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HOUSE BILL 457
57
TH LEGISLATURE
-
STATE
OF
NEW
MEXICO
-
FIRST SESSION
,
2025
INTRODUCED BY
Meredith A. Dixon and William E. Sharer and Jack Chatfield
and Nathan P. Small and Steve D. Lanier
AN ACT
RELATING TO THE ENVIRONMENT; ENACTING THE GEOLOGIC CARBON
DIOXIDE SEQUESTRATION ACT; PROVIDING FOR UNITIZATION OF
FORMATIONS FOR SUBSURFACE SEQUESTRATION OF CARBON DIOXIDE;
CREATING THE OIL CONSERVATION DIVISION SYSTEMS AND HEARINGS
FUND; ESTABLISHING FEES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be
cited as the "Geologic Carbon Dioxide Sequestration Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the
Geologic Carbon Dioxide Sequestration Act:
A. "carbon dioxide" means carbon dioxide produced
by anthropogenic sources or captured from the atmosphere,
including "qualified carbon oxides" as defined pursuant to
applicable federal law and "carbon dioxide stream" as may be
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defined in federal law and regulations pertaining to class VI
carbon dioxide injection wells;
B. "commission" means the oil conservation
commission;
C. "director" means the director of the division;
D. "division" means the oil conservation division
of the energy, minerals and natural resources department;
E. "geologic sequestration" means the long- or
short-term underground sequestration of carbon dioxide within a
geologic stratum, formation, saline aquifer, cavity or void,
whether naturally or artificially created, including deep
saline aquifers, oil and gas reservoirs and unminable coal
seams, from which carbon dioxide does not escape to the
atmosphere;
F. "operator" means a person who has the right to
inject carbon dioxide for geologic sequestration into a
sequestration facility, whether for the person's own account or
for the account of others;
G. "pore space" means the empty space between rock
grains, fractures and voids in the earth's subsurface; "pore
space" is the available space within, and contained by,
geologic formations;
H. "sequestration facility" means carbon dioxide
injection wells, monitoring wells, science wells and any other
wells used for the injection of carbon dioxide in subsurface
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geologic formations, including underground equipment, surface
equipment, pipelines and buildings used for the purpose of
geologic sequestration of carbon dioxide. "Sequestration
facility" includes a facility that injects carbon dioxide for
secure geologic sequestration pursuant to applicable federal
laws, including a geologic sequestration project as may be
defined in federal regulations pertaining to federal
environmental protection agency class VI underground injection
control wells for carbon dioxide injection wells, but shall not
apply to underground injection control class II wells; and
I. "sequestration unit" means the geologic
formation or formations proposed for the injection of carbon
dioxide for geologic sequestration and the lands to be included
within the unit. "Sequestration unit" does not include oil and
gas units where carbon dioxide is injected for purposes of
enhancing oil and gas production.
SECTION 3. [NEW MATERIAL] APPLICABILITY--DIVISION
AUTHORITY--RULEMAKING.--
A. Geologic sequestration of carbon dioxide shall
be permitted pursuant to the Geologic Carbon Dioxide
Sequestration Act.
B. The Geologic Carbon Dioxide Sequestration Act
applies to sequestration facilities that commence injection of
carbon dioxide after the effective date of this 2025 act;
provided that sequestration facilities that commenced injection
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of carbon dioxide before the effective date of this 2025 act
may apply to the division for unitization pursuant to the
provisions of the Geologic Carbon Dioxide Sequestration Act.
C. The Geologic Carbon Dioxide Sequestration Act
does not apply to the injection of carbon dioxide in connection
with the enhanced oil and gas production operations.
D. The Geologic Carbon Dioxide Sequestration Act
does not supersede existing mineral rights, existing surface
rights or existing disposal rights.
E. The division has the jurisdiction and authority
necessary to enforce the provisions of the Geologic Carbon
Dioxide Sequestration Act and may adopt and promulgate rules
and issue orders for the implementation of the provisions of
that act.
SECTION 4. [NEW MATERIAL] ACQUISITION OF LANDS FOR
GEOLOGIC SEQUESTRATION.--
A. An operator that desires to form a sequestration
unit shall attempt to acquire by option, lease, conveyance or
other negotiated means the rights necessary for geologic
sequestration within the proposed sequestration unit prior to
resorting to the procedure for unitization of such interests
pursuant to Section 5 of the Geologic Carbon Dioxide
Sequestration Act.
