Pore Space: The Final Frontier

These are the issues of net zero enterprise. Its continuing problem: To find places to put carbon. To seek new technologies and new regulations. To boldly go where no carbon has gone before.

As our recent issue on Net Zero (Summer 2023, 38:1) indicated, we are not great at actually reducing our carbon emissions in a timely manner and therefore need to find ways to manage our current carbon emissions and do that quickly. The predominant technology being proposed to solve this dilemma has been carbon capture and storage (CCS). The recent announcement by the U.S. Department of Energy of the regional hydrogen hub receiving $7 billion in Bipartisan Infrastructure Law funding proves this point, with at least four of the seven projects proposing to use CCS to reduce emissions from the use of natural gas as the source fuel. See Press Release, U.S. Dep’t of Energy, Biden-Harris Administration Announces $7 Billion for America’s First Clean Hydrogen Hubs, Driving Clean Manufacturing and Delivering New Economic Opportunities Nationwide (Oct. 13, 2023).

In theory, CCS “captures” carbon emissions from facilities and “stores” it in the pore space (the cavity or void, whether naturally or artificially created) of geologic formations deep under the earth’s surface. This means that the focus now becomes who owns those pore spaces, which can be problematic when the mineral rights have been severed from the surface property rights, creating the so-called split estate. There are two theories as to the ownership of pore space. See, generally, Global CCS Inst., Brief: Pore Space Rights—U.S. Overview (May 2022). Under the English Rule, the mineral estate owner owns both the natural resources (e.g., oil or gas) and the pore space. Under the American Rule, on the other hand, the mineral estate owner owns the natural resources but not the geologic formation, meaning they don’t also own the pore space. Instead, the surface owner retains the rights to those pore spaces and the storage rights associated with them. Further complicating the American Rule for split estates is the caveat that the surface estate owner is generally prevented from leasing the pore spaces until the mineral estate owner has completed extraction of the natural resources and has completely depleted the subsurface area. Id.

Given the prevalence of split estates in the United States, the American Rule makes quite a bit of sense. See Hannah Wiseman, Defining Pore Space Ownership and Related Issues: A Summary (Dec. 2022). When we consider that the right that was severed is only to the “minerals”—that is, the thing that fills the geological pore space—it follows that the surface estate owner then retains ownership of everything else under the surface. But if only it was that simple. Depending on the type of mining (e.g., minerals, as opposed to fossil fuels), there may be situations where the mineral estate owner is deemed to own the pore space. And even in the states that apply the American Rule, underlying documents or case law may have muddled direct application of the rule. The result is that, despite the prevalence of the American Rule, who has the rights to the pore space estate is unsettled in much of America, even in gas-rich states.

Focusing on the regional hydrogen hubs, the following is a summary of the current state of pore space ownership for each of the states making up the four hubs that have proposed CCS as part of the process. Perhaps the only clear thing from this analysis is that, even in mineral- and fossil fuel–rich states, there is little clarity on pore space ownership.

The Appalachian Hydrogen Hub includes West Virgina, Ohio, and Pennsylvania—states that have a long history of natural resource extraction. This hub relies exclusively on fracked gas and CCS to produce hydrogen. Just last year, West Virgina enacted legislation that clarifies that the rights to pore space are vested in the owner of the surface estate and that pore space may not be severed from the surface estate. W. Va. Code § 22-11B-18. This confirms the longtime holding of the Supreme Court of West Virginia in Tate v. United Fuel Gas Co., 71 S.E.2d 65 (W. Va. 1952), which held that so long as no recoverable minerals were left, the surface owner owns the right to grant storage rights for the leftover pore space. In Ohio and Pennsylvania, however, the courts have not spoken directly to the issue, nor has the legislature in either state stepped in to clarify the matter, leaving these shale-rich states in limbo. See Stefanie L. Burt, Who Owns the Right to Store Gas: A Survey of Pore Space Ownership in U.S. Jurisdictions (2016).

The Gulf Coast Hydrogen Hub is proposed in Texas, centered in the Houston region, and spreading along the coast—an area long familiar with the impacts of natural gas production. Unfortunately, and perhaps surprisingly, there is no clear rule in Texas on pore space rights as courts have split on the issue, but the predominant case law seems to favor the American Rule. Most recently, in Myers-Woodward, LLC v. Underground Servs. Markham, LLC, 2022 WL 2163857 (Tex. App. June 16, 2022, pet. filed), the Texas Court of Appeals for the Thirteenth District held that the pore space belongs to the surface estate owner, in the absence of remaining minerals. This case is currently up on appeal to the Texas Supreme Court, which has set a briefing schedule on the merits that goes into January 2024. There are also bills pending in both the Texas House and Senate (H.B. 4484 and S.B. 2107) that would clarify that pore space ownership rests with the surface estate owner.

The Heartland Hydrogen Hub would span Minnesota, North Dakota, and South Dakota, apparently with potential to expand into neighboring states. North Dakota has long recognized that pore space is owned by the surface estate owner. N.D. Cent. Code § 47-31-03. This right was affirmed by the North Dakota Supreme Court in the case Northwest Landowners Ass’n v. State, 978 N.W.2d 679 (N.D. 2022), which held that the surface owner has a constitutionally protected property interest in subsurface pore spaces and is therefore entitled to compensation when mineral estate holders use such pore space for disposal and storage operations. In its decision, the N.D. Supreme Court declared the state’s 2019 enactment of S.B. 2344, which inter alia would have allowed mineral estate owners to nevertheless inject into the pore space without consent of or compensation to the surface owner (see, e.g., N.D. Cent. Code § 38-08-25(5)), unconstitutional on its face as an unlawful taking. It does not appear that Minnesota or South Dakota courts or legislatures have yet spoken on the issue, but it is presumed that these states would follow the American Rule.

The Midwest Hydrogen Hub includes Illinois, Indiana, and Michigan. In Michigan, it is clear that the surface owner retains the right to depleted pore space; but if native oil or gas remains in that pore space, the mineral estate owner may preclude the surface owner from leasing the pore space for storage. Dep’t of Transp. v. Goike, 560 N.W.2d 365 (Mich. Ct. App. 1996). In 2022, Indiana enacted Ind. Code § 14-39-2-3, which attempts to clarify pore space ownership rights by providing that the subsurface pore space is owned by the surface estate owner unless those rights were previously (i.e., before June 30, 2022) granted to someone else. It does not appear that Illinois courts or legislature have yet spoken on the issue, but it is presumed that Illinois would follow the American Rule.

In sum, of the 10 states that were awarded federal funding for hydrogen hubs in 2023, the law of pore space rights is clear and settled in only three states. And that is just on the issue of ownership rights. In addition to case law or statutory dictates on who owns the pore space for purposes of carbon storage, issues and potential complications going forward include unitization requirements; integration or pooling ability or requirements; whether severance of pore space estate from surface estate is allowed; whether there is an implied access right to the pore space over the surface estate; when does pore space become pore space (when is the fossil fuel depleted); and who is regulating carbon storage in each state and how.

If we need to rely on CCS to reduce carbon emissions rather than technologies that remove the need for fossil fuels altogether, then we need to figure out these and other pore space issues as soon as possible so that we may all live long and prosper.