Federal

The Center for Climate and Energy Solutions seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas emissions. Drawing from its extensive peer-reviewed published works, in-house policy analyses, and tracking of current legislative proposals, the Center provides research, analysis, and recommendations to policymakers in Congress and the Executive Branch. Read More
 

Eileen Claussen Comments on Sen. Bingaman's Clean Energy Standard Act of 2012

Statement of Eileen Claussen
President, Center for Climate and Energy Solutions

March 1, 2012

From Texas to Ohio to California, 31 states have shown that a clean energy standard for electricity benefits both the economy and the environment. It can diversify our energy supplies, build homegrown industries, sharpen our competitive edge in the global clean tech market, and curb pollution that damages health and contributes to climate change.  Sen. Bingaman’s Clean Energy Standard Act of 2012 presents an opportunity to achieve these benefits nationwide. The bill builds on these state-level successes, President Obama’s call for a federal clean energy standard, and earlier proposals from both sides of the aisle.

The Center for Climate and Energy Solutions has closely studied the issues and options in designing a federal clean energy standard. Congress faces some difficult questions: Do we focus on renewable energy only, or do we try to advance nuclear power and lower-carbon uses of fossils fuels as well? Do we set a performance goal and let the market decide how best to achieve it, or do we specify particular technologies in order to guarantee diversity of energy sources? How do we reward state leadership while putting all regions of the country on an equal footing?

There are important balances that must be struck, questions that must be resolved, and we shouldn't pretend that resolving them will be easy. But we must try. Maintaining a diverse energy supply, getting the United States into the international race for clean energy, curbing pollution -- these are challenges we must meet, and ignoring them won't make them go away.

Striking the right balance will require real effort by all sides, and Sen. Bingaman’s bill is an excellent place to start. We hope it launches a vital and constructive national conversation about how best to ensure reliable and affordable electricity for our country while tackling climate change. C2ES applauds Sen. Bingaman and the bill’s cosponsors, and looks forward to working with them, their colleagues and other stakeholders to move this forward.

For more information, view our Clean Energy Standards Resource page.

Contact: Rebecca Matulka, 703-516-4146, matulkar@c2es.org

Bingaman Clean Energy Standard Act of 2012

This document summarizes the Clean Energy Standard Act of 2012 of the 112th Congress, as introduced by Senator Jeff Bingaman (D-NM) on March 1, 2012.

 

Sec. 1. Short Title.

This Act may be cited as the “Clean Energy Standard Act of 2012.”

Sec. 2. Clean Energy standard.

This section adds a new section at the end of Title IV of the Public Utility Regulatory Policies Act of 1978:

“Sec. 610. Federal Clean Energy Standard.

This section creates a federal clean energy standard through regulations promulgated within 1 year of enactment.

Definitions

Clean energy is defined to mean electricity generated:

  • At a facility placed in service after December 31, 1991 using –
    • renewable energy (solar, wind, ocean, current, wave, tidal, or geothermal);
    • qualified renewable biomass produced in an ecologically sustainable manner;
    • natural gas (includes coal mine methane), hydropower;
    • nuclear power;
    • qualified waste-to-energy (energy produced from the combustion of post-recycled municipal solid waste, biogas, landfill methane, animal waste or animal byproducts, or other biomass that has been diverted from or separated from other waste out of a municipal waste stream);
  • At a facility placed in service after enactment of this section using –
    • qualified combined heat and power (CHP) that uses the same energy source for the simultaneous or sequential generation for electricity energy and thermal energy; and generates at least 20 percent of its useful energy as electricity and 20 percent of its useful energy as heat. The energy efficiency of a combined heat and power system shall be determined in according with Sec. 48(c)(3)(C)(i) of the Internal Revenue Code of 1986;
    • a source of energy, other than biomass, with lower annual carbon intensity than 0.82 metric tons of carbon dioxide (CO2) equivalent per megawatt-hour (MWh);
  • Qualified efficiency improvements or quality additions means efficiency improvements or capacity additions made after December 31, 1991 to a nuclear or hydropower facility placed in service before December 31, 1991. The efficiency and capacity additions for hydropower shall be measured on the basis of the same water flow information that is used to determined the historic average annual generation and certified by the Secretary or the Commission.
  • At a facility that captures and prevents the release of CO2 into the atmosphere.