B. The lands to be included shall be the reasonably
ascertained areal extent of migration of the sequestered carbon
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dioxide within the formation or formations based on known
geologic information available at the time of the application.
The sequestration unit shall also identify any necessary and
reasonable areal buffer and subsurface monitoring zones as
required by federal or state law, rule, regulation, order or
permit.
C. The commissioner of public lands or a state
agency may grant to an operator rights for geologic
sequestration on lands subject to its jurisdiction on such
terms as it finds are reasonable and that provide compensation
equal to the fair market value of the rights.
D. The division may grant to an operator the right
to form and to commence operations for the geologic
sequestration of carbon dioxide in accordance with the Geologic
Carbon Dioxide Sequestration Act.
SECTION 5. [NEW MATERIAL] UNITIZATION OF SEQUESTRATION
FACILITIES--CONTENTS OF APPLICATION.--
A. An operator may apply to the division for an
order unitizing a geologic formation or formations for geologic
sequestration of carbon dioxide to be included within the
proposed sequestration unit. The division shall issue the
order upon finding that the requirements of this section and
Section 6 of the Geologic Carbon Dioxide Sequestration Act have
been satisfied.
B. An application filed pursuant to this section
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shall contain:
(1) if required by the federal government, a
copy of a permit or draft permit for injection of carbon
dioxide pursuant to any applicable federal law;
(2) a description of the proposed geologic
formation or formations and a plat of the surface lands
proposed to be included in the proposed sequestration unit,
including identification of the buffer and subsurface
monitoring zones;
(3) the names and addresses of the owners of
the surface estate within the proposed sequestration unit and
of lands within one-half mile of the exterior boundary of the
proposed sequestration unit as disclosed by:
(a) the records of the county assessor
of each county in which the proposed sequestration unit is to
be located with respect to privately owned land; and
(b) the bureau of land management with
respect to federal lands, the commissioner of public lands with
respect to state trust lands and the applicable state agency
owning the surface estate with respect to lands owned by the
state but not subject to the jurisdiction of the commissioner
of public lands;
(4) the names and addresses of the owners of
the mineral estate and mineral lessees within the proposed
sequestration unit and for all lands within one-half mile of
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the exterior boundary of the proposed sequestration unit;
(5) the names and addresses of the owners of
the pore space estate within the proposed sequestration unit
and for all lands within one-half mile of the exterior boundary
of the proposed sequestration unit;
(6) evidence of the following:
(a) geologic evidence establishing the
capability of the formation to accept and sequester carbon
dioxide;
(b) an estimate of the quantity and
volume of carbon dioxide that is reasonably believed to be
capable of being sequestered in the sequestration unit;
(c) the anticipated pressure of each
formation proposed for sequestration and the anticipated
pressure required to inject carbon dioxide into the
sequestration unit;
(d) if available, the proposed locations
of wells, types of wells, anticipated total depth of the wells,
the casing program for the wells and the proposed locations of
sequestration facilities;
(e) the depth of all fresh water
aquifers and location of any water wells within the
sequestration unit and buffer zone;
(f) the date the proposed plan is
desired to become effective;
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(g) the anticipated date of the
commencement of development of sequestration facilities;
(h) the anticipated date of the
commencement of injection operations;
(i) the estimated period of time it will
take to complete the construction of the sequestration
facility;
(j) the estimated life of the injection
operations; and
(k) the estimated pressure in the
formation at the end of the injection operations;
(7) information on each of the facts required
to be found by the division pursuant to Section 6 of the
Geologic Carbon Dioxide Sequestration Act;
(8) the amount per acre or the amount per
volume of carbon dioxide injected that the operator proposes to
pay to compensate the owners of the surface estate, including
owners in the designated buffer area and, if severed, the
owners of the subsurface formation or formations containing
pore space within the sequestration unit in which the carbon
dioxide is to be injected for sequestration. Each owner of the
formation or formations shall be deemed for all purposes to
have an equal amount of capacity to store sequestered carbon
dioxide and shall be compensated on a surface acreage basis for
such injection and storage; and
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(9) the amount per acre that the operator
proposes to pay to compensate the surface owners or, if
severed, the owners of the formation or formations within the
buffer and monitoring zones.
