Modifications to the 45Q Tax Credit

February 15, 2012 in Carbon Management, Reports & Whitepapers

The National Enhanced Oil Recovery Initiative (NEORI) recommends that Congress consider implementing arevenue-positive federal production tax credit to support deployment of commercial carbon dioxide (CO2) capture and pipeline projects. A new, more robust federal incentive is needed to increase the supply of man-made or anthropogenic CO2 that the oil industry can purchase for use in enhanced oil recovery (EOR) to increase domestic production from existing oil fields.

NEORI also recommends that Congress undertake immediate modification of the existing Section 45Q Tax Credit for Carbon Dioxide Sequestration, through legislative action and/or working with the Department of the Treasury to revise Internal Revenue Service program guidance.

To avoid stalling important commercial CO2 capture projects under development, there is an urgent need to improve the functionality and financial certainty of this federal incentive to enable its effective commercial use.

To make 45Q immediately accessible to US companies, Congress should pursue the following changes to the program:

  • Designate the owner of the CO2 capture facility as the primary taxpayer;
  • Establish a registration, credit allocation, and certification process;
  • Change the recapture provision to ensure that any regulations issued after the disposal or use of CO2 shall not enable the government to recapture credits that were awarded according to regulations that existed at the time; and
  • Authorize limited transferability of the credit within the CO2 chain of custody, from the primary taxpayer to the entity responsible for disposing of the CO2.

The consensus recommendations below detail the specific 45Q program modifications requested, and the section-by-section summary provides further explanation and context.

Background and Rationale
Section 45Q makes available a per-ton credit for CO2 disposed of in secure geologic storage. The program provides $10 per metric ton for CO2 stored through EOR operations and $20 per metric ton for CO2 stored in deep saline formations. However, due to unforeseen issues in the original statute (§ 115 of the Energy Improvement and Extension Act of 2008), the 45Q program lacks sufficient transparency and certainty for companies to be able to use the credit to secure private financing for projects.

Large-scale expansion of commercial EOR using industrially-sourced CO2 later in this decade requires that critical industrial capture projects begin construction now and enter commercial operation within the next few
years. If Congress makes modest, functional improvements this year to 45Q that result in little or no additional fiscal cost, the program currently authorized at 75 million metric tons of CO2 stored can help several significant EOR projects nationwide secure private sector financing and move forward to commercial operation.

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Opportunities to enable interstate coordination & cooperation in support of transmission infrastructure build-out in the Midwest

September 1, 2011 in Electricity, Reports & Whitepapers

Transmission infrastructure development is fundamental to the successful build-out of large-scale renewable energy production and other sources of cleaner, advanced energy production in the Midwest. The level of transmission build-out needed to support deployment of cleaner energy will require multiple jurisdictions and authorities to coordinate and collaborate. A robust, reliable and cost-effective transmission system can be achieved through coordination and cooperation at the state, regional and federal levels and through engagement of key stakeholders to provide guidance on policy development and implementation. Continue reading »

Spotlight On Biogas: Policies for Utilization and Deployment in the Midwest

August 2, 2010 in Reports & Whitepapers
Biogas is a renewable energy resource that holds tremendous potential to help meet our future energy needs. As a versatile energy resource, it can be utilized as a feedstock for electricity and/or heat, a source of renewable natural gas, or as a vehicle fuel. Materials that can be used to produce biogas are abundant, especially in the Midwest – an area rich with livestock production, food processing byproducts, and crop residues. Agricultural production is not the only source of biogas production in the Midwest; wastewater treatment facilities, urban wood and yard wastes, and landfills also provide a feedstock source.

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MGA Energy Security & Climate Stewardship Roadmap

November 25, 2009 in Reports & Whitepapers

This report documents the Midwestern Governors Association (MGA) advisory group recommendations to develop a comprehensive and far-sighted policy strategy for transforming the regional energy economy of the Midwest. Some of the recommended policies represent actions that are already in progress in a subset of the states and provinces, while others represent regional positions on key federal policies. In a world of complex and interlinked energy-use and development incentives, there is no way to completely segregate the impacts of state or provincial, regional, and national policies. But the regional MGA partnership brings an unprecedented opportunity for Midwestern states and provinces to learn from and build on others’ experience, and coordinate efforts where synergies exist at a regional scale.

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Powering the Plains

December 1, 2006 in Reports & Whitepapers

In 2001, the Great Plains Institute (GPI) convened a diverse group of stakeholders and launched its Powering the Plains (PTP) program. From the beginning, PTP turned the energy and climate debate on its head. Instead of focusing primarily on costs, PTP stakeholders also devoted attention to how the Upper Midwest can maximize its economic opportunities in energy and agriculture in a carbon-constrained world.

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