By: Chris M. Hunter and Nicklaus A. Presley
The Need
Many new energy and hydrogen production projects propose to mitigate their potential climate impacts by removing carbon dioxide from air emissions and sequestering it by injection into geologic formations.[1] The continued combustion of fossil fuel projects may also eventually depend on the availability of carbon capture and storage. In May 2024, EPA issued new air rules that will require new base load gas fired power plants and, eventually, existing coal fired plants to achieve CO2 emissions levels that likely require the use of carbon capture and storage. [2] However, not all geology is suitable or sufficient for such storage,[3] which necessitates the transport of CO2 from its source to the place of its underground injection. That likely requires a pipeline.[4]
The Problem: Local Opposition
But construction of pipelines for any energy-related purposes has become controversial and faces two significant obstacles: (i) the need to acquire property rights, often in areas not receptive to new projects; and (ii) the need to avoid or comply with an increasing number of local efforts to prohibit or control pipeline placement. For interstate natural gas projects, the Natural Gas Act provides solutions to both of these problems by granting the right to condemn property to projects that obtain certificates of “public convenience and necessity” from FERC and preempting local controls, such as zoning ordinances, from interfering with FERC approvals.[5] But there is no such federal statute for CO2 pipelines. Instead, they must either acquire property rights from willing owners or rely on state eminent domain laws often applicable to intra-state utility projects. And, they must either comply with local controls or argue that the federal Pipeline Safety Act or state siting laws preempt the application of local controls to CO2 projects.
The Response—Litigation Against Local Governments
The recent experience of Summit Carbon Solutions, LLC (“Summit”) in the Midwest illustrates the problems CO2 pipeline projects face with unsympathetic local governments. Summit has plans to capture CO2 from ethanol plants across the upper Midwest and transport it by pipeline to a storage site in North Dakota.[6] The pipeline is not unique to a single plant, but is planned to be a common carrier—providing access to any ethanol plant desiring to use the service—so in that sense it would meet the “public use” requirement of most state laws for exercising the right of eminent domain. However, in Iowa, a succession of county governments has adopted zoning ordinances requiring local permits; requiring extensive “safety” information; regulating the locations of CO2 pipelines with setback requirements; and requiring abandonment and restoration plans. Summit has sued the counties in federal court, arguing that these local efforts are preempted both by federal and state law.[7]
In 2023, a federal district court granted both preliminary and permanent injunctions against Shelby County for its application of such an ordinance. See Summit Carbon Solutions, LLC v. Shelby County, No. 1:22-cv-00020 (Dec. 4, 2023 and July 10, 2023).[8] There, the Court has ruled that federal law expressly preempts portions of the ordinance and that state law impliedly preempts others.
The Court ruled that the federal Pipeline Safety Act expressly preempts the County requirements for a “hazard safety plan” and for an “abandonment and discontinuation” plan.[9] The Court was unbothered by the County’s contention that the County ordinance was not a “safety” standard (and thereby not subject to preemption by the federal act) because it was adopted under the County’s zoning authority. The Court also ruled that state law regulating public utilities and requiring a determination by a state utility board that the projects “promote the public convenience and necessity” “impliedly” preempts those portions of the County ordinance requiring “conditional use” permits and imposing setback requirements. While the Court did not find that Iowa law “expressly” preempted local control, it determined that state law comprehensively regulated the siting of such projects and “did not envision a role for the counties” to apply rules that could ultimately conflict with siting decisions made by the State Utilities Board.[10]
Status of Law in West Virginia
Right of Condemnation
Public utilities in West Virginia are vested with the right to access and condemn private property for the construction and operation of projects approved by the Public Service Commission of West Virgina (“PSC”) as serving a “public use.” See W.Va. Code §§ 54-1-1, -2 & -3. The expressly enumerated “public uses” for which private property may be taken include “the construction of electric …power plants” and “pipelines …for transporting petroleum oil, natural gas, manufactured gas, and all mixtures and combinations thereof” when the project is for a “public use.” W. Va. Code § 54-1-2 (a)(2)&(3). These restrictions pose two hurdles to anyone seeking authority to utilize the statutory right of eminent domain.
First, the statute only enumerates certain types of pipelines, and CO2 pipelines are not among them. Accordingly, a statutory change may be required for CO2 pipelines unless they can qualify as part of another included facility such as a power plant. Second, the project must be for a “public use”—a term narrowly construed by the West Virginia Supreme Court in the context of a natural gas common carrier pipeline to require access to the gas by West Virginians.
In 2016, that Court ruled that even FERC-approved interstate natural gas pipelines do not serve a “public use” authorizing the use of State eminent domain authority where the gas to be transported is not available for use by West Virginia residents and businesses.[11] The Court’s point was that the “public use” necessary to invoke State eminent domain law must be one for the benefit of in-state residents; not just for the “public” in general. Thus, if a “common carrier” CO2 pipeline is constructed solely to carry CO2 out of state, it must address this ruling.
