The Biden administration's ambition to capture carbon dioxide on a large scale and inject it back into the ground may have seemed daunting one year ago with only two CO₂ storage facilities in the US. But a boost in federal spending on the technology in 2021 and 2022 may finally be bearing fruit after a sudden uptick in permits, according to industry watchers.

The US government is trying to encourage emitters to reduce their carbon footprint with tax credits worth up to $85 per metric ton of CO₂ captured. For the full value of the credit, the CO₂ must be pressurized into a supercritical state and injected into what is known as a Class VI well, drilled about 1 mile into the earth beneath a layer of impermeable rock.

As of April 2023, only three Class VI wells existed in the US, despite dozens of permit applications under review. One of those wells was greenlighted in 2022 by North Dakota, one of only two states at the time with permission from the US Environmental Protection Agency to permit carbon storage projects.

The other two wells, located at an Archer Daniels Midland Co. ethanol facility in Illinois, were permitted by the EPA in 2014. One has already been sealed off after reaching its capacity of 1 million metric tons of CO₂.

The slow pace of development was not lost on carbon capture's critics, who dismiss the technology as unproven at best and, at worst, as an excuse for fossil fuel companies to keep drilling. When the EPA proposed a CO₂ emissions standard in May 2023 requiring some power plants to install carbon capture to continue operating, electric utility trade groups were quick to point out the lack of CO₂ storage infrastructure.

But carbon capture advocates say an increase in annual appropriations to the EPA's Class VI well program and funding from the bipartisan infrastructure law of 2021 may finally be paying off.

In the past 12 months, North Dakota regulators have issued seven more Class VI well permits, and the Wyoming Department of Environmental Quality handed out its first three.

Meanwhile, the EPA has broken its dry spell, approving its first carbon storage project — attached to a planned Indiana hydrogen plant — under the Biden administration and proposing draft permits for a California Resources Corp. project in California's Central Valley.

"The coalition is pleased to see the pace is speeding up a little bit. It's truly unprecedented, the amount of interest in Class VI wells we're seeing at EPA," said Jessie Stolark, executive director of the Carbon Capture Coalition, an industry advocacy group.

Another recent EPA directive is expected to prompt even more permits. In December 2023, the federal agency approved Louisiana's bid for regulatory authority — known as primacy — over Class VI wells, handing off about a third of the country's proposed carbon storage projects to the state's Department of Energy and Natural Resources. The move was a long time coming for Louisiana officials, including Sen. Bill Cassidy (R) who had become frustrated with the federal government's pace of processing applications.

Momentum in Bayou State

Even before Louisiana's Class VI well primacy took effect in February, the Gulf Coast state had become a target for carbon capture development due to its oil and gas industry and porous geology. Recent state legislation on CO₂ storage leasing and accident liability has also helped usher in investment and earn the EPA's trust, said Colleen Jarrott, a New Orleans-based partner with Hinshaw & Culbertson LLP who represents carbon capture developers.

"It's the first time we get to tell Texas to sort of hold our beer," Jarrott said in an interview.

Though Texas is also seeking primacy from the EPA — as are Arizona and West Virginia — the Lone Star State will likely need to change its statutes to bring its permitting program up to the federal government's standard, according to Jarrott.

"You can have a regulatory scheme that's more strict than the EPA, but you can't have one that's less strict," Jarrott said.

One change Louisiana made was to increase the duration of a Class VI well operator's liability from 10 years to 50 years, ensuring the carbon capture company is responsible for any potential leaks.

But some community and environmental groups are still skeptical that state agencies are better equipped than the EPA to regulate carbon storage. Addressing these concerns, Fred McLaughlin, director of the University of Wyoming School of Energy Resources' Center for Economic Geology Research, advocated for funding mechanisms to cover the cost of any unforeseen impacts.

"Some states are looking at [establishing] trust funds ... that operators pay into on a per ton of injected CO₂ basis," McLaughlin said during a March 27 press briefing. "I really think that that is critical, regardless of which path a state decides to take with liability, whether it's the operator or the state."

A drop in the ocean

Despite the incremental progress in carbon storage development, industry advocates and climate think tanks alike say deployment must ramp up exponentially for the Biden administration to meet its climate goals.

US lawmakers of both parties are also eager to see more carbon storage facilities permitted. On April 2, the US House of Representatives' Climate Solutions Caucus sent a letter to the EPA to "call attention to the dismal number of Class VI well projects that have been deployed."

Signed by caucus leaders Andrew Garbarino (R-NY), Chrissy Houlahan (D-Penn.) and others, the letter asked the EPA to explain the permitting delays. The EPA did not comment on the letter.

As of March 29, the EPA had 128 permit applications across 43 carbon sequestration projects under review, according to its website. Louisiana is reviewing applications for more than 61 well permits, most of which were transferred from the EPA.

"This is a very rigorous process, and yes, it takes time," Stolark said.

But Stolark said developers need more certainty around the duration of the permitting process to help secure financing for carbon capture projects. "So that's what the coalition is specifically focused on in terms of working with EPA — what is the time frame they can process these in."