Coal companies, enviros back tax incentive extension for carbon capture projects

Dive Brief:

A coalition including environmental advocates and coal companies have pressed lawmakers in the House of Representatives to support carbon capture and sequestration (CCS) projects by extending the federal Section 45Q tax incentive indefinitely, E&E Daily reports.
The 45Q provision allows for credits of $10 and $20 per ton for capture and storage, but about half of the allowable credits have been claimed, leaving projects in development with no certainty the mechanism would remain available when their projects are completed.
The coalition sent a letter last week to the House, and indicated similar legislation was being considered in the Senate. Support for the incentive includes Peabody Energy, Arch Coal, Natural Resources Defense Council and the Clean Air Task Force.

Dive Insight:

An unusual group has come together to petition lawmakers for support of carbon capture and storage, pairing environmental advocates and coal companies in a bid to reduce emissions and expand the United States' domestic reserves. E&E Daily reports the group's letter to House lawmakers last week shows possible bipartisan support for the measure, based on the measure's broad backing.

"The diversity of coal companies, oil interests and environmental groups supporting these CCS incentives is remarkable and indicates likely deep bipartisan support in Congress when legislation is introduced," Paul Bledsoe, a former aide to President Clinton, told the news outlet. Because oil and gas prices have fallen precipitously, he said support for carbon capture projects is "absolutely critical to getting CCS more widely deployed and fulfilling its environmental and enhanced oil recovery promise."

Rep. Mike Conaway (R-Texas) is slated to introduce legislation with the permanant tax extension in the upcoming weeks, E&E Daily reports, with discussions for a new companion bill in the Senate. E&E points out the letter arrives after announcements of delays or cancellations of several high-profile carbon capture projects, including Southern Co.'s Kemper coal plant – the nation's first large CCS project on a coal plant – which is slated to begin operations the third quarter of 2016, instead of the previous deadline for the first half of the year.

Currently, the 45Q incentive includes $10/ton for use of stored carbon dioxide in enhanced oil recovery, and $20/ton for CO2 used in deep rock reservoirs. But because the program expires at 75 million tons of stored CO2, backers of a permanent extension say the incentive has effectively already expired because projects in development cannot count on it being available in several years.

"Due to the long lead time for construction of such projects, the Section 45Q credit has, for practical purposes, already expired because of the lack of financial certainty," the groups said. "Capturing and utilizing power plant and industrial CO2 through [enhanced oil recovery] yields additional American oil from existing wells that would otherwise not be accessed."