HOUSE BILL 790
49th legislature - STATE OF NEW MEXICO - first session, 2009
INTRODUCED BY
Karen E. Giannini
AN ACT
RELATING TO OIL AND GAS; ENACTING THE CARBON DIOXIDE SEQUESTRATION ENABLING ACT; IDENTIFYING OWNERSHIP RIGHTS OF PORE SPACE AS DISTINCT FROM OTHER PROPERTY RIGHTS; PROVIDING FOR FEES; PROVIDING FOR PERMITS; PROVIDING PENALTIES; MAKING APPROPRIATIONS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 12 of this act may be cited as the "Carbon Dioxide Sequestration Enabling Act".
Section 2. [NEW MATERIAL] DEFINITIONS.--As used in the Carbon Dioxide Sequestration Enabling Act:
A. "carbon dioxide" means any anthropogenic carbon dioxide, including any gas mixture containing significant quantities of carbon dioxide that the division determines is suitable for storage and sequestration pursuant to the Carbon Dioxide Sequestration Enabling Act that has been:
(1) captured from an industrial source and would otherwise have been released to the atmosphere;
(2) captured from combustion of fuels; or
(3) stripped, segregated or divided from any other fluid stream;
B. "buffer zone" means that part of a reservoir in proximity to but not included in the permitted confinement zone that the division designates as a protective zone for detection and prevention of excursion;
C. "commission" means the oil conservation commission created pursuant to Section 70-2-4 NMSA 1978;
D. "division" means the oil conservation division of the energy, minerals and natural resources department;
E. "excursion" means underground movement of carbon dioxide that has been injected into a storage facility to a subsurface location outside the horizontal or vertical limits of the permitted confinement zone;
F. "geologic sequestration" means the underground storage of carbon dioxide in a permitted confinement zone suitable to provide permanent confinement of the carbon dioxide; provided that the division may authorize the withdrawal of sequestered carbon dioxide for use pursuant to the Carbon Dioxide Sequestration Enabling Act;
G. "injection phase" means that period of time during which a storage operator is injecting or re-injecting carbon dioxide into a storage facility;
H. "permitted confinement zone" means the portion of a reservoir, defined by horizontal and vertical limits in the order permitting a storage facility, that the injected carbon dioxide is expected to physically occupy;
I. "pore space" means all underground space, whether in caverns, fissures, pores, on the surface of formation rocks or otherwise, that is suitable, or can be made suitable, for injection, transport or storage of fluids;
J. "reservoir" means any subsurface stratum, formation, aquifer, cavity or void, whether natural or artificially created, including any oil or gas reservoir, saline aquifer or coal seam suitable for or capable of being made suitable for the injection and storage of carbon dioxide, but does not include any aquifer or part of any aquifer that is an underground source of drinking water;
K. "storage facility" means a permitted confinement zone or zones, associated buffer zones and all underground equipment and surface facilities and equipment utilized in the storage operation, excluding pipelines used to transport carbon dioxide to the facility;
L. "storage operator" means any person that the division authorizes to operate a storage facility;
M. "storage rights" means, with respect to a tract of land, as a minimum, an estate or interest in land that:
(1) confers upon the owner the permanent right to use of the pore space in the permitted confinement zone for geologic sequestration of carbon dioxide;
(2) unitizes all interests in production of oil and gas from the reservoir during the injection phase of storage facility operation; and
(3) relinquishes by all owners of the mineral estate in the tract, including owners of any leasehold interest, owners of the mineral fee estate and owners of any royalty interest or other right to production therefrom, all residual rights to explore for or produce oil, gas or other minerals from the permitted confinement zone and associated buffer zone, except for production of oil and gas during the injection phase of storage facility operation. In the case of lands where the mineral fee estate is owned by the United States, the state of New Mexico or any tribal government, the consent of the governmental entity to inclusion of the lands in a storage project shall be deemed equivalent to the relinquishment of residual mineral rights for purposes of this definition;
N. "surface rights" means rights of access to the surface of lands overlying a reservoir that the division determines are reasonably necessary for the operation, maintenance, monitoring, closure and post-closure monitoring of a storage facility and for any remediation operation required pursuant to the Carbon Dioxide Sequestration Enabling Act, including well sites for injection and monitoring wells that the division permits or requires and permanent rights for pipelines and access to those well sites; and
O. "underground source of drinking water" means an underground source of drinking water as now or hereafter defined by the United States environmental protection agency pursuant to the federal Safe Drinking Water Act.
