Tamar Hallerman
GHG Monitor
09/21/12
A trio of senators introduced legislation this week that they said would tweak an existing federal tax credit to give enhanced oil recovery project operators more certainty moving forward. Sens. Kent Conrad (D-N.D.), Mike Enzi (R-Wyo.) and Jay Rockefeller (D-W.Va.) introduced the legislation, which would reconfigure the Internal Revenue Service’s existing Sec. 45Q tax credit for carbon sequestration and EOR projects. The legislation would create a registration, credit allocation and certification process that allows for EOR project operators to see the amount of credits claimed by others each year, while also compiling a queue of the projects in line to receive credits. The trio said that the tweaks would allow for more investment certainty in EOR projects by providing additional assurances to companies concerned that the credit would no longer be available to them once they built their EOR projects. “This credit will help give electric utilities the certainty they need to invest in carbon capture technology, reducing the amount of carbon emitted into our atmosphere while helping electric utilities continue using coal to provide affordable electricity to consumers,” Conrad said in a statement.
Authorized in 2008, Sec. 45Q gives companies a $10 credit per metric ton for CO2 permanently sequestered through EOR operations and $20 per ton stored in deep saline aquifers. However, critics said that few, if any, EOR projects have been able to utilize the tax credit because the IRS does not disclose how many credits have been claimed to date. Given that the credits are limited and capped at the first 75 million tons of CO2 stored, operators are not certain if their projects qualify, whether there are still credits available and how many of them they will be able to claim. Because of that lack of knowledge, some operators said they have had to walk away from the credits because they could not assure to their investors that they would receive any of the tax credits. Proponents said that the fixes, which are not expected to cost anything because the credits are already on the books, could allow for EOR project operators to attract more private investment because more about financing would be known upfront.
Legislation a Big Win for NEORI
The bill marks a notable milestone for a coalition of industry stakeholders that has worked to hammer out recommendations about how to best spur EOR projects using anthropogenic sources of CO2. Participants of the National Enhanced Oil Recovery Initiative (NEORI), led by the Center for Climate and Energy Solutions and the Great Plains Institute and comprised of more than two dozen stakeholders spanning utilities, fossil fuel producers and environmental groups, met for the better part of the year to hammer out consensus recommendations about how to best incentivize EOR, which they released in February. In addition to the 45Q recommendations, NEORI also called for the creation of a new 10-year federal production tax credit for companies that capture and transport anthropogenic CO2 for EOR, as well as for state governments to implement a suite of complementary policies.
Judi Greenwald, vice president for Technology and Innovation at the Center for Climate and Energy Solutions who helped coordinate NEORI, told GHG Monitor that the bill represents a “modest, administrative, functional fix” for 45Q. “It’s a real opportunity to make progress on EOR, and we’re excited about that potential,” she said.
Political Chances Unclear
Participants in the Initiative are hoping than EOR can be an area for political common ground in a time of fierce partisan division in Washington. But just how willing Capitol Hill will be to push through new energy policy—no matter how uncontroversial—remains up in the air. Relatively non-controversial energy legislation passed out of the Senate Energy and Natural Resources Committee over the last 18 months has had problems reaching the Senate floor for consideration, and Congress has yet to renew production tax credits for wind energy that will expire at the end of the year. Greenwald said that NEORI has yet to secure sponsors for similar legislation in the House. However, Conrad said he was confident that others will seek to implement the legislation. “I am confident many of my colleagues will recognize the incredible potential of taking carbon dioxide that would otherwise be released into the atmosphere and sending it underground to produce far more oil than we otherwise could,” Conrad said.
Rockefeller, who is currently penning his own ‘clean coal’ legislation, said that the 45Q fix is just “one piece of the puzzle” for brining CCS into widespread deployment. “We know that CCS is technically viable and can be a win-win-win,” he said in a statement. “It can secure a future for coal in a world demanding cleaner sources of power. It can reduce harmful emissions into our environment. And the CO2 capture can be used to dramatically increase domestic oil production, through enhanced oil recovery. We still need to show that it can all be brought together at a large scale and continue investing in research to bring down the costs.”
