As global warming has emerged as a real threat to the environment, private companies are seeking innovative ways to reduce their carbon emissions. One way to do this is through a process known as carbon capture and storage, or CCS.
CCS is a process in which carbon is injected into underground wells and stored in the soil's pore space. Pore space is the portion of the soil that is porous enough for water and air to flow through it. Private companies are seeking to use pore space to store their carbon emissions.
Several states have now enacted laws allowing private companies to implement CCS on private property, which has raised various legal issues, including who owns the pore space below land. States that have enacted CCS laws, including Montana, North Dakota, Oklahoma, and Wyoming are now at the forefront of CCS litigation. This article explains pore space ownership and its use in the carbon capture industry.
While the laws in the carbon capture industry are constantly evolving, it is crucial to continue to stay up-to-date on changes that may affect you. Our team of energy lawyers here at Newburn Law can help you understand your rights and how these laws change the way you may run your business.
What Is Pore Space?
Pore space, also known as porosity, refers to the portion of soil containing the soil liquid and gas phases. In other words, pore space generally refers to the areas in the soil where air or water flows through it. Essentially, the larger the pore space, the more easily water and air flows through it.
Factors affecting the percentage of pore space in soils include: the soil texture, organic matter in the soil, the types of crops grown and cultivation, and the soil depth. Pore space is especially important for the earth's ecosystems because plants need pore space—and the oxygen inside it—to grow. If soil reaches a certain density, it doesn't allow oxygen to reach the plant's root system. Plants absorb water more efficiently when the soil contains plenty of oxygen.
Whereas the study of pore space used to be mostly confined to college geology courses, interest in pore space has dramatically increased since oil and gas industries figured out that they can store their carbon dioxide in it, thus greatly reducing their carbon emissions.
Who Owns Pore Space?
One of the emerging issues around CCS is who owns the pore space in the ground. Under United States' land rights laws, the person who owns the pore space in the ground is generally the person who owns the surface estate—that is, all the land above the pore space. Of course, a landowner can sell the right to mine the underlying ground soil for minerals.
More and more, energy companies are seeking out land with underground pore space to implement their CCS technology. CCS is usually employed deep underground. The issue for companies wanting to use CCS is whether they must pay the surface owners for use of the underground pore space. Of course, this raises issues of private property rights.
Does the surface owner of the land own all of the pore space beneath it? What if someone else owns the mineral rights to the land? Do they also own the pore space?
Whether a landowner can divest their rights to the pore space under their land, who has the rights to the pore space, and the value of the pore space, are all complicated and novel legal issues courts are just now starting to address.
What Is the Value of Pore Space?
The porosity of soil is important for various reasons. The groundwater people drink is from soil pores. Additionally, the oxygen contained in pore space is essential for growing plants. Until recently, although pore space was always important, it wasn't considered to have value as a property right.
With the emerging use of CCS, however, pore space is being viewed as a valuable property right. The monetary value of pore space is difficult to determine and depends on the particular use of the pore space as well as what a person is willing to pay to use the space.
It is very difficult to appraise the value of pore space since there are usually no comparable sales. For this reason, in litigation over CCS and pore space, courts have differed widely in their valuations of pore space.
How Is Carbon Capture Used to Reduce Carbon Emissions?
Energy companies release tons of carbon dioxide into the atmosphere each year. Carbon capture, which means capturing the carbon before it is released into the atmosphere, results in lower carbon dioxide emissions. One new technology being employed is to inject and store carbon emissions into the ground's pore space. Carbon capture and storage, also known as CCS, has the potential to remove up to 95 percent of carbon dioxide emissions from power plants. Therefore, it's an extremely popular emerging method for tacking global warming issues.
CCS is essentially a three-step process:
- First, the company separates its carbon dioxide from other gases.
- Next, the carbon dioxide is then compressed and transported through pipelines, road transport with trucks, or on ships to the site where it will be stored.
- Finally, the carbon dioxide is then injected into rock formations, which is the pore space, for permanent storage. Storage sites for carbon dioxide can include saline aquifers or depleted oil and gas reservoirs.
What Federal Laws and Regulations Address CCS?
The process of CCS potentially implicates numerous federal laws and regulation, including the National Environmental Policy Act, the Safe Drinking Water Act, the Endangered Species Act, the National Historic Preservation Act, and the Clean Water Act.
The U.S. Congress has enacted laws and regulations providing incentives for private companies to implement CCS to reduce carbon dioxide emissions. Recent U.S. legislation aimed at reducing carbon emissions created tax incentives for renewable energy development, efficiency, and storage.
The 2020 legislation extended the existing Section 45Q tax incentives for CCS projects for two years. The tax credits currently $50/ton for stored carbon dioxide. A proposal currently in Congress would raise the credit to $175/ton.
What States Have Enacted Pore Space Use and Ownership Statutes?
Traditionally, property rights in the United States fall under two distinct estates—the surface estate and the mineral estate. Under the American rule, which most states follow, the mineral estate includes ownership of the underground minerals, but not of the geological formations, which includes the soils. Therefore, under the American rule, the owner of the surface estate also owns the pore space underneath the surface.
The American rule gives the mineral estate owners the right to use the pore space during mineral extraction. In states that following the American rule, a surface owner can't lease the underground pore space until the owner of the mineral estate has completely depleted the minerals. The emerging process of CCS has raised thorny legal issues about ownership of the pore space, and litigation will no doubt increase as more states enact CCS laws.
Several states have enacted pore space use and ownership statutes, including Montana, North Dakota, Oklahoma, and Wyoming. These states have all defined pore space as private property.
For example, Wyoming law states that any conveyance of the surface estate also includes the pore space underneath, unless the surface owner intentionally splits the surface estate from the pore space. Similarly, Montana's Preservation of Property rights statute presumes that the surface owner owns the pore space, referred to as “the geological storage reservoir.”
North Dakota recognizes that the surface owner also owns the pore space. In 2019, however, with the backing of private gas and oil companies, North Dakota enacted a law declaring that the oil and gas industry's use of pore space for carbon storage “is not unlawful and, by itself, does not constitute trespass, nuisance, or other tort.” Before the North Dakota law was passed, landowners could sue for trespass to their pore space, and they could also sue for oil-development-related damages under North Dakota's Oil and Gas Production Damage Compensation Act, but they can no longer do so under the new law. In addition, the new law prevents a landowner from seeking payment for use of the landowner's pore space.
Landowners in North Dakota have since filed a lawsuit over the new law, arguing that it's unconstitutional and amounts to an unconstitutional taking of the landowner's pore space without compensation. In January 2021, a North Dakota state judge struck down the 2019 law, finding that it gives the landowner's value in their pore space away for free. The defendants appealed, and the case is now before the North Dakota Supreme Court, which heard arguments in the case in March 2022.
State laws such as North Dakota's law regarding CCS are important because CCS is an emerging and popular tool for reducing greenhouse gases. The use of pore space raises new and unresolved issues regarding the valuation of pore space and property rights in pore space. Given that CCS will likely continue to increase, it will be interesting to see how courts rule on the property rights raised in CCS and pore space.
If you are in the pore space industry and have any questions at all, contact us today. Our knowledgeable energy lawyers here at Newburn Law have years of experience helping our clients understand their rights and the evolving laws.