Insights

US leaders push legislation to advance CCS for enhanced oil recovery

In the US, the recently introduced “Expanding Carbon Capture through Enhanced Oil Recovery Act of 2014” was the topic of discussion at a 26 June legislative briefing sponsored by the National Enhanced Oil Recovery Initiative (NEORI).  This Insight by the Institute’s Diane Teigiser outlines the main points of discussion at the Capitol Hill event.

The Hon. Richard A. Gephardt, former House Democratic Leader and US Representative from Missouri, and The Hon. Tim Hutchinson, former Republican US Senator from Arkansas, headlined a 26 June legislative briefing sponsored by the National Enhanced Oil Recovery Initiative (NEORI). Several aspects of the NEORI consensus recommendations for advancing carbon dioxide enhanced oil recovery (CO2-EOR) have been adopted in the proposed Expanding Carbon Capture through Enhanced Oil Recovery Act of 2014 (S. 2288).
 
Sponsored by US Senator John D. Rockefeller IV (D-WV), the bill would expand the existing 45Q tax credit to enable the development of carbon capture and storage (CCS) projects and supply the EOR industry with the necessary CO2. The new 45Q tax credits would be awarded through competitive bidding and separate tranches to ensure credits are available for a wide range of potential man-made sources of CO2.

Climate change “toughest political action”

Calling climate change “the toughest political action in the history of the species”, Gephardt said that whether or not climate change is man-made, “it is still an issue and a big boat to turn around.”  Gephardt cited environmental health and energy security as reasons to support the bill, and indicated that he believed there was a “real opportunity” to get the NEORI proposals through Congress within the next year or two. However, he cautioned that articulating the need for CO2- EOR to the American people would be a political and information challenge.

CO2-EOR can be a "common sense coalition”

Hutchinson said CO2-EOR can be a “common sense coalition” and called on legislators to make CO2-EOR a national priority. The proposed tax credit is an important first step, he said, to promote technology innovations in CCS and EOR, and provide a pathway to energy independence through increased production from existing oil fields.

Both Gephardt and Hutchinson have ties to the coal industry, which is under increasing regulatory pressure and competition from cleaner energy sources such as natural gas and renewables. Gephardt is CEO of Gephardt Government Affairs, whose clients include the Great Plains Institute and Peabody Energy. Hutchinson also has lobbying connections to the Edison Electric Institute, Peabody Energy and the Great Plains Institute through his affiliation with Dickstein & Shapiro LLP. Both former legislators have been proponents of clean coal technologies as a pathway for the continued use of coal.

A panel discussion followed the Gephardt and Hutchinson addresses.

CCS critical solution to climate change

John Steelman, Climate Program Manager of the Natural Resources Defense Council, said CCS is a critical solution to climate change and is needed on all industrial sources of CO2 emissions. While CCS is more expensive than conventional technology, EOR can help accelerate advances in CCS technology as revenue from CO2 sales can help offset capture costs. He stated that there is a clear advantage to utilizing existing oil fields, and CO2-EOR is a way to access the approximately 60% of oil that is “stranded’ in an oil field that without CO2 would otherwise not be produced.

Labor supports proposed legislation

Brad Markell, Executive Director of the AFL-CIO’s Industrial Union Council, called on legislators to reform tax provisions to encourage CCS. He said labor supports the proposed legislation since EOR touches energy, construction and manufacturing, which is good for the economy, job growth, balance of trade, and energy security.

Balanced energy portfolio needed

The NEORI proposal is a carbon capture and pollution control tax credit, not an energy tax credit, according to Thomas Altmeyer, Vice President of Government Affairs for Arch Coal. According to Altmeyer, the EPA’s Clean Power Plan will force a move to natural gas and drive up costs, as it is not economically feasible to build new coal plants with CCS. Although the sale of CO2 for EOR can help reduce the cost differential between a coal plant and a coal plant with CCS, it is still not cost-competitive in today’s market. Therefore, funding support (e.g. grants, incentives, tax credits, etc.) from both federal and state governments is needed to accelerate CCS development. Altmeyer added that a balanced portfolio of energy options – including coal – is needed to ensure grid reliability and keep electric costs down.