By Phyllis Hasbrouck
Carbon capture and storage (CCS) sounds hopeful. Since carbon dioxide (C02) is what is ruining our climate, resulting in the “natural” disasters that get worse every year, capturing it and storing it where it can’t do any harm sounds really appealing! But underneath all the greenwashing, it turns out that CCS is actually a scheme designed by the fossil fuel industry, and one that will be easily scammed.
The industry tells us that it will capture C02 either before it can leave the smokestack of a power plant or refinery or directly from the air, and send it under pressure through a buried steel pipeline to a place where it can be injected far under the ground, where it will stay forever. Sounds wonderful — we can just keep on generating power from coal and natural gas, driving cars, heating and lighting our buildings with fossil fuels, flying in airplanes, and just bury the results! But this rosy picture doesn’t hold up to a careful examination.
Right now, in six Midwestern states (Illinois, Iowa, Minnesota, Nebraska, South Dakota, and North Dakota), grassroots groups are mobilizing to stop several proposed C02 pipelines from getting government approval. Their concerns include safety, property rights, loss of agricultural productivity, and the whole CCS scheme, which will rip off the taxpayers and make climate change worse instead of creating a just transition to a renewable energy economy.
It all starts with section 45Q of the Internal Revenue Code (the 45Q tax credit), originally enacted by the Energy Improvement and Extension Act of 2008. The goal was to “incentivize the reduction of carbon dioxide emissions and to support redeployment of carbon dioxide energy through efforts such as enhanced oil recovery.” Wait, what? One tax credit is supposed to both reduce C02 emissions and promote “enhanced oil recovery?”
Enhanced oil recovery (EOR) is a method of extracting a lot of oil from a well that has stopped producing using normal processes. Injecting supercritical C02 (meaning C02 that is brought to a fluid state at the right temperature and pressure) can dissolve the oil so that it can be brought to the surface. Paul Blackburn, who has investigated the 45Q tax credit for Bold Alliance, cited a 2014 analysis by Advanced Resources International estimating that globally 1.3 trillion barrels of oil (a 36-year global supply) could be recoverable using this method. Obviously, recovering and burning all that oil would be a disaster for our climate.
But what about the sequestration part of CCS? That surely is a good thing, right? No, it’s not. First, its advocates ignore what could happen if the C02 made its way up through cracks in the rocks above it and mixed with groundwater. Carbonic acid would be created, which could dissolve lead and arsenic out of the rocks and carry them upward into our drinking water. Second, sequestration (aka storage) is very much the junior partner to EOR, the real reason that the oil industry wanted and got the 45Q tax credit.
Paul Blackburn, in the first of his five (and eventually a total of seven) blog posts, explains that with fracking passing its peak and many oil wells running dry, the oil industry sees EOR as the next big thing that will allow it to continue with business as usual, thus saving its jobs and profits. But this won’t work economically unless it gets the government to subsidize the cost of capturing and transporting C02 via tax credits. Under the 45Q tax credit, for every metric ton of C02 that a company takes from a facility and stores permanently (sequestration), the government lets the company take $50 off its taxes. For every ton used in EOR, the tax credit is $35 per metric ton. Originally, the sequestration amount was $20/metric ton, and the EOR amount was $10/metric ton, but this proved too low to make sequestration and most EOR economically viable. Now, some are pushing to increase the sequestration credit to $85 or higher, to increase the EOR credit to as much as $75, and make it a cash payment instead of a tax credit. In any case, tax credits can be transferred to companies that owe federal income taxes and want to reduce how much they pay.
Although the credit for EOR is less than for sequestration, the 45Q tax credit does not create a financial preference for sequestration because EOR operators will also pay up to $40 or more (depending on oil price) for the C02. This payment would be in addition to the $35 tax credit benefit. This arrangement will then help bring up oil that otherwise would have just stayed in the ground and sell it at a profit. How does that help us decarbonize? This is an incentive to burn more oil!
But because a facility will only give a contract to a pipeline company if it pays the facility to take all of its C02, sometimes the pipeline company will not find an EOR buyer for all of it, and that’s where sequestration (aka storage) comes in. It is not a competing use of C02; it’s a complementary use, used only when the oil wells won’t buy.