But the calculus for a CO2 pipeline seems different than for a natural gas pipeline. The benefits of and therefore the public use of a natural gas pipeline is its provision of gas to consumers, and if all the consumers are out-of-state then the Court has decreed there is no public use. But for CO2 pipelines, the public use is not tied to a consumptive use of the CO2 but rather the fact it is facilitating removal of CO2 from the atmosphere on behalf of a West Virginia based enterprise. Just how that would be viewed by the PSC or the West Virginia Supreme Court is unclear.
Preemption of Local Control in WV
Preemption of local control may be either express or implied. In the case of “implied” preemption, courts have traditionally divided into two types: field preemption and conflict preemption. Field preemption may exist where a legislature has fully occupied the field, leaving no room for local control. Conflict preemption occurs where there is a direct conflict, or at least the possibility of a direct conflict, between the federal and state or between state and local regulatory programs.
West Virginia’s Intermediate Court of Appeals ruled recently that the City of Weirton’s zoning ordinance could not be used as vehicle for imposing a 2,500’ setback requirement on a horizontal gas well. See SWN Production Company, LLC v. City of Weirton, No. 22-ICA-83 (W.Va. Nov. 1, 2023). The Court determined that the State’s Horizontal Gas Well Act impliedly preempted the local zoning ordinance. The Court determined that there were actual conflicts between the Horizontal Well Act and the local ordinance that gave rise to implied “conflict preemption.”[12] Likewise, in a pair of decisions, a federal court in West Virginia ruled that the Natural Gas Act preempted a county from using its zoning authority to regulate the siting of a FERC-regulated compressor station[13] and that a county ordinance prohibiting disposal of oil and gas related wastewater in the county was preempted by a complex state regulatory scheme for controlling underground injection of wastewaters.[14]
To assert similar preemptive effect on behalf of a CO2 pipeline, the developer would need to rely either on the Federal Pipeline Safety Act as has been done in Iowa with respect to any local controls that could be construed as conflicting with PHMSA requirements or on a state program that poses a risk of conflict with the local ordinance. As to the latter, the project would likely have to argue that it was subject to the siting authority that the PSC exercises over all power plants regardless of whether they are merchant plants or public utilities entitled to guaranteed rate reimbursements. See W.Va. Code §§ 24-2-1 and 24-2-11c (requiring siting certificates for electric generation facilities in West Virginia).
Conclusion
The financing, construction and continued operation of both fossil fuel-fired power plants and so-called “blue” hydrogen production in West Virginia will likely require CO2 pipelines to carry the unwanted emissions to geologic formations capable of storing it. In many cases, that may require the CO2 to be transported out of state. But, to do that, questions remain about the authority of developers to exercise the right of eminent domain and to preempt local land use restrictions aimed at impeding such projects.
[1]Fossil fuel fired power plants, whether coal or gas-fired , produce carbon dioxide. In addition, so-called “blue” hydrogen is created by combining steam and natural gas, which produces both hydrogen and carbon dioxide. Battelle has announced that it is acquiring seismic data for the purpose of submitting multiple applications for Class VI underground injection wells permits in West Virginia for the Mountaineer GigaSystem Project, a self-described “carbon neutral clean hydrogen facility” participating in the Appalachian Regional Clean Hydrogen Hub. See https://www.battelle.org/markets/industry/energy/carbon-storage-solutions?creative=618166267329&keyword=carbon%20capture%20and%20storage&matchtype=b&source=google&medium=cpc&term=carbon%20capture%20and%20storage&creative=618166267329&campaign=Industry-Energy-Carbon-Storage&gclid=EAIaIQobChMIkMbog7rGgwMVYGdHAR1YrgM5EAAYASAAEgIDK_D_BwE To accommodate such projects West Virginia has adopted a statutory program to resolve issues over ownership and liability for carbon storage facilities and has submitted an application to USEPA to administer a Class VI underground injection program. See W.Va. Code §§ 22-11B-1 to-21 (providing for underground CO2 sequestration and storage).
[2] See New Source Performance Standards for Greenhouse Gas Emissions from Fossil Fuel Fired Electric Generating Units, 89 Fed. Reg. 39798 (May 9, 2014).
