Welcome to the New World of 45Q
By providing a section 45Q tax incentive for CCUS projects, the law is providing CCUS the same kind of support that has helped wind and solar technology to become a competitive zero carbon energy technology option. However, while it’s great to understand potential, seeing action is a lot better.
An announcement on June 19th is the first proof of concept that this 45Q tax incentive will drive more commercial investment. Occidental Petroleum and White Energy are now evaluating a project to capture up to 700,000 tons of CO2 from two of White Energy’s ethanol facilities in Hereford and Plainview, Texas. The oil field storage site, owned by Oxy, is in the same Permian Basin region and already has a geologic storage monitoring, reporting, and verification (MRV) plan approved by the US EPA. Depending on the results of the evaluation, the project could come on line as early as 2021.
In a sense, it’s no surprise that an industrial source with low cost CO2 that’s near an oil field is looking to undertake such a project. But what’s clear from the companies’ joint statement is that the new 45Q incentive is what prompted them to take this step.
That means the law is already working as intended. By increasing the existing section 45Q tax credit for utilization from $10 per ton to $35 per ton of CO2, and allowing any project that commences construction before 2024 to get the credit, the new program provides both sufficient value and certainty to get projects moving.
The FUTURE Act legislation was a bipartisan effort led by Senator Heidi Heitkamp (D-ND) and strongly backed by Senator John Barrasso (R-WY), Senator Sheldon Whitehouse (D-RI), and Senator Shelley Moore Capito (R-WV). It’s notable that while they supported the legislation for different reasons – ranging from the urgent need for global energy decarbonization to using domestic natural resources – this bipartisan CCUS quartet continues to urge the development of the technology through other bills, including the USE-IT Act, led by Senator Barrasso, that was recently unanimously voted out of the Senate Environmental and Public Works Committee.
With policymakers setting the stage and businesses starting to take action, we have the best shot yet at making CCUS a more competitive and scalable climate technology solution for the world. Given how little time we have to decarbonize our global energy system, that news couldn’t be more welcome.
