14 state work group recommendations on carbon capture

Dec 05 2016

The U.S. states group outlies the growing opportunities for capturing carbon dioxide for use in enhanced oil recovery (CO2-EOR) with geologic storage.

The report, "Putting the Puzzle Together:  State & Federal Policy Drivers for Growing America’s Carbon Capture & CO2-EOR Industry" includes detailed analyses and federal and state recommendations of the State CO2-EOR Deployment Work Group, which consists of representatives from 14 states, leading private sector stakeholders and CO2-EOR experts. 

Wyoming Governor Matt Mead and Montana Governor Steve Bullock launched the Work Group in 2015. The Great Plains Institute staffs and facilitates the Work Group.

The report notes that market forces and federal and state policy are driving the energy industry to reduce carbon emissions and that carbon capture with CO2-EOR compares cost-effectively with other emissions reduction options. 

The Work Group recommends a targeted package of federal incentives for CO2-EOR: 

  • Improving and expanding an existing tax credit for storage of captured CO2;
  • Deploying a revenue neutral mechanism to stabilize the price paid for CO2—and carbon capture project revenue—by removing volatility and investment risk associated with CO2 prices linked to oil prices; and
  • Offering tax-exempt private activity bonds and master limited partnership tax status to provide project financing on better terms.

States can also assist by optimizing existing taxes commonly levied by states to complement federal incentives in helping carbon capture projects achieve commercial viability, the Work Group says.  Analysis undertaken for the Work Group shows that an optimized approach to state taxes can add the equivalent of roughly $8 per barrel of oil to the economics of a carbon capture project.

“The Work Group endorsed a targeted package of federal and state incentives for CO2-EOR that will help ensure that CO2-EOR becomes an integral part of our future energy system,” said Brad Crabtree, Great Plains Institute Vice President for Fossil Energy.

Crabtree noted that based on modeling results and qualitative criteria, the Work Group identified the extension, reform and expansion of the Section 45Q tax credit as its top federal priority for stimulating commercial deployment of carbon capture projects at power plants and industrial facilities.

“The Work Group report is timely. Congress has a narrow window right now to pass Section 45Q tax credit reforms before year’s end,” Crabtree said, noting that the Carbon Capture, Utilization and Storage Act (S. 3179) introduced by Senator Heidi Heitkamp (D-ND) has been co-sponsored by one-fifth of the U.S. Senate.  Bipartisan companion legislation in the U.S. House, the Carbon Capture Act (H.R. 4622) introduced by Representative Mike Conaway (R-TX), has attracted 47 co-sponsors. Governor Mead and Governor Bullock have endorsed these bills in letters to Congress.

“Complementary federal and state incentives will narrow the gap between the cost of carbon capture and revenue received from the sale of CO2 for EOR, spur commercial deployment by enticing private investment in projects, and bring down the cost of carbon capture technology as incentives have accomplished for other energy technologies,” concluded Crabtree.

Download the report

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