SECTION 6. [NEW MATERIAL] UNITIZATION OF A SEQUESTRATION
UNIT--FINDINGS--RATIFICATION--AMENDMENTS--PETITIONS FOR
INCLUSION--RECORDING--LIEN FOR COSTS.--
A. Upon receipt of an application pursuant to
Section 5 of the Geologic Carbon Dioxide Sequestration Act, the
division shall set the matter for hearing and, in addition to
notice otherwise required by law or the division's rules, shall
cause the applicant to give notice of the hearing, specifying
the time and place of the hearing and describing briefly its
purpose and the land and formations affected, to be mailed by
certified mail at least thirty days prior to the hearing to all
persons whose names and addresses are required to be listed in
the application.
B. If the proposed unitization order concerns
unknown or non-locatable owners and interest holders, the
applicant shall publish notice once a week for two consecutive
weeks in the newspaper of the largest circulation in each
county in which the proposed sequestration unit is located and
shall file proof of notice with the division concurrently with
the application. The first notice shall appear at least thirty
days prior to, and the second notice no more than twenty-five
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days from, the hearing on the application for a sequestration
unit order. The notice shall:
(1) state that an application for a
sequestration unit has been filed with the division;
(2) describe the formation or formations and
land proposed to be unitized and the buffer area and any
monitoring area;
(3) in the case of an unknown owner or
interest holder, indicate the name of the last known owner or
interest holder;
(4) in the case of a non-locatable owner or
interest holder, identify the name of the owner or interest
holder and the owner's or interest holder's last known address;
and
(5) state that any person claiming an interest
in the formations or lands proposed to be unitized should
notify the director and the operator of the proposed
sequestration facility at the published address within twenty
days of the publication date of the most recent notice.
C. After considering the application and hearing
the evidence offered regarding the application, the division
may enter an order setting forth the following findings if
established by the evidence presented:
(1) the underground stratum or formation
sought to be unitized is suitable for the geologic
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sequestration of carbon dioxide and its use for such purposes
is in the public interest;
(2) the use of the underground stratum or
formation sought to be unitized will contain the carbon dioxide
and will not contaminate fresh water;
(3) the use of the underground stratum or
formation sought to be unitized will contain the carbon dioxide
and will not contaminate oil, gas, condensate, potash or other
commercial mineral deposits capable of being produced in paying
quantities, unless all the owners, mineral lessees and other
parties owning interests in such oil, gas, condensate, potash
or other commercial mineral deposits have consented to the
sequestration unit;
(4) the use of the underground stratum or
formation sought to be unitized will contain the carbon dioxide
and will not interfere with existing or planned injection of
produced water, carbon dioxide or other fluids from ongoing oil
and gas or mineral operations;
(5) the application denotes the areal extent
of migration of the injected carbon dioxide within the
underground stratum or formation and that all lands reasonably
determined to be within the migration zone are included within
the sequestration unit;
(6) the anticipated volume or quantity of
carbon dioxide capable of being sequestered in the
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sequestration unit;
(7) the compensation to be paid by the
operator to the owners of the surface or, if severed, the
owners of the formation or formations within the sequestration
unit is fair, just and equitable;
(8) the compensation to be paid by the
operator to the owners of the surface or, if severed, the
owners of the formation or formations within the buffer area or
any monitoring area is fair, just and equitable;
(9) the compensation to be paid by the
operator to the owners of the surface where sequestration
facilities are to be built on the surface, including roads and
pipelines, is fair, just and equitable;
(10) no portion of the formation or stratum
sought to be unitized is being used, or is currently being
proposed to be used, for production of oil, natural gas, potash
or any other mineral capable of being mined and marketed in
paying quantities or for the geologic sequestration of carbon
dioxide by others within the proposed sequestration unit,
including its buffer;
(11) the sequestration unit does not include
unleased state land without an agreement with the state land
office;
(12) the applicant has made a good faith
effort to secure voluntary unitization and has secured
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voluntary agreements from owners of at least eighty-five
percent of the lands within the proposed sequestration unit;
(13) the application sets forth the following
information:
(a) the approximate anticipated date
geologic sequestration would commence within the sequestration
unit if approved;
(b) the approximate date of commencement
of the sequestration facilities if approved;
(c) the anticipated pressures
encountered within the formation or formations in which the
sequestration is to occur;
(d) the anticipated pressure required to
sequester the carbon dioxide into the formation or formations;
(e) the estimated duration of the
sequestration operations; and
(f) the areal extent of the migration of
carbon dioxide sequestered into the sequestration unit; and
(14) the application includes additional
provisions found to be appropriate for the operation of the
sequestration facility and does not violate stipulations within
the Oil and Gas Act for the prevention of waste and
preservation of correlative rights.
