Forbes Piece: The Texas Legislature Must Act To Protect The State’s Potential CCUS Prize

Oil refineries off of the Houston Ship Channel in Houston, TX Sept 29, 2014. Carbon captured at the tailgates of these and other facilities along the HSC are considered prime targets for carbon capture and storage projects in Texas. Photo Ken Cedeno

CORBIS VIA GETTY IMAGES

[Note: This story was also published at Forbes.com]

On the surface, getting a law put in place designed to facilitate the enormous economic opportunity Texas has where carbon capture, use and storage (CCUS) is concerned would seem like a no-brainer. Recent studies have pointed out that Texas and Louisiana are the two states whose geology presents the biggest potential opportunity to become home to the storage of an enormous volume of captured CO2. Most believe the Gulf Coastal region ranks among the biggest potential CCUS prizes in the world.

Companies like ExxonMobilXOM, Talos EnergyTALO, Occidental PetroleumOXY and others have been busy developing plans to exploit Texas’s unique combination of industry, existing infrastructure and geologic pore space as soon as the rules are clarified. And the public is on-board as well. A poll conducted last year by the Carbon Neutral Coalition found that 66% of Texas voters support CCUS in the state, while just 19% oppose it.

The Legislature Has One Job To Do

So, members of the Texas legislature have just one job to do here: Pass legislation that provides clarity on the rules of the road. But things are seldom so simple in Texas politics, especially related to a bill that attracts a wide variety of potential stakeholders to the debate, one in which powerful interests like the state’s big landowners, agricultural interests and the oil and gas and manufacturing industries are all involved.

Among several key issues at hand is underground pore space, and the need to clarify the terms of ownership of it, which is a big part of what SB 2017 is designed to resolve. The bill’s author and lead sponsor, Sen. Robert Nichols, a Republican whose district encompasses a big piece of East Texas, describes the issue in the bill’s summary: “Texas law and policy must be updated to accommodate industry's ability to permanently store carbon. Twelve other states have already passed legislation to facilitate carbon storage. Texas is behind these states in the development of this emerging industry, which analysts estimate to be a multi-trillion dollar industry that also provides additional revenue opportunities for landowners.”

The list of those 12 other states who are ahead of Texas on clarifying the matter include bordering states of Oklahoma, and perhaps most importantly from a competitive standpoint, Louisiana. A failure by this session of the legislature to add Texas to that list could well result in the loss of some projects currently planned for Texas to other states. This is especially true of Louisiana, where the state’s application for Class VI primacy with the EPA is at an advanced stage, and EPA is scheduled to complete its review in May. By contrast, Texas’s application is still in the “pre-application” phase.

The extents of underground geologic formations don’t follow the boundaries of land ownership, but in order to mount a successful carbon storage project, the operator must be able to control the entire formation in question. For storage projects offshore in the Gulf of Mexico, this is a comparatively simple proposition, consisting mainly of obtaining the needed permits from either the State of Texas or the federal government. But there could be dozens, even hundreds of surface owners involved in any onshore project, depending on the proposed location.

Few involved in the process understand the varied interests and perspectives at play better than Todd Staples, a former Texas Agricultural Commissioner and state senator who is now the President of the Texas Oil & Gas Association. In a call on Thursday, Staples said he sees the bill as a potential win for all parties. “This is an opportunity for landowner revenue that would be totally unimpactful to their surface estate,” he says, adding, “The proposal before the legislature is a very thoughtful process that is designed to accommodate the needs of landowners and to allow the industry to produce the jobs and investment to grow in Texas rather than competing states.”

Of the dozen other states that have already enacted this kind of clarifying statute, Staples points out that “some states allow eminent domain to be used to acquire the pore space that is necessary. Louisiana and Alabama both do. Texas does not, and that is not being asked for.”