Section 3. [NEW MATERIAL] DECLARATION OF PUBLIC POLICY.--The legislature declares that geologic sequestration of anthropogenic carbon dioxide is in the public interest. The Carbon Dioxide Sequestration Enabling Act shall be liberally construed to facilitate the establishment and operation of storage facilities.
Section 4. [NEW MATERIAL] OWNERSHIP OF PORE SPACE, CONVEYANCES AND SURFACE RIGHTS--SUBSURFACE TRESPASS--OWNERSHIP OF INJECTED CARBON DIOXIDE.--
A. The legislature declares that any grant or reservation of the minerals in any lands in New Mexico does not, unless otherwise specifically provided in the instrument of conveyance, vest in the party to whom the mineral estate or part thereof is granted or reserved ownership of the pore space underlying such lands, except for the right to use the pore space as may be reasonably necessary to explore for or produce the minerals pursuant to the common law of this state.
B. Title to pore space may be severed from the surface estate by grant, conveyance or otherwise, but no title instrument shall be construed as effecting such a severance unless it expressly so provides. The owner of a severed right or title to pore space shall have no right to enter upon, or otherwise use, the surface of the land unless the instrument of severance expressly so provides. This section shall govern the construction of all instruments affecting title to pore space executed on or after the effective date of the Carbon Dioxide Sequestration Enabling Act and shall guide the construction of all such instruments executed prior to the effective date of that act, except to the extent that a court determines that construction of any preexisting instrument pursuant to this subsection would deprive any person of vested property rights existing on the effective date of that act.
C. Any public body and any personal representative, guardian, receiver, trustee or other fiduciary shall be authorized to grant to any storage operator rights for underground sequestration of anthropogenic carbon dioxide in lands the public body or fiduciary controls in the same manner as provided by law for sale by the public body or fiduciary of interests in land, or if the public body or fiduciary is not authorized to sell the lands, then in the same manner as authorized by law for entering into agreements to grant an easement or license for the use of the lands.
D. The provisions of this section are not intended to change the law of the state with respect to the rights of the owners of any mineral estate, nor with respect to underground waters.
E. No owner of any interest in land shall have any claim or cause of action for subsurface trespass by reason of the injection of carbon dioxide pursuant to the Carbon Dioxide Sequestration Enabling Act unless the carbon dioxide physically invades pore space within the horizontal and vertical limits of the owner's land.
F. Carbon dioxide injected pursuant to the Carbon Dioxide Sequestration Enabling Act shall remain the property and responsibility of the storage operator, unless and until transferred to and accepted by another person.
Section 5. [NEW MATERIAL] PERMIT REQUIRED.--
A. No person shall construct or operate a storage facility for the geologic sequestration of carbon dioxide except pursuant to a permit issued by the division or the commission, which shall specify the horizontal and vertical limits of the reservoir, the horizontal and vertical limits of the permitted confinement zone and appropriate buffer zones and the location of surface facilities, including injection wells, monitoring wells and testing sites.
B. Prior to issuing any permit for construction or operation of a storage facility, the division or commission shall find:
(1) that the reservoir is suitable for injection and permanent storage of carbon dioxide;
(2) that construction and operation of the storage facility as provided in the permit is feasible;
(3) that the construction and operation of the storage facility will not endanger human health, surface water, underground sources of drinking water, other natural resources or the environment;
(4) that the construction and operation of the storage facility will not endanger any commercial deposit of oil, gas or other mineral outside the horizontal and vertical limits of the permitted confinement zone and buffer zones; and
(5) that the storage operator has acquired or can acquire the storage rights necessary for the operation of the facility, subject to such exceptions as the division or commission may authorize.
