Senate Bill Would Raise Value of Tax Credit to Use Captured CO2 to Produce More Oil

by Valerie Volcovici (Reuters) A U.S. Senate panel proposed making the tax credit for capturing carbon emissions for recovering oil equal to the $85/metric ton tax credit for permanently burying those emissions underground, a boon for oil and gas producers.

The finance committee proposed the change to the so-called 45Q tax credit, which was part of the 2022 Inflation Reduction Act, in its draft bill that forms a central part of the sprawling Republican budget package. The House of Representatives version of the bill that passed by one vote last month in that chamber left the credit for enhanced oil recovery projects at $60/metric ton.

The change reflects a proposal made by Wyoming Senator John Barrasso, a Republican, to put EOR projects at parity with carbon sequestration that got support from senators from other oil-producing states like North Dakota and Louisiana.

Under the IRA, former President Joe Biden's signature climate law, tax credits for permanent removal had a higher value than for EOR because of concerns that carbon capture and direct air capture technologies would encourage oil companies to keep drilling for oil, undermining the fight to limit emissions linked to global warming.

Occidental declined to comment on the Senate change. The Carbon Utilization Research Council, which Occidental chairs, welcomed the decision to put EOR at parity with sequestration.

"As production matures with current recovery methods, there is critical need for large-scale injection in formations which will need billions of tons of CO2 captured from industrial sources to sustain oil and gas production with EOR," said Shannon Angielski, executive director of CURC, adding that the barrels of oil produced would be lower carbon intensity.

Carbon removal advocacy group Carbon180 said it could risk pulling investment more toward fossil fuel production.

"Federal policy should prioritize durable carbon removal projects that can create prosperity for communities across the country — not expanded oil production," said Carbon180 director Erin Burns.

Other oil companies involved in carbon capture and DAC include Exxon and Chevron.

Sasha Mackler, global policy & advocacy for ExxonMobil Low Carbon Solutions, told Reuters that the company did not lobby for bringing the EOR tax credit to parity with carbon sequestration. READ MORE

Excerpt from E&E News Energywire: EPA’s plan to scrap a rule curbing power plant emissions has dimmed the outlook for U.S. carbon capture and storage projects. -- The Trump administration is telling the world that carbon capture and storage at power plants is not ready for prime time, delivering a major setback to a technology that’s struggling to find a foothold.

EPA proposed a re peal last week of the Biden administration’s climate rule on electricity producers, which called CCS the “best system of emission reduction” for long-running coal plants and new gas turbines.

In a new proposed rule, EPA said capturing 90 percent of carbon emissions at power plants hasn’t been “adequately demonstrated and its costs are not reasonable.” It’s “extremely unlikely that the infrastructure necessary for CCS can be deployed” by a 2032 compliance date set under the Biden rule, EPA said.

The Trump administration’s proposed rollback — which EPA touted in a news release Friday with more than 50 supportive quotes from lawmakers and trade groups — comes amid scant deployment to date of carbon capture projects on U.S. power generation. Fewer projects in the electricity sector could impede broader CCS efforts nationwide, whether they involve storing carbon dioxide underground or using it to pump out more oil and gas.

“Power plants are large emitters, and sequestering CO2 from these facilities would have required significant investment in transport and storage infrastructure, most likely in the form of [carbon capture] hubs or clusters,” Brenna Casey, an associate at BloombergNEF, said in a recent note to clients. “Other industrial emitters, like cement plants and petrochemicals producers, could have piggybacked on the infrastructure built to serve these power plants.”

In a report last fall, the Global CCS Institute — a think tank that supports the industry — said 19 commercial-scale CCS facilities were operational in the United States. Only one, the Petra Nova facility in Texas, is on power generation, the assessment showed.

Analysts offered mixed views on how much of a setback the proposed repeal of the Biden rule could deliver to power sector CCS — with some saying it could push plant operators to rethink investing in the technology or hold off on plans, while others said they didn’t expect the Biden rule to speed up CCS deployment on fossil power plants. READ MORE