KRS 353.417: Application procedures -- Duties of cabinet -- Criteria -- Requirements --

Administrative regulations.

(1) Every Class VI underground injection control permit application filed under this

section shall:

(a) Be on a form prescribed by the cabinet;

(b) Be certified by the applicant; and

(c) Contain all information specified by administrative regulations promulgated

by the cabinet in accordance with KRS Chapter 13A.

(2) (a) Upon filing an application for a Class VI permit, an applicant shall:

1. Pay a fee in an amount set by the cabinet; and

2. Submit proof of public notice of the application pursuant to KRS

353.419.

(b) The fee shall be deposited into the carbon dioxide sequestration facility

administrative fund established in KRS 353.437.

(3) In addition to obtaining a Class VI underground injection control permit, the

applicant shall secure drilling permits from the cab inet for each well described in

the approved Class VI permit.

(4) If, prior to approval of an application, the cabinet determines that the proposed

sequestration facility contains commercially valuable minerals, the cabinet shall

ensure that the interests of the mineral owners or mineral lessees:

(a) Will not be adversely affected; or

(b) Have been addressed in a written agreement entered into by the mineral

owners, mineral lessees, and the sequestration operator pursuant to KRS

353.429.

(5) To be considere d an administratively complete application, a Class VI permit

application shall include documentation that:

(a) The sequestration operator has the written consent of those persons having

ownership interests in at least seventy -five percent (75%) of the pro posed

sequestration reservoir's pore space acreage; and

(b) A pooling order has been requested pursuant to KRS 353.449 for up to

twenty-five percent (25%) of the proposed sequestration reservoir's pore space

acreage for nonconsenting, unknown, and missing pore space owners.

(6) The cabinet shall not begin technical review of an administratively complete

application until the sequestration operator has:

(a) Demonstrated that it possesses through the requisite consent and the petition

for a pooling order in a ccordance with KRS 353.449, the legal right to utilize

one hundred percent (100%) of the pore space acreage of the proposed

sequestration reservoir; and

(b) Provided documentation demonstrating the legal right to enter onto and

conduct all surface activiti es and operations associated with the proposed

sequestration facility.

(7) If the cabinet determines that a bona fide dispute exists regarding the applicant's

legal right, consistent with subsections (5) and (6) of this section, to utilize any of

the pore space acreage of the proposed sequestration reservoir, the cabinet shall:

(a) Suspend technical permit review pending resolution of the property dispute by

a court of competent jurisdiction or resolution by the parties; or

(b) Require the applicant to revise the permit application to exclude the contested

pore space acreage.

(8) A Class VI permit shall not be issued under this section unless the cabinet finds

that:

(a) The application and proposed operations comply with all requirements

established by the c abinet, including any applicable Class VI underground

injection control administrative regulations, and all applicable provisions of

state and federal law;

(b) The sequestration facility is suitable and feasible for carbon dioxide injection

and sequestration;

(c) The sequestration operator has made a good -faith effort to obtain the written

consent of all persons who own the sequestration reservoir's pore space;

(d) The applicant has demonstrated the legal right to utilize one hundred percent

(100%) of the sequestration reservoir's pore space acreage;

(e) The application contains documentation sufficient to demonstrate the legal

right to enter onto and conduct all surface activities and operations associated

with the proposed sequestration facility;

(f) The proposed sequestration facility will not endanger surface waters or any

USDW;

(g) The creation, operation, and maintenance of the sequestration facility will not

appreciably endanger human health or the environment;

(h) Adequate horizontal and vertical boun daries of the sequestration reservoir are

defined, including buffer areas, to ensure that the sequestration facility is

operated safely and prudently;

(i) The sequestration operator will establish monitoring facilities and protocols to

assess the location and migration of carbon dioxide injected for sequestration

and to ensure compliance with all Class VI permit, statutory, and

administrative regulation requirements;

(j) All nonconsenting pore space owners are or will be justly and reasonably

compensated in accordance with the administrative regulations and

procedures set forth in and promulgated under this section by the cabinet; and

(k) The sequestration operator demonstrates financial responsibility as

determined by the cabinet pursuant to subsections (10) and (11) of this section

and applicable administrative regulations.

