House Introduces Bipartisan Bill to Expand Carbon Capture, EOR Tax Credits

The U.S. House has introduced bipartisan legislation to promote the commercial deployment of technologies to capture carbon dioxide (CO2) from power plants and industrial facilities and use it for enhanced oil recovery (EOR) or geologic storage.

The Carbon Capture Act introduced on September 13 by House Agriculture Chairman Mike Conaway (R-Texas) along with 29 co-sponsors essentially seeks to amend the tax code to expand credits for CO2 sequestration. Currently, the 45Q tax incentive offers $10 per metric ton of CO2 employed for EOR and $20 per metric ton for CO2 injected in geological reservoirs without EOR. The bill seeks to increase incentives for the EOR credit to $35 per metric ton and for secure geologic storage to $50 per metric ton.

It also expands eligibility for the credit, so that more industries and facilities in more states can participate, and it extends CO2 capture and use to new beneficial commercial applications beyond oil recovery.

“There is an opportunity here to make the most of bipartisan support for carbon capture technology on power plants and industrial sources. When both sides of the aisle come together, we can find solutions that work for the environment and our economy,” said Bob Perciasepe, president of the Center for Climate and Energy Solutions (C2ES), who served as deputy administrator for the Environmental Protection Agency (EPA) during the Obama administration. “Here is an area of consensus where we can reduce emissions and invest in energy infrastructure at the same time.”

The bill follows the July introduction of a bipartisan companion bill in the Senate. The Furthering carbon capture, Utilization, Technology, Underground storage, and Reduced Emissions (FUTURE) Act. Both houses have introduced legislation that authorizes states to use tax-exempt private activity bonds to help finance the purchase and installation of carbon capture equipment.

According to the National Enhanced Oil Recovery Initiative (NEORI)—a coalition of power, oil, chemical, and technology firms and labor unions convened by C2ES and the Great Plains Institute that is dedicated to expanding deployment of carbon capture—using CO2 for EOR currently provides nearly 4% of domestic oil production and uses roughly 65 million tons of CO2 annually.

An increased supply of CO2 could enable the EOR industry to produce an additional 21-63 billion barrels of domestic oil with today’s technology and store 10-20 billion tons of CO2—or up to four years’ worth of national emissions, NEORI said.

Only one power project—NRG Energy and JX Nippon’s Petra Nova facility near Houston, Texas—currently captures carbon dioxide for the sole purpose of generating revenue with EOR. Petra Nova was POWER’s 2017 Plant of the Year for its unique business model and trailblazing technology (for more, see: “Capturing Carbon and Seizing Innovation: Petra Nova Is POWER’s Plant of the Year”).

However, developers of the unique project told POWER that to break even, oil prices need to hover at $50 per barrel. On September 14, Brent crude prices were $55.89 per barrel, a marked rise when compared to lows of about $45 in June and $28 in January.  

“Oil prices certainly impact the profitability of CO2-EOR projects, but the significant upfront investment in infrastructure and the relatively long life of these projects help reduce the impacts of oil price volatility,” Brad Crabtree, co-director of NEORI, told POWER on September 14. “Mature CO2 EOR operations are generally more resilient against low oil prices than other forms of tertiary recovery.”

Crabtree added that while the extension and reform of the 45Q tax credit doesn’t directly address oil price volatility, it would “help by providing a financially certain tax credit for carbon capture projects that would mitigate some of the revenue uncertainty that results from fluctuations in the price of oil and, therefore, revenue from the sale of CO2 captured for use in EOR.”

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)