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Carbon capture and sequestration, commonly referred to as CCS, is relatively new to Indiana.
Carbon dioxide is captured at an industrial site, compressed to a supercritical form, and transported by pipeline to an injection well where it is permanently sequestered in deep underground rock. The transportation and sequestration parts of CCS rely on real estate rights and therefore many Indiana attorneys will be asked to represent clients impacted by it.
Facilities that process corn to make ethanol for blending into vehicle fuel are a common industry looking to utilize CCS. The U.S. Department of Agriculture estimates that ethanol production significantly increases the price of corn, a leading Indiana agricultural product.
Indiana is well suited for carbon sequestration because it holds large areas of subsurface strata, in particular the Mt. Simon formation, which has characteristics desirable for sequestration. It is very deep, well below the formations for oil and gas production in Indiana, has impermeable caprock above it, and has excellent porosity and permeability, characteristics of stone that allow it to accept and hold carbon dioxide.
The carbon dioxide is pumped under high pressure into the microscopic voids in the rock—pore space —where it is irretrievable and eventually becomes a carbonate solid.
The area to which injected carbon dioxide migrates over time is known as a plume. After over a century of experience with oilfield water flooding and other injection-induced oil recovery, geologists are surprisingly good at predicting the plume, thus identifying the area where pore space rights must be acquired by the CCS developer.
Like other real estate, pore space rights may be acquired by purchase, lease or easement. Each method has particular attributes but leasing the pore space is currently the most common.
Due to the CCS process and regulations pertaining to it, a pore space lease has many characteristics not often seen in commercial real estate leases. For example, since a CCS developer cannot put a CCS permit, known as an EPA Class VI Injection Well Permit, into operation without long-term, pore space rights, and since CCS regulations require 50-year post injection monitoring (40 CFR §146.93(b)(1)), the leases are typically non-cancellable for any reason.
Indiana’s carbon sequestration statute
Indiana’s carbon sequestration framework, codified chiefly in Indiana Code Article 14-39, represents one of the more fully developed state regimes for reconciling traditional property concepts with the emerging needs of large-scale geologic carbon dioxide storage.
At the center of the statute is a bright-line rule that pore space belongs to the surface owner unless expressly severed from the surface in a recorded instrument. By vesting ownership of pore space in the surface estate (§14-39-2-3), the General Assembly eliminated the uncertainty that can arise where mineral rights have been severed, thereby allowing project developers to concentrate negotiations on a single class of interest holders rather than litigating whether the mineral estate or the surface estate controls storage rights.
The statute overlays a pragmatic, oil-and-gas-style “unitization” mechanism that allows a developer holding voluntary agreements from owners of at least 70 percent of the projected plume to petition the Indiana Department of Natural Resources (DNR) to integrate the remaining interests (§14-39-2-4).
To obtain a unitization order, the developer must (1) secure a final Underground Injection Control (UIC) Class VI permit, (2) demonstrate a good-faith effort to contract with every pore-space owner inside the project boundary, and (3) ensure that non-consenting owners receive equitable economic value.
Requiring a completed Class VI permit as a condition precedent ensures that only technically and environmentally sound projects can invoke compulsory integration, while the 70 percent threshold balances private property autonomy against the practical necessity of assembling contiguous storage reservoirs large enough to be commercially and geologically viable.
Critically, the Legislature insulated both surface and mineral owners from unintended encroachments. A unitization order does not confer a right of surface use unless expressly authorized in the DNR’s integration order, thereby preserving the traditional trespass protections enjoyed by landowners (§14-39-2-4(d)). Moreover, all rights under Chapter 14-39 are expressly subordinate to oil, gas, and coal interests (§14-39-2-1).
This subordination clause ensures that ongoing or future extraction of hydrocarbons and coal will not be impaired except to the limited extent “strictly necessary” to construct and maintain a permanent carbon dioxide storage facility.
Taken together, Indiana’s approach supplies the three ingredients most often cited as prerequisites for a durable sequestration legal regime: clear title to the storage medium, a workable mechanism for assembling large subsurface tracts without excessive hold-out risk, and explicit safeguards for competing resource interests.
By streamlining pore-space aggregation while embedding robust protections for surface and mineral estates, the statute aims to encourage private investment in geologic carbon sequestration, advance state-level decarbonization goals, and position Indiana as a jurisdiction where carbon capture projects can move from concept to injection with fewer legal unknowns.
The Indiana Legislature has also provided CCS developers with the power of condemnation for carbon dioxide pipeline rights-of-way via eminent domain where the CCS developer and landowners are unable to agree on a pipeline easement (Ind. Code § 14-39-1-9). Various regulations providing robust protection for landowners are now pending.
Conclusion
With the Indiana Legislature’s clear nod of support for the CCS industry through the adoption of Ind. Code § 14-39 et al., and the Indiana Natural Resources Commission’s recent adoption of regulations for the underground storage of carbon dioxide, Indiana is well-positioned to become a leader in an emerging industry that not only reduces carbon emissions, but creates new well-paying jobs for Hoosiers and provides landowners with a previously unknown asset.•
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John E. Rhine is a partner and Derrick W. McDowell is a senior managing associate in Dentons’ Evansville office. Karsten H. Ritter is of counsel in Dentons’ Cincinnati office. Their practices include a focus on carbon capture and sequestration. Opinions expressed are those of the authors.
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