The Way Forward: A Legal and Commercial Primer on Carbon Capture, Utilization, and Sequestration

T HE W AY F ORWARD : A L EGAL AND C OMMERCIAL P RIMER ON C ARBON C APTURE , U TILIZATION , AND S EQUESTRATION ∗

A USTIN L EE , J AMES M C A NELLY , E LIZABETH M C G INLEY , J ARROD G AMBLE

I. T HE S ECTION 45Q F EDERAL I NCOME T AX C REDIT ............................... 45 A. Eligibility for Section 45Q Credits ................................................... 46 B. Recapture of Section 45Q Credits..................................................... 47 II. CCUS M ETHODS , A PPLICATIONS , AND S ELECT I NFRASTRUCTURE ....... 48 A. Select Capture Methods used for CCUS........................................ 48 B. Primary Disposal and Sequestration Processes and Select CO 2 Infrastructure.................................................................................. 51 1. Application of CO 2 for EOR Operations ................................. 51 2. EOR as a Climate Change Mitigation Strategy for the Fossil Fuels Industry................................................................ 54 3. Application of CO 2 for Sequestration Projects ........................ 56 4. Review of Select CO 2 Infrastructure........................................ 57 III. R EAL P ROPERTY R IGHTS AND R ELATED L EGAL C ONSIDERATIONS FOR EOR AND S EQUESTRATION O PERATIONS . ...................................... 58 A. Ownership of Subsurface Geological Pore Space in the United States.............................................................................................. 58 B. Legal Distinctions between EOR and Sequestration Projects........ 61 IV. C ERTAIN C OMMERCIAL AND L EGAL C ONSIDERATIONS S URROUNDING THE C OMMON A RRANGEMENTS N ECESSARY TO C ONDUCT T HESE O PERATIONS .............................................................. 67 A. Participants; Economic Drivers and Objectives for CCUS Projects .......................................................................................... 67 B. Structure of Commercial Contractual Arrangements for CCUS Projects .......................................................................................... 68 C. CCUS Project Specific Considerations.......................................... 70 1. Industry and Private-Party Considerations .............................. 71 2. General Compliance and Recapture Risk under Section 45Q ............................................................................. 71 3. Minimum Volume Commitments ............................................ 72 4. Access and Information Rights................................................ 74

* The authors wish to thank their Bracewell colleague, Jason Hutt (Environmental and Natural Re- sources), for his insights and contributions.

Made with FlippingBook - professional solution for displaying marketing and sales documents online