Acquiring EPA permitting for injecting CO2 underground for geologic sequestration in the U.S. has typically been a slow process that is drawn out over multiple years. However, Louisiana’s recent approval for primacy over Class VI wells may help to accelerate this process by alleviating some of the burden placed on the EPA. In this Energy Market Insight, we examine the current status of Class VI applications and explore how Louisiana’s newly acquired primacy could impact these applications and carbon capture projects across the U.S.
As BTU Analytics explained in a previous insight, a Class VI well permit is necessary for any project seeking to inject CO2 underground for geologic sequestration, and in most states, these permits are regulated by the EPA. A surge of Class VI applications over the past two years, mainly due to the increased 45Q tax incentive that was passed as part of the Inflation Reduction Act in August 2022, has strained EPA resources and led to long wait times for permit approvals. As a result, the EPA has yet to grant final approval to any of the 64 permit applications that have been filed since 2021. In contrast, North Dakota and Wyoming, which have had state primacy over Class VI wells since 2018 and 2020, respectively, have been able to approve a combined seven permits since 2021.
As of December 2023, Louisiana is the third state to obtain primacy over Class VI wells. As a result, all 23 of Louisiana’s Class VI permit applications that are currently being processed by the EPA will be transferred to the Louisiana Department of Natural Resources. As we have seen with Wyoming and North Dakota, this transfer will likely lead to faster permitting for sequestration projects in Louisiana. Additionally, since Louisiana applications currently comprise a third of all EPA Class VI applications, their transfer should help to reduce the EPA’s backlog and shorten the permitting timeline for remaining applicants.
In addition to having the bulk of Class VI applications, Louisiana also has the second highest CO2 capture capacity for proposed projects, totaling 46 million metric tons per annum (Mtpa) and only trailing Texas’ 110 Mtpa. Louisiana and other Gulf Coast states have become a hub for carbon capture projects due to the region’s access to cheap natural gas, favorable geology for CO2 sequestration, and existing CO2 pipeline and export infrastructure. Of the 79 proposed carbon capture projects in Texas, Louisiana, Mississippi, and Alabama, 32 have indicated that they plan to sequester some or all of their captured CO2, amounting to 51 Mtpa CO2 that would need be sequestered in the coming years.
Louisiana’s newly acquired primacy over Class VI wells is good news for stakeholders on either end of the carbon management value chain. For owners of CO2 sequestration sites, particularly ones within the state of Louisiana, this news should signal a faster Class VI permitting process. For owners of carbon capture projects in the Gulf Coast region that plan to sequester their CO2, this news may mean that their projects are less likely to be delayed due to their CO2 being stranded aboveground. Ultimately, the pace of Class VI permitting is just one of many factors that influences the pace of development for carbon capture projects. However, Louisiana achieving primacy is an important step for advancing carbon capture projects across the U.S., particularly in the Gulf Coast region, and achieving a more streamlined permitting system.
This analysis utilizes BTU Analytics’ Carbon Capture Database, which provides detailed project-level data on over 500 global CCUS projects. This product is available to FactSet Workstation subscribers here. Email firstname.lastname@example.org to request a sample or to find out more about BTU Analytics’ Energy Transition products.