2021 ] CARBON CAPTURE , UTILIZATION , AND SEQUESTRATION 45
leased into the atmosphere by coal and natural gas fired plants in their efforts to meet energy demands . 5 According to the EIA , approximately 76 % of the total greenhouse gas emissions in the United States in 2018 were from burning fossil fuels . 6
CCUS technology will allow energy infrastructure companies to capture this CO 2 instead of releasing it into the atmosphere . As companies capture , separate , and store these volumes of CO 2 , they will be supplying a new marketplace for CO 2 as a valuable commodity — one which their operations already produce in bulk as a byproduct . This captured CO 2 can be sold downstream to other CCUS project participants for utilization or monetized through storage using Section 45Q tax credits , as discussed below . 7
This paper will examine the following : ( I ) the Section 45Q federal income tax credit , ( II ) CCUS methods , applications , and select infrastructure , ( III ) the real property rights and related legal considerations for CCUS projects , and ( IV ) certain commercial and legal considerations surrounding the common arrangements necessary to conduct these operations .
I . THE SECTION 45Q FEDERAL INCOME TAX CREDIT 8
Section 45Q , enacted in 2008 and expanded by the Bipartisan Budget Act of 2018 , is intended to incentivize the reduction of carbon oxide emissions and the efficient use of carbon oxide , including for enhanced oil recovery ( EOR ). Section 45Q allows a federal income tax credit based upon the metric tons of qualified carbon oxide 9 that the taxpayer captures using carbon capture equipment , and which is ( 1 ) disposed of through secure geological storage , ( 2 ) used as a tertiary injectant for EOR , or ( 3 ) utilized through photosynthesis , conversion to
5 . Making Carbon a Commodity : The Potential of Carbon Capture RD & D , CARBON UTILIZATION
RES . COUNCIL AND CLEARPATH FOUND ., i ( July 25 , 2018 ), http :// www . curc . net / webfiles / Making % 20Carbon % 20a % 20Commodity / 180724 % 20Making % 20Carbon % 20a % 20Commodity % 20FINAL % 2 0with % 20color . pdf ; Annual Energy Outlook 2018 with Projections to 2050 , U . S . ENERGY INFO . AD-
MIN ., tbl . 8 ( Feb . 6 , 2018 ), https :// www . eia . gov / outlooks / aeo / pdf / AEO2018 . pdf . 6 . Energy and the Environment Explained , U . S . ENERGY INFO . ADMIN ., https :// www . eia . gov
/ energyexplained / energy-and-the-environment / where-greenhouse-gases-come-from . php ( last visited July 13 , 2020 ).
7 . There are more than 4,500 miles of pipeline transport for CO 2 in the United States existing and in service today . Matthew Wallace et al ., A Review of the CO2 Pipeline Infrastructure in the U . S ., U . S .
DEP ’ T OF ENERGY | NAT ’ L ENERGY TECH . LAB ’ Y , 3 ( April 21 , 2015 ), https :// www . energy . gov / sites / prod / files / 2015 / 04 / f22 / QER % 20Analysis % 20- % 20A % 20Review % 20of % 20the % 20CO2 % 20Pipeline % 20Infrastructure % 20in % 20the % 20U . S _ 0 . pdf .
8 . Since this article was written , the Consolidated Appropriations Act , 2021 extended the start of construction date for qualified facilities under Section 45Q by two years . Accordingly , start of construction for a qualified facility now must occur prior to January 1 , 2026 . More information on the amendment to Section 45Q is available at https :// bracewell . com / insights / changes-renewable-and-carboncapture-tax-credits-under-consolidated-appropriations-act . Also , the Department of the Treasury issued final regulations under Section 45Q ( the “ Final Regulations ”), amending and clarifying the Proposed Regulations . More information on the Final Regulations is available at https :// bracewell . com / insights / treasury-releases-final-regulations-carbon-capture-credits .
9 . Note : Under Section 45Q , “ qualified carbon oxide ” includes carbon dioxide and other carbon oxides that meet the specifications set forth in the regulations .