Clean Energy Requirements

Starting in 2015, each electric utility that sells electricity to consumers will be required to obtain a minimum percentage of the electricity they sell to consumers in a calendar year from clean energy, as specified below:

Calendar Year

Minimum Annual Percentage

2015

24%

2016

27%

2017

30%

2018

33%

2019

36%

2020

39%

2021

42%

2022

45%

2023

48%

2024

51%

2025

54%

2026

57%

2027

60%

2028

63%

2029

66%

2030

69%

2031

72%

2032

75%

2033

78%

2034

81%

2035

84%

 

An electric utility may deduct the amount of electricity sold from nuclear or hydropower facilities placed in service on or before December 31, 1991, from their overall sales amount before calculating the percentage of clean energy needed for that year.

Means of Compliance

To comply with the standard, utilities are required to submit clean energy credits (CECs) to the Secretary of Energy, make an alternative compliance payment of 3.0 cents per kilowatt-hour in 2015, or some combination of the two to ensure compliance.

Federal Clean Energy Trading Program

Within 180 days after enactment of this section, the Secretary is directed to establish a Federal clean energy trading program by which electric utilities may submit clean energy credits to demonstrate compliance under this section.

CECs can only be used once for the purposes of compliance, but can be sold, transferred, or traded. CECs may banked indefinitely.

The Secretary may delegate to one or more appropriate market-making entities the creation and administration of a transparent, national credit market. Appropriate entities may also be delegated the tracking of dispatch of renewable generation.

Determination of quantity of credit

The quantity of CECs issued to each electric utility generating electricity in the United States from clean energy is equal to the product of:

For each generator owned by a utility, the number of MWhs of electricity sold from that generator by the utility; and the difference between 1.0 and the quotient obtained by dividing the annual carbon intensity of the generator, expressed in metric tons per megawatt-hour by 0.82

The carbon intensity of the generator is measured in terms of metric tons of CO2 per MWh of electricity generated.

In general, no generator is issued negative CECs.

The quantity of CECs issued to an owner of a qualified combined heat and power system in the United States is equal to the difference between:

The product obtained from multiplying the number of MWhs of electricity generated by the system, and the difference between 1.0 and the quotient obtained by dividing the annual carbon intensity of the generator by 0.82; and the product obtained by multiplying the number of MWhs of electricity generated by the system that are consumed onsite by the facility and the annual clean energy requirement for the calendar year.

In addition, qualified combined heat and power systems are awarded additional credits for (GHG) emissions avoided as a result of using a qualified combined heat and power system, rather than a separate thermal source, to meet onsite thermal needs.

Qualified waste-to-energy facilities are awarded 1.0 CEC per MWh of electricity generated by the facility and sold by the utility.

Determination of annual carbon intensity of generating facilities

The Secretary determines the annual carbon intensity of generating facilities by dividing the net annual CO2-equivalent emissions of the generator by the annual quantity of electricity generated by the generator.

Within 180 days after enactment of this section, the Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall issue interim regulations for determining the carbon intensity of each significant source of qualified renewable biomass.

The Secretary shall also commission the National Academy of Science to evaluate and report on the net GHG emissions associated with generating electricity from each significant source of qualified renewable biomass, including evaluation of additional sequestration or emissions associated with changes in land use by the protection of biomass, and provide recommendations for determining the carbon intensity of electricity generated from qualified biomass.

This study is to be completed within one year. The Secretary shall take the findings into account, and consult the Administrator of the EPA, Secretary of Agriculture, and Secretary of Interior, to issue final regulations determining the carbon intensity for qualified biomass within 180 days after the publication of the study.

Civil Penalties

An electric utility that fails to meet its annual clean energy requirements is subject to a civil penalty of 200 percent of the alternative compliance payment for each kilowatt-hour sold to consumers in violation of the requirement.

The Secretary may mitigate or waive the civil penalty if the electric utility failure to comply is determined to be out of reasonable control of the utility. The Secretary shall reduce the amount of the penalty by the amount paid by the electric utility to a State for failure to comply with a State renewable energy program, if the State requirement is more stringent than the federal clean energy standard.

The Secretary may asses a civil penalty in accordance with Sec. 333(d) of the Energy Policy and Conservation Act (42 U.S.C. 6303(d)).

Alternative Compliance Payment

An electricity utility may satisfy its requirement, in whole or in part, by submitting in lieu of a CEC, a payment at the level of that year’s alternative compliance payment.

State Energy Efficiency Funding Program

The Secretary shall establish a State energy efficiency funding program no later than December 31, 2015. All funds collected as alternative compliance payments or civil penalties shall be used solely to carry out this program.

