United States: Securing Rights-of-Way To CO2 Pipeline Corridors In The United States

Background

In the previous article in this series The Future of Carbon Dioxide Injection EOR in the United States, we discussed the sources and cost of CO2 supply for enhanced oil recovery ("EOR") in the United States and the benefits that CO2EOR technology can bring to an otherwise mature oil reservoir that has reached its useful productive life.

This article examines the U.S. pipeline system and the regulatory regime for the transportation of CO2 across public and private land and some of the potential means of securing rights-of-way to the land where construction of a new pipeline corridor is planned.

In order to transport CO2 necessary for CO2EOR operations, U.S.-based oil producers rely on a network of over 50 privately held pipelines spanning some 7,200km in length across the U.S.1 Of this, Texas boasts the largest network, which includes 1,200km of pipelines centered along the Gulf Coast (namely Mississippi, Louisiana and eastern Texas). An additional 4,100km of pipeline primarily serves the Permian Basin in West Texas and New Mexico and is fed with CO2 from nearby sources in New Mexico and Colorado. The remaining sizeable portion of the U.S. CO2 pipeline network is in the Rocky Mountains, with 1,150km operating in northern Colorado, Wyoming and Montana.2

Given the extensive existing network, siting a route through which a new pipeline corridor can be constructed is generally no easy task. Significant capital outlays, numerous regulatory consents and rights-of-way approvals over public and/or private land necessitate thorough siting and planning of a CO2 pipeline, particularly so where the source of the CO2 supply and the location of the EOR operations are at some distance from each other. Minimizing the capital expenditure involved in constructing a new CO2 pipeline and securing title (typically in the form of rights-of-way) to the land which the pipeline will run is critical to the success of any CO2EOR project. The capital expenditure for the proposed Lobos pipeline which is to supply CO2 from the southwestern U.S. to Permian Basin oil fields in Texas is, for example, expected to exceed $300 million.3

Unlike natural gas pipelines crossing one or more U.S. states, which are regulated by the Federal Energy Regulatory Commission ("FERC"),4 there is no federal government agency authorized to oversee the routing of proposed new CO2 pipeline corridors in the U.S. and no federal authorization exists to condemn privately-owned land for a CO2 corridor.5 Rather, the construction and transportation of CO2 and acquisition of public and private land across which a new pipeline corridor is to be constructed necessitate an examination of both federal and state regulations. This article will also focus specifically on the legal tools that may be availed by pipeline owners to assist them to secure the legal rights to construct a CO2 pipeline corridor over public and private land in the U.S.

How are CO2 pipelines sited on publicly-owned lands?

Multiple levels of government, namely municipal, county, state and/or (as applicable) federal, control the ownership of public land in the U.S. over which a pipeline owner may propose to site a new CO2 pipeline corridor.

The federal government manages significant tracts of public land in the U.S., owning some 47 percent of the land in the western U.S.6 and is the majority landowner in a number of states, for example, Nevada (where it owns 85 percent), Utah (where it owns 65 percent) and Oregon (where it owns 53 percent).7 However, federally controlled land is not held or managed by one single federal agency, and a pipeline developer/owner must apply for a right-of-way from each federal agency that controls a parcel of public land along the proposed pipeline corridor.8

Each such federal agency is required to administer the land it controls consistent with multiple authorizing statutes. For example, the Federal Land Policy and Management Act ("FLPMA") prescribes how the U.S. Bureau of Land Management ("BLM") must deal with a variety of lands under its administration. BLM is also the principal administrator of the Mineral Leasing Act ("MLA") which sets out a framework for the provision of rights-of-way for the construction of CO2 pipelines in the U.S.9

Footnotes

1 Nat'l Energy Tech. Lab., A Review of the CO2 Pipeline Infrastructure in the U.S., 3 (Apr. 21, 2015) (these figures include various sizes of pipeline, including larger-diameter trunk-lines which carry combined volume from two or more sources, direct lines that supply an exclusive supplier and an exclusive user, and feeder lines that provide CO2 for each type of pipeline segment along the CO2 transportation chain).

2 Id.

3 Lobos Pipeline Project FAQ, Kinder Morgan, http://www.kindermorgan.com/content/docs/lobos_faq.pdf (construction is currently suspended due to the drop in oil prices), see Nicole Maxwell, Kinder Morgan withdraws CO2 pipeline application, Albuquerque Journal (Jan. 23, 2015) https://www.abqjournal.com/530879/kinder-morgan-withdraws-co2-pipeline-application.html.

4 15 U.S.C. 717f(e), (h) allow a natural gas pipeline developer to seek a U.S. district court order to condemn land if the developer cannot privately agree a sale with the landowner, provided that the developer holds a Certificate of Public Convenience and Necessity from FERC.

5 Nat'l Energy Tech. Lab., at 31-32.

6 The "western U.S." refers to the 11 western-most states, excluding Alaska and Hawaii.

7 Carol Hardy Vincent et al., Cong. Research Serv., R42346, Federal Land Ownership: Overview and Data, 4-5, 20 (2014).

8 However, 30 U.S.C. § 185(c)(2) authorizes the U.S. Secretary of the Interior to grant a right-of-way through lands administered by multiple federal agencies.

9 In Exxon Corp. v. Lujan, 730 F.Supp. 1535, 1543 (D.Wyo 1990), the U.S. District Court of Wyoming ruled that it was not unreasonable for BLM to regulate CO2 pipeline corridors under the MLA rather than FLPMA (BLM was free to regulate under either statute). By siting this particular CO2 pipeline under the MLA, BLM required that the pipeline be operated as a common carrier. See also 43 CFR § 2885.11 (b)(16).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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