North Dakota’s U.S. Senators are both praising new rules from the IRS for the 45Q carbon capture tax credit.
The credits are designed to encourage businesses to capture and dispose of carbon oxide emissions, as well as to use them in recovering oil and natural gas. Originally passed in 2008, the credit was recently extended.
The new rules were announced Wednesday, Jan. 6.
“These final regulations provide taxpayers and the American energy sector with needed clarity on utilizing the section 45Q credit,” Treasury Secretary Steven T. Mnuchin said in an announcement. “These regulations are an essential step toward harnessing the entrepreneurial spirit of Americans to further modernize the American energy sector, while ensuring American energy producers maintain their competitive edge around the world.”
Sens. John Hoeven and Kevin Cramer both issued statements Monday, Jan. 11, praising the new rules.
“We’ve been working to put the 45Q tax credit in place to help our coal producers,” Hoeven said in a statement. “We have now secured the final regulations from Treasury, and passed legislation extending the construction deadline to provide producers with more time to utilize the credit. The 45Q tax credit is an essential revenue stream for our nation’s coal facilities, as well as oil producers and manufacturers, supporting good jobs in North Dakota and benefitting every home and business through a more resilient and reliable electricity grid. At the same time, this tax credit is an important part of our efforts to support the development of CCUS technologies, like Project Tundra, enabling our nation to continue utilizing its abundant coal reserves while also reducing emissions. That’s a win for our economy, environmental stewardship and America’s energy security.”
Last week, Treasury announced the final 45Q rule, which includes two provisions that Hoeven worked to secure to benefit coal facilities, enhanced oil and gas recovery (EOR) operations and project developers in North Dakota. Specifically, the rule includes a more flexible definition of Carbon Capture Equipment (CCE), providing broader eligibility for the tax credit. In addition, the rule includes a provision similar to Hoeven’s CO2 Regulatory Certainty Act, ensuring that the tax credit works both for long-term storage and enhanced oil recovery.
“Carbon capture is the future of reliable, low emissions energy, and North Dakota is a national leader in the development and use of this technology,” Cramer said. “With the administration’s long-awaited guidance finalized, investors can now take advantage of the carbon capture tax credit with confidence and clarity.”
The 45Q CCUS tax credit was extended and expanded as part of the FUTURE Act (Furthering carbon capture, Utilization, Technology, Underground storage, and Reduced Emissions Act) in 2018, a bill to incentivize the creation of innovative technology to capture, store, and utilize carbon.
The final regulations allow smaller carbon capture facilities to be aggregated into one project for purposes of claiming the credit when certain factors are present, such as common ownership and location; as well as provide guidance on recapture, including introducing a recapture period of 3-years. Under these rules, credits must be repaid if previously sequestered carbon oxide leaks into the atmosphere during a three-year period after the initial storage or injection.