Carbon Capture and Sequestration

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]  


Continue Reading Texas Takes Much-Anticipated Steps to Streamline Permitting and Assume Regulatory Authority for Carbon Sequestration Wells

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.

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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