A Tale of Two CCS Worlds

Yep.

The only way it can leak to the surface is through old wells that were inadequately plugged & abandoned or through well control incidents in active wells. The industry already deals with these sorts of issues in existing operations.

There is no lack of suitable pore space in the subsurface.

Nuclear waste could also be easily disposed of in a similar manner, just in different types of rocks.

We know that the 45Q tax credit for CCS is currently $50/t.
We know that congress is in the process of raising it to $85/t.
We know that some (not all) industrial CO₂ point sources can be economic at $50/t.
We know that quite a few more industrial CO₂ point sources can be economic at $50/t.
We know that we can safely inject and permanently sequester CO₂ in a multitude of geologic settings.

What more do we need to know?

It makes economic sense to the companies that can generate a profit off of the tax credit.

The 45Q tax credit was largely a Republican idea; but it has broad bipartisan support.

The average person doesn’t pay for this. It’s a tax credit. Whether or not the tax credit will generate enough economic activity to offset itself from taxable income generated by that economic activity is unknown. Although, this has been the Republican justification for tax cuts… It used to be the justification for Democrats like JFK too.

There is no shortage of CO₂ in the atmosphere; nor will this actually reduce the atmospheric concentration. It might measurably slow the growth… But the plants will be OK.

Reality doesn’t care if WUWT followers or anyone else supports it. The tax credit has been in place since 2008. It was expanded at the end of 2020.

The 45Q tax credit has been expanded a number of times since it was initially established in 2008, most recently at the end of December 2020 (for details, see the sidebar “Evolution of the Section 45Q tax credit”). Investors have responded positively to the current rules, which could help unlock significant investment in CCS in the future.
–
The Bipartisan Budget Act of 2018 instituted a number of important changes to Section 45Q that made these credits more attractive to investors. It expanded Section 45Q to cover both carbon dioxide and carbon oxide. It eliminated limits on the overall credits available in the market—and for some types of taxpayers, it lowered thresholds for the amount of carbon that would have to be captured in a given year.
–
It clarified how long credits would be available—12 years, beginning when the carbon capture equipment is placed in service—providing more certainty for investors. And importantly, it increased the value of Section 45Q credits.
–
In 2020 and early 2021, the US Treasury Department and the Internal Revenue Service published guidance that addressed many remaining open questions about how the credit works, providing additional confidence to investors. Regarding project development, the guidance is broadly similar to guidance previously provided for wind and solar projects.
–
Further, on December 27, 2020, President Trump signed into law the Taxpayer Certainty and Disaster Tax Relief Act of 2020, also known as the “Extenders Bill,” which extends the Section 45Q tax credit to projects that begin construction prior to January 1, 2026 (extending by two years the original date of January 1, 2024).

https://www.whitecase.com/publications/insight/carbon-capture/us-tax-credit-encourages-investment

The November 2020 coup d’état, demands from Wall Street and the soon to be juiced-up version of the 45Q tax credit have combined to send interest in CCS/CCUS through the roof…

WASHINGTON, June 24, 2021 – U.S. Senators introduced the CATCH (Coordinated Action To Capture Harmful Emissions) Act today, which raises the value of the 45Q tax credit, a crucial incentive for accelerating carbon capture and storage projects.
–
“Carbon capture is critical to decarbonizing our global energy system, and its momentum in the U.S. is at an all-time high. We are thrilled to see the CATCH Act introduced in the Senate, as it is an important piece of the puzzle to improve the current U.S. policy landscape for carbon capture, removal, and storage deployment. It also aligns with President Biden’s American Jobs Plan and builds on the existing 45Q enhancement bills and the SCALE Act to invest in CO2 transport and storage”, said Lee Beck, International Director of Carbon Capture at the Clean Air Task Force.
–
The CATCH Act was first introduced in the House in May of this year, rounding out a legislative policy package that could help grow critically needed U.S. carbon management capacity 13-fold by the mid-2030’s. Clean Air Task Force released a factsheet that outlines the comprehensive carbon capture package, and demonstrates how carbon capture incentives and CO2 infrastructure and storage policies like the SCALE Act will work together to expand carbon management capacity for a net-zero emissions U.S.
–
The CATCH Act is sponsored by Senators Ben Ray Luján (D-NM), John Barrasso (R-WY), Tina Smith (D-MN), Chuck Grassley (R-IA), Chris Coons (D-DE), Debbie Stabenow (D-MI), John Hoeven (R-ND) and Kevin Cramer (R-ND) and is an important complement to The 45Q Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021 in the Senate and the Access 45Q Act in the House. These include crucial enhancements to the tax credit, including, among other provisions, a direct pay option and a commence construction deadline extension. The infrastructure provisions in the SCALE Act would help connect carbon capture facilities to and commercialize saline geologic storage of CO2. 
–
The key components of the CATCH Act are:  
–
New 45Q Values: Increases the 45Q credit value from $50 to $85 per metric ton for CO2 captured and stored in saline geologic formations and from $35 to $60 per ton for CO2 stored via enhanced oil recovery;  
–
[…]

https://www.catf.us/2021/06/u-s-senators-introduce-critical-improvement-to-45q-tax-credit-completing-proposed-carbon-capture-legislative-package/

This might come as a shock… But we don’t drill oil & gas wells because people we agree with support it or because oil & gas fuel our economy. We drill oil & gas wells to make money. When we start drilling CCS wells, we’ll be doing it for the same reason.