D. The division shall not issue an order approving
the application until the applicant has received agreements in
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writing by persons owning at least eighty-five percent of the
lands within the proposed sequestration unit. When the persons
owning the required percentage of interest have approved the
sequestration unit, the division may enter an order approving
the application and unitizing the interests of all persons
within the sequestration unit whether or not the persons have
voluntarily agreed to the sequestration unit. If the required
percentage of interest for a proposed sequestration facility
does not approve the sequestration unit within a period of six
months from the date of filing the application, the application
shall be revoked by the division unless the division, for good
cause shown, extends the time for ratification; provided that
the time for ratification shall not be extended for more than
six months.
E. An order entered by the division pursuant to
this section may be amended by the division after notice and a
hearing as follows:
(1) for amendments concerning an expansion of
the sequestration unit, notice shall be in the same manner and
subject to the same conditions as notice provided in
Subsections A and B of this section and to include all the
interests in the area in which the additional lands considered
for expansion are located;
(2) for amendments dealing only with a
modification of operations of the sequestration facility or
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sequestration unit, notice shall be sent to all owners of
interests within the sequestration unit at the owners' last
known address on file with the operator; and
(3) for all other amendments, notice shall be
in the same manner and subject to the same conditions as notice
provided in Subsections A and B of this section.
F. A certified copy of any order of the division
entered pursuant to this section shall be recorded in the land
records of the counties where a portion of the sequestration
unit and attendant buffer and monitoring zones are located.
SECTION 7. [NEW MATERIAL] UNITIZATION OF SEQUESTRATION
UNIT--EFFECTS OF UNITIZATION ORDER.--
A. Except to the extent that the parties affected
agree, no order providing for a sequestration unit shall be
construed to result in a transfer of all or any part of the
title or other rights in any tract in the sequestration unit,
except for the right to inject carbon dioxide into the
formation or formations subject to the sequestration unit. The
rights to use the surface for access and sequestration
facilities requires a separate agreement between the surface
owner and operator, and the terms of surface agreements shall
treat all surface owners fairly. No agreement or order shall
operate to violate the terms and requirements of any permit
applicable to the formation or formations or the wells within
the sequestration unit.
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B. No order of the division issued pursuant to the
Geologic Carbon Dioxide Sequestration Act shall be construed to
confer on any person the right of eminent domain, beyond the
unitization of the sequestration unit.
C. Each of the tracts of land within the
sequestration unit shall be allocated a pro rata share of the
proceeds for the sequestration of carbon dioxide on an acreage
basis, with the numerator being the number of acres within the
tract divided by the total number of acres in the sequestration
unit. Upon an expansion or contraction of the sequestration
unit, the tract allocation percentages shall change based on
the new acreage in the expanded or contracted sequestration
unit, effective the first day of the month following approval
by the division of the expansion or contraction.
D. Each tract's share shall be allocated and paid
to the surface owners or, if previously severed, the owners of
the subsurface formation or formations or the voids within the
formations within the sequestration unit into which the carbon
dioxide is to be injected for sequestration, the operator and
any other persons owning interests in the sequestration of
carbon dioxide within the tract on the basis of the agreement
or agreements.
E. With respect to the interest of any party who
cannot be located or whose identity cannot be ascertained, the
operator shall deposit the unlocatable or unknown owner's share
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in an interest-bearing account in a national or state-chartered
bank with deposits insured by the federal deposit insurance
corporation for a period of five years or until the owner is
located and the share distributed to the owner, whichever is
less. If the share is not distributed to the owner in five
years, on the anniversary of the fifth year, as provided in
Paragraph (15) of Subsection A of Section 7-8A-2 NMSA 1978,
such sum shall be paid to the taxation and revenue department
to be distributed pursuant to Section 7-1-6.43 NMSA 1978.
SECTION 8. [NEW MATERIAL] OWNERSHIP OF INJECTED CARBON
DIOXIDE.--All carbon dioxide injected into geologic
sequestration in a sequestration unit shall be deemed the
property of the operator. During the term of the sequestration
unit and for so long as the sequestration unit agreement
remains in force and effect, no surface or mineral interest
owner or lessee shall have the right to produce, capture, take,
reduce to possession, waste or otherwise interfere with or
exercise any control over such carbon dioxide within the
sequestration unit unless approved by the operator and the
division or except as to drilling operations through the
formation subject to the sequestration unit for purposes of
drilling to deeper depths and horizons for the extraction of
oil, gas and other minerals.
