One week after they appeared to deal a serious blow to Colorado’s ability to attract carbon-storage projects, state regulators Monday reversed course, saying the state can consider the social cost of sequestering carbon as a benefit when considering whether to permit such projects.
In making this change to rules for permitting Class VI wells that pump carbon underground for permanent storage in geologic space, the Colorado Carbon and Energy Management Commission heeded requests from business leaders and the Colorado Energy Office. The language added to the rules before the ECMC officially adopted them was not as strong as business groups like the Colorado Chamber of Commerce had sought, but it’s enough that carbon-storage operators likely will at least consider working in this state.
And it brings to a temporary conclusion a topsy-turvy eight-month period in which legislators passed a law that will allow the state to seek primacy over Class VI well rules from the EPA, state regulators proposed rules considered by many in the sector to be too onerous and then ECMC members refined those rules to find middle ground.
Why carbon capture is needed
Carbon capture, a technology that is active in other states but nascent in Colorado, is considered crucial to the state meeting its emissions-reduction goals over the next 25 years, particularly in hard-to-decarbonize industries like cement manufacturing. In it, carbon emissions are captured directly from industrial facilities and pushed back into the ground, where Colorado has space to hold 134 billion metric tons of carbon dioxide.
But the rules that received preliminary approval from the ECMC on Dec. 5 threatened to send the signal that Colorado was closed to business for the technology, warned sector leaders who particularly cited two provisions in the rules. Those rules must get approval from the U.S. Environmental Protection Agency before it agrees to hand over its permitting authority for Class VI wells to the state, which could happen in early 2026.
One provision stated that when judging whether projects have no net negative cumulative impact on disproportionately impacted communities — a standard they must meet to receive permits — positive economic impacts like jobs created can’t be considered. The other stated that the ECMC couldn’t consider the social cost of carbon — a measure of the impact on projects on the large-scale environment and public health — when determining if carbon-capture projects offered positive benefits to surrounding communities.
Environmental groups oppose reconsideration
Shortly after the preliminary decision, however, the Colorado Energy Office, Colorado Department of Public Health and Environment and ECMC staff asked the commission to reopen the hearing so they could discuss more the social cost of carbon. And in a hearing Wednesday, they asked the commissioners to add to their statement of basis and purpose for the Class VI rules a provision specifying that the social cost of carbon can be considered as part of any broader assessment of climate impact by a proposed project.
“While the social cost of carbon is shown as a dollar value, it really is based upon damages that take place to the environment and to human health,” Colorado Energy Office Executive Director Will Toor told the ECMC. “While it is not a perfect metric, it is probably the most important metric available to assessing the climate impacts of carbon sequestration.”
Environmental organizations heavily protested the inclusion of this metric, urging first against the reopening of the hearing and then against adding any provision to what is commonly known as the SBAP. WildEarth Guardians, GreenLatinos and 350 Colorado said the tool is used to evaluate national and global damages associated with increases in carbon and cannot be weighed against local environmental and health impacts without giving a big boost to the applications for all carbon-capture-and-sequestration projects.
Business groups support carbon storage
“It should be obvious that the proposed use of including the SCC as a consideration as a beneficial cumulative impact for Class VI permits is more than just a ‘thumb on the scale’ in favor of the project,” the groups wrote in a filing with the ECMC. “Using the SCC in this way would justify any of the currently anticipated harms of any CCS project, from the contamination of groundwater, seismic activity, noise pollution, air pollution from the use of combustion-based engines or the risk of carbon-dioxide pipeline ruptures in an already overburdened community.”
Carbon-capture sector leaders say the litany of public-health risks opponents often try to connect to CCS projects is greatly exaggerated, noting that carbon is being injected into the ground and not pulled out in ways that add any significant emissions to a community. Still, the law that allowed the ECMC to seek primacy over Class VI wells from the EPA said that such wells must be at least 2,000 feet from residences or schools and that the ECMC must bar net negative cumulative impacts to the environment and public health when the projects are within a half-mile of a typically poorer and higher-minority DIC.
In its ECMC filing, the Colorado Chamber asked commissioners to add agencies’ testimony that social cost of carbon was the “best quantitative tool” available to assess a project’s beneficial impact to greenhouse gas emissions and the climate. And it sought to include a statement that failing to use the metric “would underestimate a proposed project’s benefits to society and prevent a more complete accounting of a project’s true impact.”
Final language paves some middle ground
The final language that the ECMC added was more muted, saying: “In analyzing cumulative impacts, the commission intends to consider the climate and GHG-reduction benefits associated with geologic storage projects. Although some stakeholders argued that the ‘Social Cost of Carbon’ should be part of this analysis, the commission believes the use of the SCC is worthy of additional study, and the commission does not intend to prohibit its use, when appropriate, as one factor in the overall evaluation of the environmental and public-health impacts of a proposed Class VI project.”
Commissioner John Messner particularly argued that he thought it was best to leave the new statement out of the SBAP, believing that the preliminarily improved rules already allowed project proponents to put forth arguments about positive environmental impacts. But agency staffers said repeatedly that they fell the explicit inclusion about use of the social cost of carbon was needed to show that is a permissible benefit to be considered, and ECMC Chairman Jeff Robbins pushed the rest of the commission to agree.
“The Colorado Chamber is very appreciative of the ECMC, at the encouragement of its sister agencies CDPHE and CEO, to consider the social cost of carbon when permitting CCS projects,” said Christy Woodward, regulatory affairs advisor for the chamber. “This allows the regulation of Colorado’s carbon management commission to come into alignment with the already approved considerations of other state agencies for all industries in Colorado. This technology is critical to Colorado’s ability to meet its greenhouse-gas targets, and this consideration allows for more regulatory certainty for these projects.”