrosswalk is a robust chart containing all federalregulations required for a UIC Class VI program. Inthe pre-application process and during rulemaking,the state and EPA typically spend a significant amountof time discussing and negotiating the regulat

and hiring at least 4 FTEs, including 3 UIC program positions and a data management specialist. Once the quantity of potential Class VI projects is better understood, staffing and resource requirements may need to be reevaluated. There are a variety of available options for funding a state UIC Class VI program including injection funds