C. Carbon dioxide injected pursuant to the Carbon Dioxide Sequestration Enabling Act into a storage facility shall not be withdrawn, except for withdrawal and re-injection at the storage facility in connection with oil and gas production, unless specifically authorized by the division or commission or in event of an emergency as defined by division or commission rules.
Section 6. [NEW MATERIAL] POWERS OF THE DIVISION AND COMMISSION.--
A. The division or commission may:
(1) adopt rules to regulate the injection, geologic sequestration, storage and removal from storage of carbon dioxide, including administering the federal Safe Drinking Water Act, as may be authorized by any program adopted by the United States environmental protection agency regarding geologic carbon sequestration;
(2) after public notice and hearing, issue permits for the construction and operation of storage facilities and determine, and from time to time re-determine, the vertical and horizontal boundaries of the permitted confinement zone or zones and appropriate buffer zones;
(3) adopt rules and orders necessary or proper to administer and enforce the provisions of the Carbon Dioxide Sequestration Enabling Act;
(4) impose such terms and conditions upon any permit issued pursuant to the Carbon Dioxide Sequestration Enabling Act as may be necessary to protect human health and safety, surface water, underground sources of drinking water, other natural resources and oil, gas and mineral deposits outside the permitted confinement zone and buffer zones and the environment;
(5) authorize withdrawal of carbon dioxide from a storage facility permitted pursuant to the Carbon Dioxide Sequestration Enabling Act for use, upon such terms and conditions as the division or commission shall prescribe;
(6) after public notice and hearing, establish fees for the permitting and re-permitting of storage facilities that do not exceed the reasonable cost of administering the Carbon Dioxide Sequestration Enabling Act;
(7) require storage operators to furnish financial assurance sufficient to secure the storage operator's compliance with statutory and regulatory requirements for proper maintenance, closure and post-closure monitoring of any storage facility and prescribe the forms and amounts of such financial assurance;
(8) after notice and opportunity for a hearing, assess civil penalties for any violation of the Carbon Dioxide Sequestration Enabling Act or of any rule or order adopted or permit issued by the division or commission pursuant to the Carbon Dioxide Sequestration Enabling Act, not to exceed ten thousand dollars ($10,000) for each violation or for each day of a continuing violation;
(9) issue orders requiring the unitization of oil and gas interests in the permitted confinement zone and associated buffer zones; and
(10) exercise jurisdiction over all persons, facilities, properties and matters and do all things necessary or proper to administer and enforce the provisions of the Carbon Dioxide Sequestration Enabling Act.
B. Section 70-2-13 NMSA 1978 and rules adopted pursuant thereto shall apply to all hearings required or authorized under the Carbon Dioxide Sequestration Enabling Act.
Section 7. [NEW MATERIAL] CONDITIONS PRECEDENT TO INJECTION--EXCURSION.--
A. No storage operator shall commence injection of carbon dioxide pursuant to this act until the storage operator has:
(1) complied with all conditions precedent to commencement of injection provided in applicable rules and in its permit;
(2) acquired the storage rights and surface rights necessary for operation of the storage facility; and
(3) filed a certified copy of the commission or division order defining the permitted confinement zone or zones and buffer zones in the office of the county clerk of each county in which any part of any permitted confinement zone or associated buffer zone is located.
B. If the division or commission at any time determines that excursion has occurred, the division or commission shall, as it determines to be appropriate to accomplish the purposes of the Carbon Dioxide Sequestration Enabling Act:
(1) expand the boundaries of the permitted confinement zone as necessary to encompass the area of excursion and of any necessary buffer zones, in which event the storage operator shall make a good faith effort, as expeditiously as possible, to acquire storage rights and surface rights in the expanded area as the division or commission shall order; or
(2) if the division or commission determines that the area of excursion is not suitable for confinement and storage of the anthropogenic carbon dioxide, require the storage operator to undertake such remedial measures as may be necessary and proper to prevent further excursion and to remedy any damage caused by the excursion, including abatement of any resulting water contamination.
C. The division or commission may by rule require any person who encounters carbon dioxide in a well to report such discovery to the division or commission and, if the division or commission determines that the carbon dioxide is present in the well due to excursion from a storage facility, to take necessary or appropriate actions to prevent the escape of sequestered carbon dioxide into or through the well.
