A new report from Clean Water Action details how companies manipulated the controversial Section 45Q tax credit at the expense of taxpayers and efforts to address climate change. Oil companies benefited from well over $500 million dollars in tax credits that were designed to capture carbon and keep it in secure geologic storage deep underground. It appears the tax credit was predominantly used to coax more oil out of declining fields -- the report reveals that EPA has no record that the vast majority of the carbon claimed under 45Q actually remains safely underground. Proof that carbon is stored below ground and not leaked into the atmosphere is a critical part of the tax credit requirements.
“This is not a minor reporting error. This looks like flagrant noncompliance with a fundamental requirement that gauges the efficacy of carbon capture and storage technology as a climate mitigation tool. 45Q is close to useless without secure geological storage. The industry just took the money and ran,” said John Noel, National Oil & Gas Program Director.
In order to qualify for the tax credit, a company was required to report to EPA the amount of carbon geologically sequestered and develop a detailed monitoring, reporting and verification plan to ensure that the carbon actually remained underground and did not escape into the atmosphere.
IRS reports that over 59 million metric tons of carbon had been claimed under 45Q as of 2017.
EPA, however, only has 3 million metric tons reported as sequestered underground in secure geologic storage as of 2017.
By ignoring the verification and monitoring requirements the industry cut costs and gained an unearned advantage in the marketplace. If it is not remedied these oversight issues will undermine the competiveness of zero carbon alternatives.
Despite these discrepancies, Congress extended the 45Q credit in early 2018. And yet, the oil industry is seeking further handouts from the federal government. Enhanced Oil Recovery (EOR) proponents unveiled a major proposal to build more pipelines to deliver captured CO2 directly to oil fields. This will potentially unlock billions of barrels of oil trapped in vast residual oil zones, burnishing companies bottom-lines while putting communities and the climate at further risk from this increased oil and gas extraction.
“The amount of extra oil potentially available to extract and burn as a result of generous federal tax credits and proposals to streamline pipeline permitting is astounding. This is oil that the industry admits would likely remain the ground without this help -- the federal government does not need to subsidize oil industry profits.”
“In the wake of the credit extension in 2018, lawmakers should focused attention on 45Q and provide resources to hold bad actors accountable and restore public trust to the process of geologic sequestration. Congress and federal agencies have the power to course correct and align the tax credit with the original policy goals.”