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Addressing these recapture and compliance risks will require that the participants make representations and warranties about themselves , their facilities , and their processes that confirm that the applicable qualifications and requirements have been met . To the extent compliance with Section 45Q and other regulatory requirements is dependent on a participant taking future actions ( such as the buildout or maintenance of its facilities ), the participant must expressly obligate itself to meet those specific requirements . Finally , these representations , warranties , and obligations will need to be supported by customary indemnity obligations in favor of the applicable counterparty in the event that it suffers damages or third-party claims resulting from a breach of these specific obligations .
3 . Minimum Volume Commitments
The volume of CO 2 captured and utilized or sequestered in CCUS project operations will correlate directly with the amount of the tax credits that the project can generate and , in utilization projects , the amount of fees paid by endusers of that CO 2 . As such , in many cases , project participants will seek commitments from the various participants that are “ upstream ” in the contractual chain to deliver or conduct activities expected to generate a minimum amount of CO 2 as necessary to achieve the economic assumptions underlying the business case for the project . In the event the participant obligated to deliver or generate the CO 2 does not meet its delivery or generation obligations called for under its agreement , it will be obligated to pay a deficiency payment for the undelivered volumes ( or underutilization of its facilities ).
Capturers seek these minimum generation commitments from emitters based on anticipated production from an assumed level of operations at the emitter ’ s facilities . This provides capturers some certainty regarding the level of tax credits ( or deficiency payments in lieu thereof ) that they can generate . At the other end of the contractual chain , both capturers and users of CO 2 often agree to the delivery and acceptance of a specified minimum volume of CO 2 . This provides certainty to capturers regarding the revenue stream they can expect to receive from CO 2 offtakers . It also provides certainty to the user of CO 2 regarding the level of feedstock it will receive . Minimum volume commitments are also important in the CO 2 sequestration context as they function to provide the owner of the storage facility with a baseline set of fees it can anticipate receiving from the capturer . In turn , the storage facility owner will normally guarantee the capturer a level of “ firm capacity ” in the applicable storage facility that corresponds to the minimum volumes that the capturer can commit to deliver under these arrangements .
Structuring the various volume commitments made by each of the project participants requires a lot of coordination among the terms of the different agreements creating these commercial arrangements . The amounts of these volume commitments should be coordinated to ensure that sufficient volumes