In general, seventy-five percent of the funds in the State energy efficiency program shall be used by the Secretary, without further appropriations or fiscal year limitations, to provide funds to States to implement their energy efficiency plans under Sec. 362 of the Energy Policy and Conservation Act (42 U.S.C. 6322), in accordance with the proportion of those amounts collected by the Secretary from each State.

A State that receives funds under this program shall maintain records and evidence of compliance as required by the Secretary. The Secretary may, as determined to be appropriate, issue additional guidelines and criteria under this program.

Exemptions

In 2015, electric utilities that sold less than 2 million MWh in the previous calendar year are exempted from compliance under this section. The sales threshold for exemptions decreases by 100,000 MWh per year until it reaches 1 million MWh in 2025. The threshold remains 1 million MWh after 2025.

For the purpose of calculating electricity sold in determining exemption, the quantity of electricity sold by an affiliate of the electric utility or an associate company (as defined in Sec. 1262 of the Energy Policy Act of 2005 (42 U.S.C. 16451)) shall be treated as sold by the electric utility.

State Programs

The establishment of a federal CES does not affect the authority of a State to regulate electric utilities or implement other clean or renewable energy laws or regulations. The Secretary shall coordinate between the federal CES and relevant state programs.

Adjustment of Alternative Compliance Payments

Starting annually no later than December 31, 2016, the Secretary shall increase by five percent the rate of the alternative compliance payment, and as the Secretary determines necessary, adjust that for the rate of inflation.

Report on Clean Energy Resources That Do Not Generate Electric Energy

The Secretary is to submit a report to Congress within three years on mechanisms to supplement this section by examining the benefits and challenges of integrating clean energy resources that do not generate electricity as credited resources but may substantially reduce energy loads (including energy efficiency, biomass converted to thermal energy, geothermal energy collected using heat pumps, thermal energy delivered through district heating systems, and waste heated used as industrial process heat), or through the implementation of complementary policies.

The report may provide legislative recommendations for changes to the federal CES established under this section or new complementary policies that would provide effective incentives for using additional clean energy resources.

Exclusions

This section does not apply to electric utilities located in Alaska or Hawaii.

“Sec. 611. Report on Natural Gas Conservation.

This section requires that within two years after the date of enactment, the Secretary must submit to Congress a report quantifying the losses of natural gas during its production and transportation, and make appropriate recommendations for programs and policies to achieve conservation of natural gas for beneficial use.

Press Release: Inaugural Climate Leadership Award Recipients Announced

Press Release
February 29, 2012
 

Contact:
C2ES: Tom Steinfeldt, steinfeldtt@c2es.org, 703.516.0638
The Climate Registry: Alex Carr, alex@theclimateregistry.org, 778.340.8837
ACCO: Dan Kreeger, dkreeger@ACCOonline.org, 202.496.7390
 

One Individual and 20 Organizations Receive Inaugural Climate Leadership Awards

WASHINGTON, D.C. – Today, the U.S. Environmental Protection Agency (EPA), the Center for Climate and Energy Solutions (C2ES) (formerly the Pew Center on Global Climate Change), The Climate Registry (TCR), and the Association of Climate Change Officers (ACCO), named the winners of the inaugural Climate Leadership Awards. The awards recognize corporate, organizational, and individual leadership in addressing climate change and reducing carbon pollution. From setting and exceeding aggressive emissions reduction goals to reducing the emissions associated with shipping goods, these organizations are improving efficiency, identifying energy and cost saving opportunities, and reducing pollution.

“The Climate Leadership Award winners are breaking new ground in cutting carbon pollution that harms our climate and threatens our health,” said Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation. “We applaud our winners for their inspiring leadership, and hope they will serve as examples to catalyze the efforts of other organizations.”

“Corporate leadership is essential to meeting our climate and energy challenges,” said C2ES President Eileen Claussen. “We join EPA in applauding the first winners of the Climate Leadership Award. These companies demonstrate every day that it’s possible to shrink your carbon footprint without compromising your bottom line. Their accomplishments will inspire other companies to act, and will contribute to strong, sensible policies benefiting both our economy and our climate.”

“The Climate Registry congratulates the inaugural Climate Leadership Award winners on their impressive achievements,” said David Rosenheim, the executive director of TCR. “As we transition in the next few years to a low carbon economy, these organizations will undoubtedly reap the benefits of taking aggressive action to reduce their carbon risk.”