(9) The cabinet shall render a decision on a permit application in accordance with KRS

353.421.

(10) (a) A permit sha ll not be issued under this section unless the sequestration

operator posts qualifying financial responsibility sufficient to cover the cost

of:

1. Corrective action;

2. Well plugging of Class VI injection wells and monitoring wells;

3. Post-injection site care and facility closure;

4. Emergency and remedial response; and

5. Addressing endangerment of underground sources of drinking water.

(b) The financial responsibility instruments shall contain protective conditions for

coverage for cancellation, renewal , and continuation provisions. The

sequestration operator shall have detailed written estimates, in current dollars,

of the cost of performing the activities contained in paragraph (a)1. to 5. of

this subsection. The cost estimates shall be separate for ea ch phase and shall

be based on the costs of the cabinet to hire third parties to perform the

required activity.

(c) For the duration of the permit, the sequestration operator shall annually adjust

the cost estimates of each activity and provide the informa tion to the cabinet.

Any decrease or increase in the initial cost estimate shall be subject to the

cabinet's approval. If at any time the current cost estimate:

1. Increases to an amount greater than the face amount of the financial

responsibility instrume nts currently in use, the sequestration operator

shall submit to the cabinet within sixty (60) days, written evidence of an

increase of the face amount of the existing financial responsibility

instruments or substitute another instrument in the increased amount; or

2. Decreases to an amount lesser than the face amount of the financial

responsibility instruments, those instruments may be reduced to the

amount of the current estimate upon receipt of written approval from the

cabinet.

(d) The cabinet shall per form an annual evaluation of the qualifying financial

responsibility to determine if the amount of financial responsibility provided

by the sequestration operator is sufficient to secure the operator's obligations

under state and federal law. A cabinet det ermination under this subsection is

considered final. If the cabinet determines the amount of financial

responsibility is insufficient, the sequestration operator shall:

1. Provide an adjustment of the cost estimate to the cabinet within sixty

(60) days of notification by the cabinet; and

2. Adjust the financial responsibility instruments in accordance with

paragraph (c) of this subsection.

(e) The initial deposit, use, and length of pay -in periods for trust funds or escrow

accounts are subject to the cabin et's approval. The sequestration operator may

make periodic deposits into a trust fund or escrow account throughout the

operational period to ensure sufficient funds are available to carry out the

required activities on the date on which they may occur. Th e cabinet shall

consider project-specific risk assessments, projected timing of activities, and

interest accumulation in determining whether sufficient funds are available to

conduct the required activities.

(11) (a) In demonstrating and maintaining financ ial responsibility as determined by

the cabinet, the sequestration operator shall provide financial responsibility

from the following list of qualifying instruments:

1. Trust funds;

2. Surety or cash bonds;

3. Letters of credit;

4. Insurance;

5. Self-insurance; or

6. Any other instrument the cabinet finds satisfactory.

(b) The cabinet may promulgate administrative regulations in accordance with

KRS Chapter 13A to allow self -insurance as a financial responsibility

mechanism for some or all of the costs and o bligations of the sequestration

operator under terms and conditions as the cabinet deems necessary to ensure

completion of all obligations of the Class VI permit. To account for the risks

of default and resulting responsibility obligations incurred by the carbon

dioxide sequestration facility trust fund established in KRS 353.441, the

cabinet's terms and conditions may include:

1. Corporate guarantees;

2. Securing performance by lien or collateral; and

3. Adjustments in assessed contributions by the sequest ration operator to

the carbon dioxide sequestration facility trust fund established in KRS

353.411.

(c) All qualifying financial instruments are subject to the cabinet's approval.

