On November 16, 2022, the California Air Resources Board (CARB or the Board) proposed a new Scoping Plan for the reduction of greenhouse gas (GHG) emissions. Generally, the Scoping Plan is a means by which the Board can assess California’s progress toward achieving carbon neutrality by 2045, and issue new policies and strategy to meet that goal. The Board is required by law to update the Scoping Plan every five years, and this is the third such update since the California legislature enacted the California Global Warming Solutions Act in 2006. CARB staff are touting the Scoping Plan not only as reducing GHG emissions, but also as leading to the creation of four million new jobs and the avoidance of $200 billion in pollution-related health expenditures.
On November 16, 2022, the California Air Resources Board released its proposed final “2022 Scoping Plan for Achieving Carbon Neutrality.” The plan lays out a path for California to achieve carbon neutrality and reduce anthropogenic emissions to 85 percent below 1990 levels by 2045. Notably, it highlights the necessity for carbon capture and carbon removal to achieve net negative emissions. California is an ideal testing ground for CCS for several reasons, including a culture of innovation, good geology for storage, and aggressive state targets on emissions.
Continue Reading California’s 2022 Proposed Final Scoping Plan
On May 3, 2022, the Railroad Commission of Texas (Railroad Commission) voted to approve three actions that represent a major step forward in facilitating the deployment of carbon capture, use and sequestration activities (CCUS) in Texas. Specifically, the Railroad Commission approved:
- Publication of proposed amendments to its rules implementing the state program for geologic storage of anthropogenic CO2 and incorporating federal requirements;
- Submittal to the US Environmental Protection Agency (EPA) of a pre-application to gain regulatory authority over Class VI underground injection control (UIC) wells that are used for injection of CO2 into deep subsurface formations; and
- A request that the Governor formally ask EPA for Class VI UIC well program approval. [i]
The Treasury Department and IRS have issued long-awaited Proposed Regulations regarding the tax credit for carbon capture and sequestration under Section 45Q of the Code1 (the “section 45Q credit”).
Generally, the amount of the section 45Q credit and the party that is eligible to claim the credit depend on whether the taxpayer captures qualified carbon oxide using carbon capture equipment originally placed in service at a qualified facility before February 9, 2018 (“Old 45Q Facility”), or on or after February 9, 2018 (“New 45Q Facility”), and whether the taxpayer disposes of the qualified carbon oxide in geological storage (“sequestration”), uses it as a tertiary injectant in a qualified enhanced oil or natural gas recovery project (“EOR”), or utilizes the carbon oxide in certain specified ways (“utilization”). The effective date of the amendments to the Code extending and expanding the section 45Q credit is February 9, 2018 (the “Credit Effective Date”). The Credit Effective Date appears throughout the Proposed Regulations to distinguish between Old 45Q Facilities and New 45Q Facilities and establishing the effective date for certain provisions.
Continue Reading Treasury Issues Proposed Regulations on Section 45Q Tax Credit for Carbon Capture
The largest market for CO2 captured from industrial sources through carbon capture utilization and storage (CCUS) is enhanced oil recovery (EOR), using the CO2 to produce oil. Captured CO2 can be used for cement, algae production, and other uses, but EOR has vast potential. Moreover, it has a nearly 50-year track record in the US, where it was pioneered. Carbon dioxide injected into oil formations becomes permanently stored as part of the process. …
Continue Reading CCUS After the Pandemic
The Department of Treasury and Internal Revenue Service have released Notice 2019-32 seeking comment on key issues to be interpreted in the Section 45Q carbon oxide sequestration tax credit. Congress significantly enhanced the Section 45Q tax credit in the Bipartisan Budget Act of 2018, increasing the credit from $10/ton for CO2 used as a tertiary injectant (i.e., to produce oil or gas) to $35/ton; and increasing the credit for CO2 geologically stored but not used as a tertiary injectant from $20/ton to $50/ton. See our previous blog post here for additional details on the applicable credit amounts for projects before and after enactment of the Bipartisan Budget Act and other credit amount details.
Continue Reading IRS to Seek Comment on Key Issues to be Interpreted in Section 45Q Tax Credit
In an article published in Law360, two Hunton Andrews Kurth LLP Partners discuss the passage of the Bipartisan Budget Act of 2018 and its implications for Section 45Q of the Internal Revenue Code. Carbon capture and sequestration supporters expect this to significantly boost deployment of carbon capture and storage (CCS) across the US.
Energy ministers from participating Carbon Sequestration Leadership Forum (CSLF) countries will meet to discuss carbon capture and sequestration (CCS) issues in Abu Dhabi December 3-7. Included, are some suggestions for a US position heading into the meeting.
Continue Reading Recommendations for a US Message at the Carbon Sequestration Leadership Forum Ministerial Meeting