An active legislative area is carbon capture and storage (“CCS”), which could be an option for incentivizing Louisiana’s struggling energy economy. On August 19, 2020, Governor Edwards issued two executive orders directed towards the ambitious commitment (or pledge) to cut greenhouse gas emissions 25-28% by 2025 and to planning measures in order that Louisiana would be “net zero” by 2025. One of the Governor’s executive orders creates a “Climate Initiatives Task Force,” comprised of 23 mostly yet-to-be-named members from nine state agencies, the Public Service Commission, the Louisiana Mid-Continent Oil and Gas Association; the Louisiana Chemical Association, an electric utility, a federal scientific agency, an environmental group, a community development group, a member of a tribal organization, a local government representative, a person with climate change policy experience, and an at large member.
Meeting these goals represents a huge practical and political challenge. For industrial facilities, in addition to process improvements, energy efficiency projects, and pollution controls, meeting this challenge can include the removal of carbon dioxide (CO2) from emission sources for permanent underground storage. Geological storage (sequestration) will require Louisiana industry to develop and implement carbon capture and other related infrastructure projects. These initiatives, along with the oil and gas industry’s recent embrace and commitment to implement climate solutions, opens the door for Louisiana to become an economic hub for CCS in the United States.
In Louisiana, we are fortunate that the highly concentrated industrial corridors from which CO2 can be captured are in relatively close proximity to the depleted and ideal geological formations which are capable of sequestration. These factors, as well as Louisiana having available pipeline infrastructure, knowledgeable experts, and an experienced workforce, make Louisiana particularly well suited to development of CCS.
In this regard, recent Act No. 61 of the 2020 Louisiana Legislature (Senate Bill 353, by Sen. Sharon Hewitt), updates the Louisiana Geologic Sequestration of Carbon Dioxide Act and provides greater clarity with respect to “geologic storage facilities of hydrocarbon-bearing formations.” It also extends the time for repayment of the fee for the carbon dioxide geologic storage trust fund from 10 years to 12 years, and creates a site-specific trust account (rather than the fee going to the State), together with other beneficial updates to the law.
On the federal level, very recently, the U.S. Treasury Department and IRS issued long-awaited proposed regulations with respect to the Section 45Q tax credits concerning the sequestration of CO2 for enhanced oil recovery. 85 Fed.Reg. 34050 (June 2, 2020). These proposed rules would provide greater certainty concerning the qualifications, implementation, use, and transfer of these tax credits. The public comment period on the proposed rules ended August 3, 2020, and a final rule is anticipated before the end of the year.
When considering Louisiana’s infrastructure, its laws and regulations already in place for CCS, the potential finalization of Section 45Q credits, regulators who are eager to work with companies to kickstart this new industry, and the Governor’s new Climate Initiates Task Force, it appears that Louisiana is well-positioned to become a global leader in carbon capture and storage.