Section 8. [NEW MATERIAL] ACQUISITION OF STORAGE RIGHTS AND SURFACE RIGHTS.--Acquisition of storage rights by a storage operator shall, unless otherwise agreed between the parties, preserve to the owners from whom the rights are acquired and their heirs, successors and assigns:
A. the right to drill through the reservoir in such manner as shall comply with applicable rules and orders of the division or commission; and
B. all other rights or interests of such owners in the surface or the subsurface that can be exercised without interference with the operation of the storage facility or compromising the integrity thereof.
Section 9. [NEW MATERIAL] UNITIZATION OF OIL AND GAS PRODUCTION.--
A. If the reservoir for any storage project contains oil or gas deposits that can be commercially produced during the injection phase of storage facility operation, the storage operator may, in lieu of acquiring all interests in the oil and gas in the permitted confinement zone and buffer zones that can be so produced, apply to the division or commission for compulsory unitization of such interests.
B. The division or commission may order the compulsory unitization of oil and gas interests described in Subsection A of this section if the division or commission finds that:
(1) the storage operator has obtained a permit to construct a storage facility;
(2) the storage operator has acquired by voluntary conveyance or unitization at least twenty-five percent of the expense-bearing oil and gas interest in the reservoir and at least twenty-five percent of the revenue interest in the oil and gas in the permitted confinement zone and buffer zones;
(3) the storage operator has made a good faith effort to obtain voluntary unitization upon terms that would allow use of the reservoir for geologic sequestration as provided in the Carbon Dioxide Sequestration Enabling Act; and
(4) the terms of the unit agreement and unit operating agreement that the storage operator proposes, or as modified in the division's or commission's order, are fair and reasonable to the non-joining owners.
C. Compulsory unitization of the rights to oil and gas production as provided in this section does not relieve the storage operator of the requirement of the Carbon Dioxide Sequestration Enabling Act to obtain all other storage rights and surface rights necessary for the operation of the storage project, including rights of surface access and rights to operate injection and monitoring wells following the termination of applicable oil and gas leases, or of oil and gas production, and rights to produce other minerals, the production of which is precluded by the construction and operation of the storage facility.
Section 10. [NEW MATERIAL] ENHANCED RECOVERY OPERATIONS.--
A. The Carbon Dioxide Sequestration Enabling Act does not apply to any enhanced oil recovery project or enhanced gas recovery project now or hereafter permitted by the division or commission under the Oil and Gas Act where the sole purpose of injection is enhanced recovery of oil or gas, nor does it prohibit the use of anthropogenic carbon dioxide in such projects. The Carbon Dioxide Sequestration Enabling Act also does not apply to the disposal of oil field waste by injection pursuant to division or commission rules adopted pursuant to the Oil and Gas Act.
B. The division or commission may adopt rules pursuant to the Carbon Dioxide Sequestration Act to authorize the conversion of enhanced oil recovery projects or enhanced gas recovery projects into storage facilities. Upon approval of conversion, the Carbon Dioxide Sequestration Enabling Act shall apply to the converted storage facility.
Section 11. [NEW MATERIAL] COOPERATIVE AGREEMENTS.--The division and commission are authorized to enter into cooperative agreements with other state, federal or tribal agencies, including agencies of other states, for the purpose of implementing the provisions of the Carbon Dioxide Sequestration Enabling Act.
Section 12. [NEW MATERIAL] CARBON SEQUESTRATION FACILITIES FUND.--The "carbon sequestration facilities fund" is created in the state treasury to be administered by the energy, minerals and natural resources department. The fund is composed of all fees collected pursuant to the rules adopted under the Carbon Dioxide Sequestration Enabling Act. Money in the fund is appropriated to the energy, minerals and natural resources department for the purpose of administering the Carbon Dioxide Sequestration Enabling Act and the rules adopted pursuant to that act, and shall not revert at the end of a fiscal year. Disbursements from the fund shall be made upon warrants drawn by the secretary of finance and administration pursuant to vouchers signed by the secretary of energy, minerals and natural resources.
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