I write about it on WUWT because it is related to energy and climate change policy, it interests me, I know a fair bit about it and it annoys the living schist out of people like Griff and BigOilBob.

The funny thing is that they aren’t ramping up production either…

https://www.linkedin.com/posts/sheridandoug_commodities-inflation-mining-activity-6823336980445749248-_UT2

That applies to windmills, too, doesn’t it. Is government largesse a reason to promote more windmills for those of us who have to pay for subsidizing windmills with our taxmoney?

It applies to every economic activity that our government chooses to incentivize.

It’s taking advantage of a situation created by stupid/underhanded people, that ends up harming everyone, except the few in a position to benefit. And it perpetrates a lie: that CO2 needs regulation and/or is harmful to human life.

It doesn’t harm anyone except the greentards’ feelings and it eliminates all arguments in favor of regulating CO₂.

I imagine the Democrats are going to come up with all sorts of scams to spend money on as long as they are in power. Removing CO2 from the atmosphere is one of them.

This actually has more support from Republicans than from Democrats.

Appeasing alarmists is the wrong way to go.

CCS/CCUS doesn’t appease alarmists… It antagonizes them.

The protest against carbon capture is an extension of environmentalists’ long held opposition to most uses of fossil fuels, especially coal, as well as nuclear energy because of the pollution and toxic waste they leave behind. The difference here is a technology that can potentially provide much cleaner fossil fuel power that greens reject anyway as a cynical scheme by industry to extend the life of coal and gas plants and slow the rollout of renewable energy.
–
“Carbon capture in the power sector is a documented ploy to keep the fossil fuel industry profits going,” says John Noel, a senior climate campaigner at Greenpeace USA. “We shouldn’t be giving incentives to polluting industries to capture CO2.”

https://www.realclearinvestigations.com/articles/2021/07/20/smokestack_fighting_how_greens_spurned_better_as_the_enemy_of_perfect_-_and_may_wind_up_losers_785733.html

We will get a carbon tax, some form of cap & trade or something much, much worse unless we rapidly ramp up CCS/CCUS and eliminate the source of a problem that probably doesn’t exist. We might even get all that bad schist, even when we demonstrate that CCS/CCUS works.

It’s not a matter of “if”… It’s a matter of “when” and “how.”

“The alternative is the far higher prices for gasoline, natural gas and electricity that would result from a carbon tax.”

I’m going to go out on a limb here and say a nationwide CO2 tax is not going to happen in the United States.

It may not be called a tax… But support for carbon pricing is growing, not shrinking. The 45Q tax credit is actually the most benign form of carbon pricing.

Joe Biden is already under pressure because of how the gasoline prices have risen so high, and he has already said he is against raising gasoline taxes, and a CO2 tax is just a glorified gasoline tax dressed up in different clothes, and if Joe were to propose such a thing, that would be pointed out to him in public, and put even more pressure on Joe, and Joe knows it. I don’t think Joe is going to go there.

I don’t think Joe knows what he’s signing…

The tax credit is what it is. The emitter gets the tax credit if they capture and geologically dispose of the CO₂. It’s a fully transferable tax credit, like the ITC for solar and PTC for wind. Many, if not most, wind and solar projects are funded with tax equity financing. CCS is being financed the same way.

The emitter can only benefit from the 45Q tax credit if they have a means of capturing the CO₂, transporting it to a suitable geological repository and drilling, operating and monitoring injection wells. Very few emitters have the means to do this. Most oil companies have the means to do this… provided they can generate a profit from the operation.

Most emission sources currently cost more than $50/t to capture the CO₂. Coalfired power plants, iron & steel and cement plants run from $50 to $200/t just for capture. These are not economic at $50/t. Some might be economic at $85/t.

Natural gas processing, hydrogen, fertilizer and corn ethanol plants generally have a cost of capture of around $25/t. If the cost of securing the rights to a suitable geological repository transporting to the location, drilling, operating and monitoring injection wells is significantly less than the 45Q tax credit minus $25/t, the project is probably economic.

I’m fairly certain that the US oil industry wasn’t the intended beneficiary of this particular bit of “crony capitalism.” I have little doubt that the Democrat sponsors of the CATCH Act will be shocked to find that the companies drilling and operating the CCS wells aren’t wind, solar & unicorn dust companies.

Tax revenue isn’t being given away.

If the economic activity resulting from the tax credit doesn’t generate enough tax revenue to offset the tax credit, government will have to 1) raise other taxes, 2) cut spending, and/or 3) run up more debt.

