Ohio Gets in on the Action: Proposed House Bill 170 Takes Aim at Carbon Capture & Sequestration

The Ohio General Assembly has recently introduced their attempt to allow carbon capture and sequestration (hereinafter “CCS”) as a widespread means of reducing carbon emissions within the State. The proposed act (hereinafter “HB 170”) focuses attention on the regulatory processes for initiating and operating CCS projects, with a heightened focus on the role that the Ohio Department of Natural Resources (“ODNR”) will play in CCS. A more in-depth discussion of the proposed legislature follows.

Key Provisions of HB 170

HB 170 answers important questions regarding CCS, while also establishing a regulatory scheme for the CCS projects. Specifically, HB 170:

1. Establishes that the “pore space” below the surface lands and water belongs to the surface owner, opposed to the owner of the mineral rights.
2. Grants upon the ODNR’s Division of Oil and Gas Resources Management the role and exclusive authority to regulate CCS projects within the state.
3. Seek priority over the director of transportation and local authorities, stating their authority shall not discriminate against, unfairly impede, or obstruct CCS projects.
4. Introduces the framework of apply to become a CCS operator.
5. Sets the guidelines for when an injection facility is completed and, accordingly, when the chief of the Division of Oil and Gas Resources Management may issue a certificate of completion.
6. Directs the Division of Oil and Gas Resources Management to grant orders for statutory consolidation or pooling of proposed pore space.
7. Establishes an outline of how, as a surface or pore space owner, to recover against the CCS operator if damages materialize.

Legal Implications of HB 170

Importantly, establishing the “pore space” as belonging to the surface owners codifies the existence of a pore space estate interest in Ohio, which will undoubtedly arise in conveyances where subsurface interests are reserved. Illustratively, HB 170 specifically relays that; “No agreement conveying mineral, oil and gas, coal, limestone or similar resource, or other interests underlying the surface shall convey pore space in the strata unless the agreement expressly includes conveyance of the pore space.” Further, this section goes on to establish that when there is a severance of the pore space, the pore space will be considered the dominant estate, which will allow the CCS operator to make reasonable use of the surface to access the pore space.

Additionally, HB 170 creates forced pooling for future CCS projects. Specifically, once a CCS operator has obtained the consent of at least seventy percent of the owners of the proposed pore space, then the operator may apply for statutory consolidation. Further, after the statutory consolidation is applied for, the chief of the Division of Oil and Gas Resources Management shall provide notice to all pore space owners of the proposed CCS operation. After notice has been received, if a subsurface owner expresses an objection based on other valuable minerals, then the chief is able to send the application back to the CCS operator to address the valuable mineral concern, until the chief is satisfied. This portion of HB 170 likely sets the scene for debates about whether the valuable minerals have been depleted. Additionally, this would bring forth a question of which subsurface estate is dominant, the pore space or the minerals.

Also notable is the timetable when the chief may order a certificate of completion. HB 170 denotes that a certificate of completion shall not be issues until fifty or more years have passed from the final carbon dioxide injections. This section includes certain conditions that the operator must meet before the certificate of completion is issued, such as; the carbon dioxide is not expected to extend or migrate outside of storage, the carbon dioxide poses no threat to public health or safety, and all carbon dioxide wells and associated equipment are in good condition and will retain mechanical integrity. Upon satisfaction of the conditions and issuance of a certificate of completion, primary responsibility and liability of the stored carbon dioxide will be transferred to the state. Interestingly enough, the proposed legislation is silent as to the title and ownership of the stored carbon dioxide, rather HB 170 only addresses responsibility and liability.

Conclusion

Time will tell whether this proposed legislation is enacted. If enacted, it will transform Ohio’s carbon emissions and likely have significant legal impact. However, as mentioned above, there are areas for improvement and clarification within HB 170. Stay tuned for more updates.

Law clerk Matthew Gibson contributed to this article.