(12) (a) The cabinet shall not issue a permit under this section or approve an

application to transfer a sequestration facility to a successor operator pursuant

to subsection (13) of this section, and an operator shall not be eligible to

receive any permits or become a successor operator under this section if:

1. The applicant has falsified or otherwise misrepresented any information

on or relating to the permit application;

2. The applicant has failed to abate or reach an agreement with the cabinet

regarding an una ppealed violation of KRS 353.411 to 353.459 or the

administrative regulations promulgated thereunder;

3. A control person of the applicant has a forfeiture of a financial

responsibility instrument;

4. The applicant is a control person for another operator that has a

forfeiture of a financial responsibility instrument;

5. A control person for the applicant served as a control person for another

operator when an unresolved financial responsibility instrument

forfeiture occurred;

6. The applicant is or has a c ontrol person who controls or is controlled by

another operator that has a forfeiture of a bond; or

7. The cabinet determines that an activity of the applicant is currently in

violation of this chapter or KRS Chapter 149, 151, 224, 349, 350, 351,

or 352 or any administrative regulation promulgated thereunder.

(b) The cabinet:

1. May restore the eligibility of applicants, operators, and control persons

who are deemed permit -ineligible pursuant to paragraph (a)1. of this

subsection upon resubmission of the ap plication correcting the false or

misrepresented information;

2. Shall restore the eligibility of applicants, operators, or control persons

who are deemed permit -ineligible pursuant to paragraph (a)2. of this

subsection upon satisfactory abatement of the v iolation and payment of

any civil penalties;

3. Shall restore the eligibility of applicants, operators, or control persons

who are deemed permit -ineligible pursuant to paragraph (a)3. to 6. of

this subsection upon entry of and satisfactory compliance with an agreed

order between the operator and the cabinet that resolves all the

operator's outstanding violations, requires payment of any civil

penalties, and provides restitution to the cabinet for any costs associated

with the forfeiture, plugging, and prope r abandonment of a well in

excess of the financial responsibility instruments forfeited to the cabinet

by the operator; and

4. a. Shall provisionally restore the eligibility of applicants who are

deemed permit -ineligible pursuant to paragraph (a)7. of this

subsection upon either submittal of proof that the violation is in

the process of being corrected to the satisfaction of the cabinet or a

demonstration that the applicant has filed and is pursuing a good -

faith administrative or judicial appeal to contest the violation. If

the Circuit Court affirms the violation, then the applicant shall,

within thirty (30) days of the judicial action, submit proof that the

violation is in the process of being corrected to the satisfaction of

the cabinet. Provisional restor ation of permit eligibility related to

paragraph (a)7. of this subsection may be withdrawn at any time if

the cabinet determines that the applicant no longer satisfies the

requirements of this section.

b. The cabinet shall fully restore the eligibility of applicants who are

deemed permit -ineligible pursuant to paragraph (a)7. of this

subsection upon either submittal of proof that the violation has

been corrected to the satisfaction of the cabinet or that the

violations have been ordered vacated in a final d ecision of the

secretary or a reviewing court after all appeals have been

exhausted.

(13) A permit issued pursuant to this section shall not be transferred by sale, assignment,

lease, or otherwise, except upon the written approval by the cabinet of a joint

application submitted by both the transferor and the transferee. The joint application

for transfer shall be on a form prescribed by the cabinet and accompanied by a fee

in an amount set by the cabinet. Fees under this subsection shall be deposited in the

carbon dioxide sequestration facility administrative fund established in KRS

353.437. The transferee shall file financial responsibility with the application in an

amount and form that the cabinet deems satisfactory to cover the costs of the

activities listed in subsection (10)(a) of this section. All rights and liabilities under

the permit shall pass to the transferee upon written approval of the transfer by the

cabinet.

(14) The cabinet shall conduct periodic reviews of each permit issued pursuant to thi s

section. The cabinet shall review each permit at least once every five (5) years from

the date of the permit issuance and whenever the cabinet has reason to believe,

based on available information, that the permit may no longer be in compliance

with KRS 353.411 to 353.459. During permit review, the cabinet shall review all

provisions of the existing permit, including the adequacy of the financial

responsibility required by this section. The cabinet may, by determination issued to

the permit holder, requir e revision or modification of the permit provisions,

including requiring the posting of additional financial responsibility, in order to

ensure compliance with this section.