U.S. Senators Rob Portman, R-Ohio, and Michael Bennet, D-Colo., on Nov. 19 introduced a bill to help power plants and industrial facilities finance the purchase and installation of carbon capture and storage equipment.
The carbon that is captured can be used for Enhanced Oil Recovery (EOR) or stored underground. The Carbon Capture Improvement Act would allow businesses to use tax-exempt private activity bonds to finance the high upfront capital costs associated with installing carbon capture equipment.
Both Ohio and Colorado are major producers of coal and both states also have a heavy reliance on coal-fired power, though that is diminishing as power generators like Xcel Energy (NYSE: XEL) and American Electric Power (NYSE: AEP) shutter coal plants in those states. The U.S. Environmental Protection Agency’s new greenhouse gas-reduction rule for new power plants, which was published in final form on Oct. 23 and is under appeal in federal court, mandates CCS for all new coal-fired facilities.
“I’m pleased to introduce this bipartisan legislation that will have real environmental benefits, but also allow states like Ohio to continue to utilize our natural resources,” said Portman. “We’ve developed a solution that will allow us to capture carbon, but also protect Ohio jobs. This is a commonsense idea and that’s why it’s supported by business groups, energy groups, and environmental groups alike.”
“This bill would reduce one of the largest impediments to carbon capture technology. It is good for the economy and good for the environment,” Bennet said. “The captured carbon dioxide can be used by oil producers to extract every last little bit of oil available in their wells – improving our energy security and boosting domestic energy production. It also reduces emissions from power plants and industrial facilities to help keep our air clean – which is something that Coloradans value and makes our state an attractive place to live. This bipartisan bill is a market-based, technology-neutral approach to attacking the problem that carbon dioxide creates.”
The bill allows businesses to use private activity bonds (PABs) issued by local or state governments to finance a carbon capture project. These bonds are beneficial to consumers and businesses because of their tax-exempt status and because they can be paid back over a longer period of time. If more than 65% of CO2 emissions from a given facility are captured and injected underground, then 100% of the eligible equipment can be financed with PABs. If less than 65% is captured and sequestered, then tax-exempt financing is permitted on a pro-rated basis.
“CCS is a crucial tool for reducing carbon emissions, and deploying additional projects will make it more affordable in the US and around the world,” said Armond Cohen, Executive Director of the Clean Air Task Force. “Private activity bonds can reduce the cost of financing projects, which will help lower the hurdles to getting more steel in the ground.”
“Enactment of this bill can help pave the way for carbon capture utilization and storage projects in the U.S. to be built which in turn will make more CO2 available for enhanced oil recovery and securely storing that CO2,” said Mike Moore, Executive Director of the North American Carbon Capture Storage Association, which is comprised of entities including the American Petroleum Institute, Kinder-Morgan, Occidental Petroleum, Shell, British Petroleum, and the International Energy Association. “Just in the mature fields alone, recoverable oil with CO2 could be over an additional 20 billion barrels. In turn, these barrels add to the growing self-sufficiency of the U.S., augmenting national and economic security as well as the environmental benefits of building clean energy systems and capturing CO2 before it is released.”
The National Enhanced Oil Recovery Initiative (NEORI), a coalition representing major energy producers, environmental, labor, and state representatives, said: “We thank Senators Michael Bennet and Rob Portman for their leadership and support for deployment of carbon capture technologies at power plants and industrial facilities, and for their introduction of legislation to authorize private activity bonds (PABs) for carbon capture projects. Access to tax-exempt private activity bonds will provide project developers an important tool in a broader toolkit of measures needed to help attract private investment and finance carbon capture projects.