The Oil and Gas Addendum

On June 20, 2023, Pennsylvania State Senators Yaw, Robinson, Stefano and Vogel introduced Senate Bill 831, the “Carbon Capture and Sequestration Act” with the intent to address the use of pore space for carbon sequestration. The Carbon Capture and Sequestration Act has been referred to the Pennsylvania Senate Environmental Resources and Energy Committee. Like any proposed legislation, the Carbon Capture and Sequestration Act will be subject to debate and amendment. Nonetheless, Pennsylvania property owners should pay close attention to this proposed legislation because it is a draft framework to govern a potential new industry that could significantly impact Pennsylvania property owners.

The Carbon Capture and Sequestration Act has a worthy purpose, the promotion of geologic storage of carbon dioxide in Pennsylvania. [SB 831, Section 2 (1)]. The Carbon Capture and Sequestration Act defines “Carbon sequestration” as “[t]he underground storage of carbon dioxide in a reservoir.” [SB 831, Section 3].  Authors Douglas W. Duncan and Eric A. Morrissey explain in their paper “The Concept of Geologic Carbon Sequestration” that “[c]arbon dioxide can be captured from stationary sources, such as powerplants and other large industrial facilities, compressed to a fluid state, and injected deep underground into permeable and porous geologic strata in which it will remain isolated for long periods of time.” The carbon dioxide is injected into the ground via “Class VI” wells regulated under the federal Environmental Protection Agency’s Underground Injection Control Program. Click here for more detail about the Class VI permitting process.

Promoting the long-term subsurface storage of carbon dioxide offers two interrelated benefits. First, the impacts of carbon dioxide in the atmosphere can be mitigated by storing carbon dioxide underground. Second, the storage of carbon dioxide offers a new industry and creates economic benefits from that industry. The Carbon Capture and Sequestration Act is a worthwhile first step to set ground rules for the orderly development of a new potential industry and to promote carbon sequestration in Pennsylvania as a matter of public policy.

Section 4(a) of the proposed Carbon Capture and Sequestration Act would set a general rule that “[o]wnership of all pore space in all strata below the surface lands and waters of the Commonwealth shall be vested in the owner of the surface above the pore space.” [SB 831 Sec. 4]. That is consistent with legal authority in Pennsylvania regarding pore space going back over a century to Chartiers Block Coal Co. v. Mellon, 25 A. 597 (Pa. 1893) and aligns with our predictions about pore space ownership in Pennsylvania.

A potential safeguard for pore space owners is Section 7(b) of the Carbon Capture and Storage Act, which states that “[n]o owner of pore space, other individual holding any right to control pore space or other surface property interest owner or subsurface property interest owner, shall be liable for the effects of injecting carbon dioxide for carbon sequestration activities, or for the effects of injecting other substances for the purpose of carbon sequestration which substances are injected incidental to the injection of carbon dioxide, solely by virtue of their interest in the pore space or surface or subsurface rights.” [SB 831 Sec. 7].This provision could help to address liability concerns of pore space owners which could otherwise keep those owners from granting development rights.

On the flip side, the Carbon Capture and Storage Act contains something akin to an oil and gas “forced pooling” concept for pore space carbon storage uses. Section 5 of the proposed legislation is titled “Cotenants, ownership of pore space by multiple cotenants and collective storage” and it provides a way to develop and use pore space for carbon storage even if all property owners do not give consent. [SB 831 Sec. 5]. The proposed Carbon Capture and Storage Act proposes that if a storage operator has the agreement of at least 60% of the pore space owners whose property will be used in a carbon storage project, the storage operator can seek an order from the Secretary of the Pennsylvania Department of Environmental Protection that includes the remaining pore space if an agreement cannot be reached with those owners. As the Carbon Capture and Storage Act progresses through the legislative process, property owners should pay particular attention to this “forced storage” provision to see how it develops.

In all, the Carbon Capture and Storage Act is a needed starting point in Pennsylvania to set up a legal structure governing potential carbon sequestration. Having a well-considered legal structure in place first is preferable over reactionary legislation developed to address an industry that has already to operate. The Carbon Capture and Storage Act is not the law in Pennsylvania; it is a bill working its way through the General Assembly in 2023. Nonetheless, property owners should pay close attention to its progress and to make voices heard regarding its content.

If you have a question regarding pore space ownership or development rights in Pennsylvania, contact the author, Brendan A. O’Donnell at 412-288-2226.