The process of getting CO2 from a power plant or a refinery has turned out to be very difficult, and the current 45Q payments don’t cover the costs. So far, every project that has been attempted to capture CO2 from power stations has failed miserably. But the government is planning on subsidizing many more attempts to reduce the cost. However, there is a source of almost pure C02 that is available in large quantities in the Midwest that comes from the fermentation of corn to make the ethanol that is a required additive to gasoline and diesel. The cost of capturing C02 from an ethanol plant is estimated to be $25–$35 per ton, so with 45Q credits for capture of CO2 from ethanol at $50 a ton for sequestration (or $35 a ton for EOR), it will be an enormous windfall for billionaires and a matching loss for taxpayers.
So now you know how CCS is a scheme for taxpayers to fund industries to generate C02 for the oil companies to recover more oil — which needs to stay in the ground if we are to have a livable climate. Our climate can’t afford it, and neither can all the incredibly important programs that we need to create a just transition. If the proposed C02 pipelines get built, the 45Q tax credit will give rise to a huge increase in pollution and global warming. And meanwhile we’ll see cutbacks in programs that could help our country build a renewable energy economy — like free bus service, weatherization programs, and retraining for pipeline workers. CCS will suck up the taxpayers’ money and put it in the billionaires’ offshore bank accounts.
But the cynical fossil fuel industry doesn’t even care if the projects being funded with government subsidies are successful. Even if they fail eventually, they will have bought the fossil fuel industry time to continue business as usual for another 20 years, and delayed the strong push to convert to renewable energy, by siphoning off huge amounts of taxpayer money. It is so much better to prevent the CO2 from being produced in the first place than it is to try to capture and store it permanently. Vague claims for carbon neutrality by 2050 are just there to prevent us making a decisive push for a carbon-free economy.
Paul Blackburn calls 45Q the “rich people never pay taxes again” tax credit. His investigation into 45Q reveals how the scheme will become a scam. If Congress agrees to lift the cap higher than $50 per ton (as many are now advocating), it will create enormous incentives to invest in the scheme, a huge transfer of taxpayer money to CO2 producers, and a massive supply of cheap CO2 for oil companies to use for EOR. No matter how millionaires or billionaires make their money, if they invest in CCS, they can be rewarded with enough tax credits to bring their tax bill down to zero.
Not only that, but nobody is getting ready to actively monitor who buys how much C02 from whom, and what they do with it. According to Blackburn, neither the EPA nor the IRS has set up a structure to make it practical to track C02 flows and tax credit transfers. The IRS considers 45Q tax credit data to be private tax data not subject to public disclosure. Incredibly, there will be no online reporting by tax credit claimants. Instead, those who are capturing and sequestering or using C02 for EOR will fill out a simple bottom-line two-page paper or pdf IRS tax form and attach more detailed information in any form they choose. So this scheme will attract scammers, and we will all pay for it. Just when we will need trillions to make the switch to renewables, while helping our people through rough times, we’ll be sacrificing perhaps hundreds of billions of tax dollars through this tax scheme to the super rich.
And we are talking about BIG money here. If just the three pipeline companies that have proposals on the table for pipelines in the Midwest sequester the amount that they claim they can transport to storage over 12 years, they would receive up to $23 billion in tax credits at $50 per ton, or if Congress increases the tax credit, about $40 billion at $85 per ton.
Next time you see or hear someone praising carbon capture and storage, please let them know that this is not the way forward. To learn more, read Paul Blackburn’s blog posts linked below; visit carboncapturefacts.org and pipelinefighters.org; or listen to Blackburn explain the scam here. If you live in Illinois and want to get involved in stopping C02 pipelines there, contact Save Our Illinois Land, a group that has been allied with 350 Wisconsin since 2016.
Paul Blackburn Blog Posts About CCS
Part 1: Welcome to the 45Q Tax Credit Piggie Farm! (May 24, 2022)
Part 2: The 45Q Tax Credit Pipeline Goldrush (June 1, 2022)
Part 3: Meet the 45Q Tax Credit Piggies! (June 8, 2022)
Part 4: Is the IRS Ready to Wrangle the 45Q Tax Credit Hogs? (June 20, 2022)
Part 5: Will the 45Q Tax Piggies Be Hogtied by the U.S. EPA? (July 7, 2022)