SECTION 9. [NEW MATERIAL] EFFECT OF CERTIFICATES AND
ORDERS OF THE DIVISION.--A person acting pursuant to a
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certificate or order issued by the division pursuant to the
Geologic Carbon Dioxide Sequestration Act, in compliance with
the provisions of that act or with rules or orders issued by
the division pursuant to that act, shall not be deemed to be a
public utility subject to the provisions of the Public Utility
Act or a common carrier as that term is used in the Oil and Gas
Act solely because the person owns, controls or operates all or
part of a carbon sequestration unit or carbon sequestration
facility.
SECTION 10. [NEW MATERIAL] PRESERVATION OF RIGHTS.--
Nothing in the Geologic Carbon Dioxide Sequestration Act shall:
A. prevent a mineral owner or lessee from drilling
through the sequestration unit or near a sequestration facility
so long as it uses reasonable measures to protect the facility
against the escape of the carbon dioxide being stored and the
drilling operations are conducted in accordance with all
applicable drilling and casing rules; or
B. affect or limit any enhanced oil recovery or
enhanced gas recovery project permitted by the division or
commission or prohibit use of anthropogenic or naturally
occurring carbon dioxide in such projects.
SECTION 11. [NEW MATERIAL] FEES.--The division may levy
on operators the following fees, which shall be paid to the
division and deposited in the oil conservation division systems
and hearings fund:
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A. an annual regulatory fee for sequestration
facilities approved. The annual regulatory fee shall be in an
amount set by division rule, and the amount of the fee shall be
based on the annual projected costs to the division for
oversight and regulation of sequestration facilities; and
B. application fees for applications for
certificates or orders pursuant to the Geologic Carbon Dioxide
Sequestration Act, the amounts of which shall be set by
division rule; provided that the amount of the fee shall be
based on the anticipated cost of processing the application for
which the fee is levied.
SECTION 12. [NEW MATERIAL] OIL CONSERVATION DIVISION
SYSTEMS AND HEARINGS FUND--CREATED.--The "oil conservation
division systems and hearings fund" is created as a
nonreverting fund in the state treasury. The fund consists of
all funds received by the oil conservation division from fees
imposed pursuant to Section 11 of the Geologic Carbon Dioxide
Sequestration Act, appropriations, gifts, grants, donations,
income from investment of the fund and any other money
distributed or otherwise allocated to the fund. 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 or the secretary's authorized representative. Money
in the fund is subject to appropriation by the legislature to
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the division to develop and modernize the division's online
application processing system, online case management system
and online case file system and for other technical upgrades
and hearing administration costs needed to support an
underground injection control class VI program, including
programmatic personnel. Money in the fund may be expended by
the division for the purposes of the fund.
SECTION 13. [NEW MATERIAL] OWNERSHIP OF PORE SPACE WITHIN
THE EARTH.--
A. Absent specific language in a severing
instrument to the contrary, the surface estate includes the
pore space, and the ownership of all pore space in all strata
below the surface lands and waters of this state is declared to
be vested in the several owners of the surface above the strata
or formations.
B. To the extent the dominant mineral estate is
reasonably utilizing the surface estate for the production of
minerals located thereon and therein, the formations so used
shall not be interfered with and are excluded from the
provisions of the Geologic Carbon Dioxide Sequestration Act.
C. A conveyance of the surface ownership of real
property shall be a conveyance of the pore space in all
formations and strata below the surface of such real property
unless the ownership interest in such pore space was previously
severed from the surface ownership or is explicitly excluded in
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[bracketed material] = delete
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the conveyance.
D. The ownership of pore space in any formations or
strata may be conveyed in the manner provided by law for the
transfer of interests in real property. No agreement conveying
minerals or other interests underlying the surface shall act to
convey ownership of any pore space in the formations or stratum
unless the agreement explicitly conveys that ownership
interest.
E. No provision of law, including a lawfully
adopted rule or regulation, requiring notice to be given to a
surface owner, to an owner of the mineral interest or to both
shall be construed to require notice to persons holding
ownership interests in any pore space in the underlying
formations or strata unless the law specifies notice to the
persons is required.
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