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Carbon-Capture Uncertain Future Amid IRS Delays

EORI Director Steven M. Carpenter is quoted in the article as an industry expert in the field of EOR.

A recent article published in Bloomberg Tax outlines the difficulties faced by proposed carbon capture projects due to a lack of guidance and clarity from the IRS.

Carbon Capture projects are expensive endeavors; investors are unwilling to back proposed projects until the IRS interprets parts of the new law under tax code Section 45Q, clarifying what structures qualify for enhanced and extended tax credits.

Carbon capture is a technology that traps and stores carbon dioxide so it won't enter the atmosphere. In 2018, Congress provided additional tax credits under Section 45Q to encourage the development of projects using carbon capture technology; without additional guidance on rule interpretation many projects have stalled. Development can take years of planning and permitting prior to breaking ground on a project.  To qualify for tax incentives, construction must begin before 2024 so investors are feeling the squeeze. The delay in regulation clarity hampers forward progress in carbon capture projects; unfortunately some of those will not be able to meet the deadline.

Steven Carpenter, Director of the Enhanced Oil Recovery Institute in Casper, Wyoming sums up the problem in his quote from the original article, “Only those folks who have started the process, only those folks who have already invested some time and understand that they want a project so they’ve begun to go down that road have any chance if the current time frame stays at 2024.”

Carpenter expounds on the risk later in the article, “There’s too much risk that we could spend time, money, and energy and get down the path and turn around and they say, ‘Sorry, you missed the mark.’”

Read to full article by reporter Allyson Versprille in Bloomberg Tax online: https://news.bloombergtax.com/daily-tax-report/carbon-capture-projects-face-uncertain-future-amid-irs-delays