The agency’s actions have significant implications for the domestic carbon capture and storage industry.

By Joshua T. Bledsoe, Nikki Buffa, Jennifer K. Roy, Nolan Fargo, and Samantha Yeager

In the same week, the US Environmental Protection Agency (EPA) took two rulemaking actions with significant implications for the domestic carbon capture and storage (CCS) industry. On September 12, 2025, EPA proposed repealing the Greenhouse Gas Reporting Program (GHG Reporting Program), under which CCS projects report their emissions to quality for 45Q tax credits. On September 15, 2025, EPA published a final rule granting Arizona primary enforcement authority, or “primacy,” for all classes of Underground Injection Control (UIC) wells under the Safe Drinking Water Act (SDWA).

Below, we discuss the implications of both EPA actions, including their potential impact on CCS projects.

Proposed GHG Reporting Program Repeal

EPA has proposed repealing all aspects of the GHG Reporting Program — including those that explicitly apply to operators that inject carbon dioxide underground. Currently, under 40 CFR part 98 subpart RR (Geologic Sequestration of Carbon Dioxide source category, commonly referred to as Subpart RR), certain facilities, including UIC Class VI wells, are required to report information on carbon dioxide received for injection, develop and implement an EPA-approved site-specific Monitoring, Reporting, and Verification Plan (MRV Plan), and report the amount of carbon dioxide geologically sequestered using a mass balance approach and annual monitoring activities.

The GHG Reporting Program requirements are cross-referenced in Treasury Department and Internal Revenue Service (IRS) regulations for the 45Q tax credit program, which direct Class VI well operators to comply with applicable Subpart RR requirements to qualify for 45Q tax credits. In addition, some UIC Class II well operators choose to report under Subpart RR to qualify for 45Q tax credits, though such operators can also utilize an ISO standard (an alternative not currently available for Class VI).

In its proposed rule, EPA acknowledged the use of GHG Reporting Program in other regulatory schemes, including those for 45Q tax credits, and recognized that repealing the GHG Reporting Program may require Treasury and the IRS to revise their regulations.

The full implications of a GHG Reporting Program repeal remain to be seen. EPA is accepting comments on the proposed rule until November 3, 2025, and will conduct a virtual public hearing on October 1, 2025.

Federal and State Support for Arizona Primacy

EPA has granted Arizona primacy over its UIC program. With this approval, the Arizona Department of Environmental Quality (ADEQ) will oversee permitting for all well classes, including: Class I for deep waste disposal; Class II for oil and gas production fluids; Class III for mineral extraction; Class IV for hazardous waste in groundwater cleanup; Class V for non-hazardous fluid disposal; and Class VI for carbon dioxide storage. (Latham covered EPA’s proposed rule to grant Arizona primacy over its UIC program in this blog post.)

In announcing its approval, EPA highlighted Class VI wells for underground storage of carbon dioxide as a “focus of American energy companies.”

Arizona officials have expressed support for EPA’s decision. Governor Katie Hobbs emphasized that primacy empowers Arizona “to safeguard the integrity of [the state’s] groundwater, while also supporting responsible economic growth and clean energy development.” ADEQ Director Karen Peters stated that EPA’s approval allows the state to “make decisions faster and tailor oversight to Arizona’s unique groundwater conditions.” The decision could expedite permitting for UIC wells in Arizona, including for Class VI carbon storage wells.

Arizona joins a growing list of states pursuing or holding primacy for UIC wells. To date, five states — Louisiana, North Dakota, West Virginia, Wyoming, and now Arizona — have received primary permitting for all well classes. Most recently, EPA proposed granting Texas primacy over Class VI wells. (For more information, see this Latham blog post.)

By obtaining primacy, states can implement regulatory frameworks that address their specific needs, potentially leading to more effective and efficient project permitting and implementation.

Latham & Watkins will continue to monitor developments in these areas.