[3] The West Virginia DEP created a Carbon Capture and Storage (CCS) Working Group over a decade ago to evaluate the possibility of CCS. See https://dep.wv.gov/executive/Pages/ccsworkinggroup.aspx. At the same time, American Electric Power (“AEP”) conducted a CCS demonstration project at its Mountaineer Plan in Mason County, WV. Early reports from the project expressed optimism about the future of CCS, but in 2022 a local AEP official advised West Virginia’s Public Energy Authority that the technology was not financially feasible in the current regulatory and market structure and that “the nearest geologic formation that would allow for long-term storage of carbon in large enough quantities [to sequester carbon from a coal-fired power plant] to be feasible is in Illinois.” See “Appalachian Power president tells Public Energy Authority that carbon capture has a financial viability problem,” Charleston (WV) Gazette Mail, June 28, 2022.
In addition, a coalition of states and electric energy producers have sought to stay the effect of EPA’s new greenhouse gas rules based on claims that carbon sequestration and storage is not yet demonstrated as a practicable option for controlling CO2 emissions. See Petitioners’ Motion to Stay, State of West Virginia at al v. USEPA, No. 24-1120 (D.C. Cir. May 13, 2024).
[4] See Global Carbon Capture & Storage Institute, Fact Sheet, Transporting CO2: https://www.globalccsinstitute.com/wp-content/uploads/2018/12/Global-CCS-Institute-Fact-Sheet_Transporting-CO2-1.pdf (“Given the large quantities of CO2 that would be captured by CCS in the long term, it is unlikely that truck and rail transport will be significant.”).
[5] See Mountain Valley Pipeline, LLC v. Wender, 337 F. Supp. 3d 656, 444 (S.D. W.Va. 2018)(noting that “the preemptive effect of the [Natural Gas Act] is well-settled.”).
[6] See https://summitcarbonsolutions.com/project-footprint/
[7] Summit is also seeking affirmation from the Iowa Utilities Board that it qualifies under state law for the right to exercise eminent domain against private property. https://iowacapitaldispatch.com/2024/01/24/state-regulators-poised-to-decide-summit-pipeline-permit/?utm_medium=email According to the same source, there are ongoing legislative efforts in Iowa to restrict the right of eminent domain to ethanol pipelines that have already secured private rights of way for 90 percent of a pipeline.
[8] See https://climatecasechart.com/wp-content/uploads/case-documents/2023/20230710_docket-122-cv-00020_order-1.pdf (July 10, 2023 preliminary injunction) and https://climatecasechart.com/wp-content/uploads/case-documents/2023/20231204_docket-122-cv-00020_order.pdf (December 4, 2023 permanent injunction).
[9] The Pipeline Safety Act provides expressly that a “[s]tate authority may not adopt or continue in force safety standards for interstate pipeline facilities…. 49 U.S.C. § 60104(c). The Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued a letter dated September 15, 2023 to Summit Carbon. See https://s3.documentcloud.org/documents/23989162/attachment-a-phmsa-letter-to-summit_2130461_230921-112814.pdf There, PSHMSA suggested that in the absence of an actual conflict between a local zoning ordinance and a PHMSA regulation the Pipeline Safety Act had no preemptive effect. It advised Summit Carbon that “[l]ocal governments have traditionally exercised broad powers to regulate land use, including setback distances and property development …in the vicinity of pipelines. Nothing in the federal pipeline safety law impinges on these traditional prerogatives of local-or state- government so long as officials do not attempt to regulate the field of pipeline safety preempted by federal law.”
[10] Even more recently, Summit has reportedly filed a similar action against Kossuth County, Iowa—characterized as the “fourth” such action against a county in the State. https://iowacapitaldispatch.com/2024/01/03/pipeline-company-sues-fourth-county-for-zoning-ordinance/?utm_medium=email
[11] See Mountain Valley Pipeline, LLC v. McCurdy, 793 S.E. 2d 850 (W.Va. 2016). The Court determined that the State’s statutory eminent domain rights may be exercised only for a “public use,” and that a pipeline designed solely to transport gas from West Virginia to markets and users located out of state was not a public use for the benefit of West Virginians within the scope of the eminent domain statute. The Court also found significant the fact that while the source of the gas was West Virginia, the majority of the gas was “owned” by Mountain Valley or its affiliates. It is unclear exactly what this meant as gas rights are frequently acquired by lease from West Virginia residents. As a result, it is also unclear whether the decision would have been different had the market created by the pipeline been for the advantage of local gas lessors.
[12] The Court declined to determine whether there was implied “field” preemption despite noting that the Horizontal Well Act delegated “sole and exclusive authority” over all aspect of the permitting and location of oil and gas wells to the WVDEP. West Virginia’s land use laws also provide that “nothing in this chapter authorizes an ordinance [or] rule preventing or limiting …the complete use of natural resources by the owner… [except inside] of municipalities or urban areas.” W.Va. Code §8A-7-10(e).
[13] See Mountain Valley Pipeline, LLC v. Wender, 337 F. Supp. 3d 656 (S.D. W.Va. 2018).
[14] See EQT Prod. Co. v. Wender, 870 F. 3d 322 (4th Cir. 2017).