Key Takeaways

• As states continue to support and encourage carbon capture and sequestration projects, some communities are seeking to halt development through local ordinances; 
• Litigation to stop the drilling of injection wells for carbon sequestration is beginning to proliferate;
• Stakeholders in carbon capture and sequestration projects should not just rely on the support of state and federal governments, but also engage with local communities to avoid moratoriums, litigation, and unnecessary delays.

As carbon capture and sequestration (CCS) projects proliferate across America, hints of conflict around the relatively new and large-scale business endeavors are beginning to appear. On Tuesday, Oct. 18, international chemical company Air Products filed a lawsuit against Livingston Parish in Louisiana, asking that a recently passed moratorium on the drilling of injection wells be deemed “invalid and unenforceable.” The lawsuit represents one of the few instances in which courts have been asked to adjudicate a dispute between a CCS project developer and a municipality seeking to hinder the project’s development.

The Project

In October 2021, Air Products and Louisiana Governor John Bel Edwards announced plans for Air Products to build in Ascension Parish a $4.5 billion manufacturing plant designed to produce over 750 million standard cubic feet of “blue” hydrogen per day. The project is intended to split the methane in natural gas into both hydrogen and carbon dioxide. The carbon dioxide is to be compressed and sent through a pipeline before being injected deep under Lake Maurepas via injection wells. Air Products aims to sequester nearly 5 million metric tons of carbon dioxide per year through the storage facility.

Air Products’ preparation for the carbon sequestration facility includes the construction of two Class V test wells (for injection of nonhazardous fluids) and a seismographic survey in Lake Maurepas as a preliminary step toward obtaining a Class VI permit from the Environmental Protection Agency for construction of carbon injection wells. One of the Class V test wells is located in Livingston Parish.

Livingston Parish’s Moratorium

In response to growing pressure within the local community, the Livingston Parish Council passed Ordinance No. 22-49, which establishes a temporary ban on the construction of Class V injection wells in the parish. This is the second moratorium the parish has passed in recent months; the parish has already passed a one-year moratorium on the construction of Class VI wells required for the injection of carbon into the substrata. The passage of Ord. No. 22-49 means that Air Products cannot move forward with its test wells and, consequently, with its carbon sequestration project.

The Lawsuit

In its lawsuit, Air Products argues the ban on Class V wells contravenes the authority of several state agencies that approved the wells and seismographic survey during the permitting process: “This Ordinance, if allowed to take effect, will directly contravene the authority of the Louisiana Legislature, the Louisiana Department of Wildlife and Fisheries (“LDWF”), the Louisiana State Mineral and Energy Board, the U.S. Army Corps of Engineers, and the U.S. Environmental Protection Agency, among others.” Air Products further states that the Class V well moratorium is “preempted and invalid” under federal and Louisiana law. For these reasons, Air Products seeks injunctive relief, including a temporary restraining order, a preliminary injunction and a permanent injunction “as it concerns Class V wells.”

Big Picture

With new commercial-scale CCS projects being announced every week across the United States, conflicts will continue to arise between state and municipal authorities on the value and propriety of carbon capture. Here, the state of Louisiana has declared it to be in the public interest to support the development of CCS projects and that “geologic storage of carbon dioxide will benefit the citizens of the state and the state’s environment.” See RS 30:1102. Yet, support for the industry has clearly not trickled down to the municipal level. This dichotomy in interests will continue to manifest around new projects as the carbon capture industry develops. To avoid similar disputes, as well as the loss of time and resources in prosecuting those disputes, stakeholders in nascent projects across the country should invest in shoring up support at all levels of government and prepare to move quickly when legislative roadblocks arise.

* * *

BakerHostetler’s Energy team, recognized as an Energy Group of the Year by Law360, has successfully secured major projects for leading international and domestic energy companies and service providers with interests in oil, natural gas (including shale) and alternative energy sources. From financing to land acquisitions, exploration to drilling, and production to distribution—our business, litigation and regulatory knowledge affords clients the leverage they need in a highly demanding marketplace.