“The inaugural winners of the Climate Leadership Award have demonstrated aggressive greenhouse gas (GHG) management actions and climate-related strategies," said Daniel Kreeger, ACCO's Executive Director. "The exemplary climate response exhibited by these organizations is a testament to the visionary leadership and innovation within their executive suite and workforce. The thought and action leadership of these award winners is a model for all companies, government entities, academic institutions and individuals for which to strive to achieve.”

The Climate Leadership Award recipients are as follows:

Organizational Leadership: Recognizes organizations for exemplary leadership both in their internal response to climate change and through engagement of their peers, competitors, partners, and value chain:

  • IBM
  • San Diego Gas & Electric


Individual Leadership: Recognizes an individual for outstanding efforts in leading an organization’s response to climate change:

  • Gene Rodrigues, Director of Customer Energy Efficiency and Solar at Southern California Edison


Supply Chain Leadership: Recognizes organizations for actively addressing emissions outside their operations:

  • Port of Los Angeles
  • SAP
  • UPS


Excellence in GHG Management (Goal Achievement): Recognizes organizations for aggressively managing and reducing their GHG emissions:

  • Campbell Soup Company
  • Casella Waste Systems
  • Conservation Services Group
  • Cummins Inc.
  • Fairchild Semiconductor
  • Genzyme
  • Hasbro
  • Intel Corporation
  • International Paper
  • SC Johnson


Excellence in GHG Management (Goal Setting): Recognizes organizations for establishing aggressive GHG reduction goals:

  • Avaya
  • Bentley Prince Street
  • Campbell Soup Company
  • Ford Motor Company
  • Gap Inc.
  • Ingersoll Rand


The awards will be presented tonight at the inaugural Climate Leadership Conference in Fort Lauderdale, Fla. The conference will bring together leaders from business, government and academic institutions who are interested in exchanging best practices on how to address climate change while simultaneously running more competitive and sustainable operations.

More information about the Climate Leadership Awards and award winners: http://www.epa.gov/climateleaders/awards/index.html

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About C2ES
The Center for Climate and Energy Solutions (C2ES) is an independent non-profit, non-partisan organization promoting strong policy and action to address the twin challenges of energy and climate change. Launched in November 2011, C2ES is the successor to the Pew Center on Global Climate Change, long recognized in the United States and abroad as an influential and pragmatic voice on climate issues. C2ES is led by Eileen Claussen, who previously led the Pew Center and is the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

Climate Leadership Conference

Promoted in Energy Efficiency section: 
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February 29-March 1 in Fort Lauderdale, Florida.

With the U.S. Environmental Protection Agency as the headline sponsor, the first annual Climate Leadership Conference will be held from February 29-March 1, 2012, in Fort Lauderdale, Florida. The conference will bring together leaders from business, government and academic institutions, and the non-profit community interested in exchanging ideas and information on how to address climate change while simultaneously running their operations more competitively and sustainably.

The conference includes a gala to honor recipients of the Climate Leadership Awards, a new national awards program to recognize exemplary corporate, organizational, and individual leadership in response to climate change. U.S. EPA, in partnership with C2ES, The Climate Registry (The Registry), and the Association of Climate Change Officers (ACCO), sponsor the awards. 

Featured conference speakers include:

  • Nancy Sutley – Chair, White House Council on Environmental Quality
  • Gina McCarthy – Assistant Administrator, Office of Air and Radiation, U.S. Environmental Protection Agency
  • Mary Nichols – Chair, California Air Resources Board
  • Eileen Claussen – President, Center for Climate and Energy Solutions

Click here for complete speakers list and detailed conference agenda.

Program Highlights

  • Network with leaders from the public and private sectors, including federal and state government officials, industry leaders, and nonprofit experts
  • Attend the Climate Leadership Awards Gala, which is held in conjunction with the conference
  • Hear insights from winners of the 2011 Climate Leadership Awards for the Supply Chain, Organizational and Individual Leadership categories

Conference attendees will learn about and exchange solutions on topics including

  • Leveraging Clean Energy Opportunities
  • Managing Climate Risks and Building Resilience
  • Supply Chain Strategies
  • Disclosures and Questionnaires
  • Setting and Achieving GHG Reduction Goals Education & Engagement
  • Strategies Making the Business Case for Climate Response

Any sponsorship or advertisements appearing in these materials do not imply endorsement, recommendation, or favor by the United States Government or the U.S. Environmental Protection Agency.

The Bingaman Clean Energy Standard: What is “Clean”?

This is the second blog post in a multi-part series on the Bingaman Clean Energy Standard. Read part 1.

One question on the eve of the debut of Sen. Jeff Bingaman’s (D-NM) Clean Energy Standard bill:  What is “clean”?  

