Carbon Emissions Reporting Rollback in Tax Extender Splits Alliance

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By Dean Scott

A GOP-led effort to offer simpler greenhouse gas emissions reporting for oil and gas operations that capture and store carbon dioxide—part of a Senate tax extenders package—is testing a bipartisan coalition backing more generous tax credits.

The tax extender bill, introduced last month by Senate Finance Committee Chairman Orrin Hatch (R-Utah), would extend several expired tax credits for renewable energy and biodiesel and also would significantly increase credits for carbon capture and storage efforts under Section 45Q of the tax code.

Boosting carbon capture credits is backed by the oil and gas industry and an unlikely alliance of Democratic climate hawks such as Sen. Sheldon Whitehouse of Rhode Island, and Republican climate policy critics such as Sen. John Barrasso of Wyoming.

But language in the Hatch extender bill sets out more modest Environmental Protection Agency greenhouse gas reporting requirements for operations that use carbon dioxide for enhanced oil recovery, while more stringent reporting rules apply to carbon dioxide more permanently stored in geological formations underground.

The bill would raise the tax credit for enhanced oil recovery efforts to $30 per ton from the current credit of $10 per ton. The tax credit for more permanent storage would be increased to $50 per ton from the current amount of $20 per ton.

An aide to Whitehouse said the senator has concerns about any easing of the emissions reporting requirements but is hopeful a compromise can be found to allow the bill to go forward.

Companies backing the legislation include Occidental Petroleum Corp. as well as NRG Energy, which helped develop the $1 billion Petra Nova carbon capture project southwest of Houston.

The reporting language—which various Senate offices said was inserted at the request of Sen. John Hoeven (R-N.D.)—"is a simplification of reporting procedures,” said Brad Crabtree of the Great Plains Institute, who works with environmental and energy groups that are backing an increase in CCS credits. Crabtree said the coalition isn’t taking a formal position on the measure.

More Money Should Mean More Reporting

Kurt Waltzer of the Clean Air Tax Force said the possibility of separate reporting requirements has raised concerns among environmental groups, who argue that oil and gas operations should be willing to comply with the same reporting requirements for permanent storage, given they would be rewarded with a significantly increased tax credit under the bill.

Hoeven aides say oil and gas operations aren’t seeking more modest reporting requirements but rather are trying to ensure that any future Treasury Department interpretations of the tax laws follow the current distinction the EPA makes between carbon captured for oil and gas recovery and more permanent storage. The Treasury Department typically has to issue such guidance to implement changes made in tax law.

Even if a compromise is found, the effort to boost carbon capture credits still faces an uncertain future, in part because House Republicans are not as enthusiastic about moving a tax extender package in that chamber. The increased tax credits in the tax extender bill were drawn from a Senate bill introduced by Sen. Heidi Heitkamp (D-N.D.) in July 2017, known as the Furthering Carbon Capture, Utilization, Technology, Underground Storage, and Reduced Emissions, or FUTURE Act.

Cosponsors of that 2017 bill included Whitehouse, Barrasso, and Sen. Shelley Moore Capito (R-W.Va.).

House Ways and Means Committee Chairman Kevin Brady (R-Texas) has been skeptical about extending such tax breaks and has noted that lawmakers already have plenty on their plates for the next few weeks, including a continuing resolution to fund the government past Jan. 19 and a spending bill for when that continuing resolution runs out.

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