Nebraska Shapes its Legal Framework for Carbon Capture and Underground Storage

Enacted in 2021, the Geological Storage of Carbon Dioxide Act regulates carbon-storage sites in Nebraska. Such projects have the potential to significantly offset industrial carbon emissions, including in ethanol production.

Carbon capture and underground storage (“CCUS”) is the technology that removes carbon dioxide from industrial emissions and then compresses, transports, and injects it deep underground. CCUS has gained traction as a tool to reduce carbon emissions. In Nebraska, ethanol producers, in particular, have expressed interest in CCUS as a tool to lower their carbon footprints. Developers have begun acquiring land for CCUS pipelines throughout Nebraska, connecting ethanol plants to storage sites in North Dakota and elsewhere.[1]

Although the structural and technological framework for CCUS exists to efficiently capture up to 90% of carbon emissions on a project-by-project basis, legal uncertainty has remained a barrier to widespread utilization of CCUS storage sites. To encourage the deployment of CCUS nationwide, Congress in 2019 approved a tax credit for such projects, 26 USC section 45Q. Nebraska, in turn, adopted the Geological Storage of Carbon Dioxide Act (“Act”), Neb. Rev. Stat. section 57-1601 et seq.[2]

Under section 57-1604(1) of the Act, title to a “storage reservoir” is appurtenant to the surface estate. That is, a storage reservoir presumptively belongs to the owner of the overlying land. Unless a deed “explicitly exclude[s]” it, the storage reservoir transfers with that overlying land. Section 57-1601(2). A landowner can sever and separately convey the reservoir estate. But such a conveyance must specifically identify the reservoir’s location, any access rights across the surface estate, and the nature of reservoir rights conveyed. If a conveyance lacks these requirements, the surface estate holder may later be able to void it.

To begin storing carbon in a reservoir estate, a developer must obtain at least two permits, one from the Nebraska Oil and Gas Commission (“Commission”) and another from the U.S. Environmental Protection Agency (“EPA”). In addition, local regulations may require further approvals, and different provisions will govern the transportation of captured carbon to the storage site.

EPA approval comes first. The principal federal law regulating CCUS is the Safe Drinking Water Act, 42 USC section 300f et seq. It ensures that any underground injection of carbon will not jeopardize underground sources of drinking water. 40 CFR sections 146.81 to 146.95. Although the EPA can delegate this permitting authority to states, it has not yet done so for Nebraska.

The developer must demonstrate to the EPA that the CCUS project will not harm underground drinking water and provide information about the geological structure and hydrogeological properties of the proposed storage site, data for the proposed geologic sequestration site, and information about nearby drinking water.

Next, the developer must apply for state approval. The Commission is the chief permitting authority in Nebraska. In evaluating applications, it must consult with the Department of Environment and Energy (“Department”) and EPA. The Commission generally reviews permit applications in the order received, although it must give “priority” to storage operators who intend to store carbon dioxide produced in Nebraska. Section 57-1607.

Under section 57-1610, the developer must prove the existence of 15 conditions to the Commission, including:

• That the developer has completed a comprehensive geological study of the storage reservoir to assess seismic risk;
• That the developer will conduct ongoing testing and monitoring;
• That the project will not endanger human health or the environment, including nearby water sources or the atmosphere;
• That the project will not interfere with existing mineral rights; and
• That the developer has obtained the consent of persons owning 60% of the storage reservoir and that any nonconsenting owners will “be equitable compensated.”

Upon obtaining a permit, the storage operator assumes title to the stored matter and liability for any damage caused by leaks thereof. Once storage at the site is complete, however, the storage operator may apply to the Commission for a “certificate of project completion.” Under section 57-1619, the standard for such certificate is that the site is “in good condition and retain[ing] mechanical integrity” and that the operator has complied with all applicable laws, addressed any pending claims, and received permission to close the site from the Program. Id.

Section 57-1619 then purports to absolve the storage operator from all liability for the stored matter. According to the Act, the state acquires title to the storage reservoir and, with it, “all rights and interests in, and all responsibilities associated with, the stored carbon dioxide.” The Commission must thereafter monitor and manage the stored matter on behalf of the state.

Although the Commission has yet to grant a permit, we anticipate that the Act will facilitate the growth of CCUS statewide. Attorneys at Baird Holm specialize in land use and energy development. Please do not hesitate to contact us if you have questions about CCUS or any related matter.

[1] Note that Nebraska’s nascent legal framework governing land acquisitions for CCUS can be a complex process. Landowners and CCUS developers should involve qualified counsel to assist with permitting, ownership, and operation documents.

[2] Unless indicated otherwise, all references are to the Nebraska Revised Statutes.