Hoeven Presses Treasury to Ensure 45Q Tax Credit Works for Energy Producers

Senator’s CO2 Regulatory Certainty Act Would Provide Long-Term, Regulatory Certainty

WASHINGTON – Senator John Hoeven today pressed U.S. Treasury Department Secretary Steven Mnuchin to provide regulatory certainty when implementing the recently renewed 45Q tax credit for carbon capture and sequestration (CCS) to ensure energy producers are able to utilize the credit for enhanced oil and gas recovery. 

In a letter to the Treasury Secretary, the senator outlined the importance of implementing the tax credit to reflect the difference between geological storage and enhanced oil and gas recovery, as promulgated by the Environmental Protection Agency (EPA). 

“Current U.S. Treasury Department guidance and Internal Revenue Service (IRS) directives do not reflect EPA’s differentiated regulatory treatment for purposes of claiming the Section 45Q tax credit. At present, the agencies have defaulted to using only EPA’s geological sequestration requirements to verify eligibility for the tax credit. Subjecting enhanced oil and gas recovery operators to a different set of regulatory requirements than EPA already promulgated has, in turn, prevented numerous operators from making long-term investments in energy and infrastructure projects that promote the beneficial use of CO2 and domestic energy production, as well as improve environmental stewardship,” wrote Hoeven. 

“Last year, I introduced the CO2 Regulatory Certainty Act (S.1663) to provide permanent, statutory certainty for claiming the tax credit for anthropogenic CO2 used as a tertiary injectant in an enhanced oil and gas recovery, and I continue to work with my colleagues in Congress to pass this important legislation. In the interim, I respectfully ask the U.S. Treasury Department and IRS, in consultation with the EPA, U.S. Energy Department, and U.S. Interior Department, to implement the recently expanded Section 45Q tax credit in a manner that reflects EPA’s separate regulatory treatment of carbon storage,” the letter continues. 

The administrative action would follow Hoeven’s CO2 Regulatory Certainty Act, legislation that aligns tax guidelines with existing federal regulation at the EPA to ensure CCS project developers can utilize the Section 45Q tax credit. The bill clarifies and aligns IRS guidelines with current Environmental Protection Agency (EPA) regulations that already reflect operational and legal differences between enhanced oil and gas recovery and geological storage under the Clean Air Act and the Safe Drinking Water Act.