The rationale behind just about every Republican tax cut is that the the economic activity resulting from the tax cut will generate enough tax revenue to offset the tax cut.

I don’t know what the end result will be. I just know what’s happening right now in the CCS space and have a pretty good idea what will happen if the 45Q tax credit is boosted to $85/t for CCS and $60/t for EOR… And it’s a fairly certain bet that it will be boosted.

Nobody is taxing anyone to pay for this. The 45Q tax credit is not offset by tax increases on anyone else. It’s benefitting everyone who will continue to be able to have affordable, reliable energy.

That said, it’s not “an ecological program,” even if Democrats believe it is.

It’s a tax credit… Similar to a tax deduction… Not all that different than a tax cut.

Money comes from economic activity in the private sector. All of the money starts out in the private sector.

Tax cuts, deductions and credits take less money from the private sector under the conditions laid out by our Federal government in… (drum roll, please)… The Federal tax code.

It’s not exactly the same thing. A tax credit directly reduces the taxes owed by the the taxpayer down to zero taxes owed. A tax deduction just reduces taxable income.

A fully refundable tax credit is 99% welfare.

45Q is not refundable; but it is transferable. This makes it a source of financing from tax equity investors.

This is a mechanism our government uses to encourage the private sector to invest in things our government wants.

A publicly held corporation has a legally binding fiduciary obligation to take advantage of tax credits and deductions that are being made available to their industries, if they can generate a better return for their shareholders .

That problem can only be fixed by voters and/or an Article V Constitutional Convention of the States.

I don’t think it would get hijacked… But it’s difficult to imagine 3/4 of the States ratifying anything.

Simon,

Thank you for so eloquently fixing an irrelevant sidetrack… 🍻

At $85/t for CCS, pretty well all of the CO₂ emissions from natural gas processing, LNG, fertilizer, ammonia and hydrogen plants will be economic. The emissions from quite a few petrochemical plants and oil refineries will also become economic. I don’t know exactly how large that volume is; but I’m pretty sure it’s larger than the volume we will be able to quickly sequester. Assuming, LA and TX award CCS leases this year, it will take 2-4 years just to get the permits approved. We will probably have to drill some “science” wells first. The EPA will probably want to see whole cores and rock mechanics data for the primary sealing shale formations. The initial injection wells won’t be drilled quickly. The tempo will pick up as infrastructure is expanded and operational experience increases. As the costs of capture come down due to technological improvements and economies of scale, more CO₂ sources will become economic.

If CCS wells were drilled at the same historical rate that oil & gas wells were drilled in the Gulf of Mexico, it would be technically possible to sequester 100% of US emissions from fixed point sources. They might never be economically viable; but it is technically possible.

I would never bet against Climatards doing really stupid things.

Coal, natural gas power and cement plant emissions are difficult and expensive to capture because the CO₂ is diffuse in the flue gas. The Allam cycle will be a game changer for gas. Coal and cement remain challenging.

I’m not arguing anything. I’m just explaining the facts. The 45Q tax credit is a real thing. It’s already there and government is about to increase it. We can make real money by taking advantage of it. Just like we make more money by taking advantage of the IDC deduction, percentage depletion allowance and every other tax break that the government puts into the tax code.

The more emissions reduction achieved through CCS, the less reason there is for government to push through a carbon tax. At that point the war against oil & gas would have no basis other than politics.

“One of the things I ask people is, if all the E&Ps were net zero and have no carbon footprint, or if you could sequester carbon for a dollar, would you change any of the energy infrastructure you have today? And most people say ‘no,’” he said. “Because, why would you change it? It works well, it’s very functional. Why would you invest trillions of dollars in something else if what you already have works?” Good question.
–
“For the E&Ps, the question right now is do they have a license to operate?” Dell continued. “My view is, if you are net-zero, you are earning your license to operate. If the entire E&P space is net-zero, why wouldn’t you have it? What is the argument at that point? Then it’s just politics, and some people will say, well, I just don’t like it. Some people just hate the industry, and you can’t really address that. But that’s not really a strong, sticking argument over time. So, my goal is to be net-zero.”

https://www.forbes.com/sites/davidblackmon/2021/07/08/can-one-mans-vision-lead-the-shale-industry-out-of-the-esg-desert/?sh=6e10b2400f51

We’ll still have politics even if the oil & gas industry achieved net-zero emissions… But that would that would totally eliminate tiny bit of scientific rationale for replacing fossil fuels.

50% in 9 years? Probably not doable. 50% in 25 years with a minimal effect on energy prices and no effect on reliability, while cutting the Climatariat off at the knees? Probably doable.

Why did that make me think of George Thorogood and the Delaware Destroyers?

That’s my intent every other November… But I have to conduct business in the world that exists… Which isn’t always the one I voted for.

I would rather drink 7-Up than the tap water in my Houston apartment. Maybe 7-Up & Jim Beam… Hold the 7-Up… 😉