Rockefeller bill would expand carbon dioxide EOR tax credits
US Sen. John D. Rockefeller IV (D-W.Va.) introduced legislation that would increase tax credits for using carbon dioxide in enhanced oil recovery, and establish a certification process to help future projects obtain financing.
Growth of the CO2 EOR industry depends upon capturing substantially more CO2 from manmade sources, the senator said on May 5. “Authorized to only provide tax credits for 75 million tons of CO2, the existing 45Q program is insufficient to take advantage of CO2-EOR’s potential,” he maintained. “Already, tax credits have been claimed for 21 million tons, and the remaining pool of tax credits likely will be exhausted in the next several years.”
The bill also would establish periodic reviews of the CO2 sequestration credit under Section 45Q of the federal tax code and provide the US Treasury Secretary authority to ensure that new tax credits would be revenue positive to the federal government over time when taking into account the revenue produced from increased oil recovery resulting from the credit compared with tax revenue lost from credits being claimed, Rockefeller said.
According to the National Energy Technology Laboratory (NETL), increasing the supply of CO2 captured from manmade sources has the potential to increase American oil production by tens of billions of barrels, while safely storing billions of tons of CO2 underground, the senator added.
He introduced his Expanding Carbon Capture through Enhanced Oil Recovery Act alongside another bill, the Carbon Capture and Sequestration Deployment Act, which would authorize $1 billion over 15 years for a cooperative industry-government research and development program in the US Department of Energy’s Fossil Energy Office.
Other provisions
It also would modify Section 45Q by allowing projects to apply for a guaranteed allocation of credits for future use, and authorize $20 billion in loan guarantees to be used for the construction of new commercial-scale electric generation units or industrial facilities utilizing carbon capture and storage (CCS) technology; the retrofit of existing commercial-scale electric generation units or industrial facilities utilizing CCS technology; and the construction of CO2transmission pipelines.
“The reality for West Virginia and the rest of the country is that we need coal; we can’t meet our energy needs without it,” Rockefeller said. “It is simply unrealistic to think that we can stop burning coal and shift to cleaner sources of energy instantly. And it is equally unrealistic to think that coal is as clean as it could be, or that it will be around forever. Either way, we have to prepare for the future.”
The National Enhanced Oil Recovery Initiative, a coalition organized by the Center for Climate and Energy Solutions (formerly the Pew Center on Global Climate Change), and the Great Plains Institute, said the tax credit program in Rockefeller’s CO2-EOR bill would pay for itself within 10 years through the federal revenue generated from new domestic oil production.
“This tax incentive will boost domestic oil production, generate net federal revenue, encourage the development of much-needed carbon capture technology, and safely store carbon dioxide underground,” said Brad Crabtree, vice-president for fossil energy at the Great Plains Institute.
“[CCS] is a critical technology to cut carbon emissions while coal and natural gas remain part of our energy mix,” said Eileen Claussen, president of the Center for Climate and Energy Solutions. “Providing incentives to capture CO2 for use in enhanced oil recovery will help bring more commercial-scale projects on line, which will help advance carbon capture technology and lower costs.”
Contact Nick Snow at [email protected].
Nick Snow
NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.