WASHINGTON (Reuters) – Oil drillers that use a method to store carbon dioxide emissions underground to boost crude production, a technique that coal miners and some environmentalists support, got a boost in the budget agreement President Donald Trump signed on Friday.
The deal raised the so-called 45Q tax credit, for storing underground emissions from crude production and coal and gas fired power plants, to $35 a metric ton, up from $10 a ton.
Occidental Petroleum Corp, Denbury Resources Inc and other oil producers with ready access to carbon dioxide have used the existing credit to keep output going even during downturns in the industry.
Exxon Mobil Corp and Chevron Corp also use the technique on some of their oil fields. None detail their tax savings from the credit, but since it was first offered in 2008, companies have collected at least $350 million in the credits, according to Internal Revenue Service figures as of last summer.
Senator Heidi Heitkamp, a Democrat from North Dakota, which gets about 70 percent of its power from coal, fought for years to bring energy producers and some environmentalists together to support the tax extension. Passing the tax credit extension “proves that if members of Congress really want to find solutions, it’s possible to work across the aisle to get results,” Heitkamp said.
Kurt Waltzer, managing director of Clean Air Task Force, a nonprofit environmental group, said the tax break extensions should stimulate many new so-called carbon capture utilization and storage, or CCUS, projects across the country.
The legislation was supported by conservative Republicans including Senator John Barrasso, from Wyoming, the top coal producing state, and Democrats who avidly support aggressive action to curb emissions linked to climate change, including Senator Sheldon Whitehouse of Rhode Island.
Clean Air Task Force said the legislation provides financial certainty for investors in carbon storage by guaranteeing eligibility for projects that begin construction within seven years, with credits claimed once carbon dioxide is captured and stored.
Separately, the budget deal also included the sale of 100 million barrels of oil from the Strategic Petroleum Reserve, the country’s emergency oil stash, beginning in 2022 and running through 2027. The largest ever sale from the SPR, a series of underground caverns in Texas and Louisiana, would cut its current level of crude storage by 15 percent and raise $6.1 billion to help fund the federal government.
Reporting by Timothy GardnerEditing by Chizu Nomiyama