Carbon Capture and Sequestration

Carbon capture and sequestration (CCS), also referred to as carbon capture and storage, is creating new opportunities for energy companies, landowners, mineral owners, and other participants in California’s energy industry. At the same time, CCS projects can raise complicated questions involving real property, subsurface rights, leases, land use, permitting, environmental requirements, and long-term project obligations. Carbon capture and sequestration (CCS) projects require a combination of technical, regulatory, commercial, and property rights. One of the most important legal questions can arise much deeper: who actually owns the geologic storage reservoir or pore space needed for the project, and what does the property’s chain of title say about that ownership?

In California, that question cannot simply be answered by assuming that pore space belongs to the surface owner or the mineral owner. California’s current statutory framework provides that title to a geologic storage reservoir is vested in the owner of the overlying surface estate unless the reservoir has been severed and separately conveyed. The statute also provides specific rules concerning conveyances of geologic storage reservoir rights and makes clear that a mineral or other subsurface conveyance does not itself transfer ownership of a geologic storage reservoir unless the instrument explicitly conveys that ownership.

That makes the chain of title a central component of CCS development. The relevant question is not simply who owns the land today. It is how the applicable subsurface rights were created, reserved, conveyed, or severed over time and how current California law applies to those interests.

At Reed Energy Law, PC, we bring an unusually practical perspective to these issues. Alyssa Reed is among the relatively small number of attorneys with firsthand in-house experience developing carbon sequestration projects in California, acquiring the property rights necessary to operate them, and working through the permitting process on behalf of a CCS operator. Her experience is not limited to advising a client from outside the project. She has been directly involved in the business and legal decisions required to move CCS projects from an opportunity to an operating development.

That experience gives us a different understanding of what CCS developers and property owners actually need from their legal counsel. We work with CCS operators, energy companies, landowners, mineral owners, and other parties involved in carbon storage projects throughout California. Our work can include legal opinions, property-rights analysis, leasing, transaction structuring, surface-estate protections, project development, and permitting strategy.

Determining Who Owns the Storage Rights

The first step may instead be determining exactly what subsurface interest the project needs and who owns it. We review the property’s chain of title to determine whether the relevant geologic storage reservoir was retained with the surface estate, severed and separately conveyed, or otherwise affected by prior instruments. This can require examining historical deeds, mineral reservations, conveyances, leases, assignments, and other recorded documents. The legal analysis is particularly important because a historical mineral severance does not necessarily answer the question of who owns the geologic storage reservoir under California’s current statutory framework. The wording of the instruments and the applicable law must be considered together.

Pore Space, Mineral Rights, and the Subsurface Estate

A CCS project can encounter multiple layers of subsurface interests. The project may need access to a particular storage formation while existing mineral owners or oil and gas operators retain rights that could be affected by injection, pressure changes, wells, or other project activities. We analyze the relationship among the surface estate, geologic storage reservoir or pore space, mineral estate, and existing leases or operating rights. The objective is to determine which interests are actually implicated by the proposed project and which parties need to be involved. This analysis is not necessarily the same from one property to another. Two neighboring parcels may have very different title histories and therefore require different transaction structures.

Understanding the Actual Project

The rights required for a CCS project depend on what the project will actually do. A project may require injection wells, monitoring wells, access roads, pipelines, measurement equipment, compression facilities, monitoring activities, and continuing access to the storage area. But the subsurface rights needed for injection and storage must be analyzed separately from the surface rights needed to construct and operate the associated infrastructure. We help clients map the project’s activities to the property interests required to conduct them. That process helps determine whether the project needs a lease, easement, license, consent, waiver, purchase, assignment, or another form of agreement.

Mineral Interests That May Be Affected

Whether mineral-owner involvement is necessary depends on the title and the actual project. Existing mineral rights can be particularly important where a proposed storage reservoir overlaps with formations that are subject to oil and gas development or other mineral interests. The parties need to determine whether injection and storage could interfere with existing or future mineral activities and whether the mineral owner holds rights that must be addressed. We help clients evaluate these questions and determine what form of consent, waiver, agreement, or other transaction may be appropriate.

Project-Specific Agreements and Waivers

A CCS project should not automatically rely on a generic mineral waiver or broad subsurface agreement. The appropriate document depends on what the title establishes and what the project requires. In some cases, the project may need to acquire or document ownership of the relevant geologic storage reservoir. In others, it may need an agreement with a mineral owner, an existing operator, or another rights holder. The agreement may need to address the specific formation, depth, area, activities, access rights, monitoring rights, and interactions with existing interests. We help structure and negotiate these agreements around the actual project rather than granting or waiving rights more broadly than necessary.

Legal Opinions on CCS Rights

Because ownership questions can be central to the feasibility of a storage project, a legal opinion may provide important clarity before substantial capital is committed. We can analyze the relevant title documents and applicable California law and provide opinions concerning ownership and the rights necessary to support the proposed project. A legal opinion can also help identify areas where additional agreements or title work are advisable before development proceeds.

Protecting the Surface Estate

Surface rights remain important, but they are only one component of the CCS rights analysis. Once the subsurface ownership questions have been resolved, the project still needs appropriate rights to construct, operate, monitor, maintain, and eventually decommission its facilities. California’s CCS statute also addresses the relationship between geologic storage reservoir rights and the surface estate. An instrument transferring storage reservoir rights must address the scope of any right to use the surface, among other requirements, and a storage reservoir owner has no right to use the surface beyond what is provided in a properly recorded instrument. We help clients make sure these surface rights are deliberately defined rather than assumed.

CCS Due Diligence and Title Review

For a CCS developer, due diligence should answer more than whether someone owns the parcel. It should establish the legal structure of the surface, subsurface, mineral, storage, and operational rights associated with the proposed project. We assist with reviewing title, identifying severances and reservations, evaluating existing mineral and operating interests, determining whether the project has the necessary rights, and identifying gaps that should be addressed before development.

CCS Projects in California

California’s CCS regulatory framework continues to develop, making it important to evaluate current law and regulations alongside the property’s title history. A project that is legally workable under one set of assumptions may require a different structure as statutes, regulations, and agency requirements evolve. Our work combines title analysis with our experience in energy project development, permitting, real property, mineral interests, and oil and gas operations.

Reed Energy Law’s CCS Experience

Alyssa Reed is unusual among California attorneys in having worked in-house for an energy company on carbon solutions projects. She has experience developing projects, acquiring the rights needed to operate them, and working through the permitting process from the operator’s perspective. That experience matters because CCS property-rights questions are not merely academic. The legal structure needs to support an actual project, with actual wells, infrastructure, operations, financing, regulatory requirements, and long-term property interests.

California Carbon Capture and Sequestration Counsel

At Reed Energy Law, PC, we help CCS operators, developers, landowners, mineral owners, and other participants evaluate and establish the property rights necessary for carbon storage projects. Our work includes legal opinions, chain-of-title analysis, evaluation of geologic storage reservoir and pore space rights, mineral-rights analysis, project-specific waivers and agreements, and due diligence concerning the rights needed to develop and operate the project.

If you are evaluating a CCS project in California, do not assume that surface ownership, mineral ownership, or a standard oil and gas agreement answers the subsurface-rights question. Get in touch with Reed Energy Law, PC, to discuss the property’s chain of title and determine what rights and agreements your project actually requires.