Broadly speaking, a clean energy standard requires an electric utility to generate or purchase a certain percentage of its supply from “clean” sources. Judging by previous Congressional proposals for promoting renewable or other low-emitting energy sources – not to mention the electricity portfolio standards in place in 31 states and the District of Columbia – cleanliness is in the eye of the beholder.

Press Release: Enhanced Oil Recovery Plan Draws Bipartisan Welcome in Congress

Press Release

February 28, 2012


Contact:Tom Steinfeldt, steinfeldtt@c2es.org, 703-516-0638
 Patrice Lahlum, plahlum@gpisd.net, 701-281-5007  

 

Enhanced Oil Recovery Plan Draws Bipartisan Welcome in Congress 

Consensus Recommendations from Industry, State and Nonprofit Leaders Benefit Economy, Energy Security, and Environment

WASHINGTON, D.C. – A coalition of industry, state, environmental and labor leaders called today for federal and state incentives to stimulate the expansion of enhanced oil recovery using carbon dioxide (CO2) from power plants and industrial facilities. The proposed measures would boost domestic U.S. oil production while reducing the nation’s CO2 emissions. 

The recommendations by the National Enhanced Oil Recovery Initiative (NEORI), convened by the Great Plains Institute (GPI) and the Center for Climate and Energy Solutions (C2ES), were released at an event on Capitol Hill.  

Senator Kent Conrad (D-ND) and Congressman Mike Conaway (R-TX) were on hand to welcome the recommendations, and Senator Max Baucus (D-MT), Senator John Hoeven (R-ND) and Senator Richard Lugar (R-IN), and Congressman Rick Berg (R-ND) offered written statements in support of the initiative.

In CO2-enhanced oil recovery (EOR), oil producers inject CO2 into wells to draw more oil to the surface. The practice, 6 percent of current U.S. domestic oil production, helps sustain production in otherwise declining oil fields, but limited supplies of CO2 constrain the expansion of EOR. NEORI’s recommendations would encourage the capture of CO2 from industrial and power facilities for use in EOR.

The centerpiece of the group’s recommendations is a proposed federal tax incentive focused on companies that capture and transport CO2, not oil companies. NEORI estimates that the tax credit would quadruple U.S. oil production from EOR, to 400 million barrels a year, while reducing CO2 emissions by 4 billion tons over the next 40 years. The U.S. Treasury Department would administer the competitively awarded tax credit. 

NEORI calculates that the program would pay for itself within 10 years through increased federal revenues generated by boosting domestic oil production, with an estimated net return of $100 billion over 40 years. The incentive would reduce the trade deficit by saving the United States about $610 billion in expenditures on imported oil over the same period. 

As an immediate measure, NEORI recommends that Congress or the Treasury Department modify the existing Section 45Q Tax Credit for Carbon Dioxide Sequestration to provide a more workable incentive to firms to capture and transport CO2.

At the state level, NEORI identified a range of existing state policies encouraging commercial deployment of CO2 capture technologies and projects and recommends that other states tailor and adopt them. The model state policies include tax credits, exemptions or abatements, and the inclusion of carbon capture-and-storage in electricity portfolio standards, among others.

“The EOR Initiative’s recommendations strike common ground among a diverse collection of interests and offer a realistic opportunity to increase U.S. oil supplies while reducing carbon emissions,” said C2ES President Eileen Claussen. “The proposal reflects practical solutions that deliver a win for our nation’s economic growth, energy security, and the climate.” 

“Implementing these recommendations for EOR can create a virtuous circle of increasing benefits to our nation over time,” said Brad Crabtree, policy director for GPI.  “Congress and state policymakers can expand American oil production, spur jobs, increase revenues, reduce the trade deficit and store significant CO2, all with incentives that pay for themselves.”

In total, an estimated 26 billion to 61 billion barrels of economically recoverable oil could be produced in the United States using currently available CO2-EOR technologies and practices, or potentially more than twice the country’s proved reserves.  Expanded use of CO2-EOR also can advance the development of infrastructure needed for long-term capture, transportation and storage of carbon emissions.

NEORI participants include state officials from Illinois, Indiana, Michigan, Montana, New Mexico, Texas, West Virginia and representatives of:

Air Products, Inc.Natural Resources Defense Council
AFL-CIOOhio Environmental Council
Arch Coal, Inc.Southern Company
Archer Daniels Midland Co.Summit Power 
Basin Electric Power CooperativeTenaska Energy
Clean Air Task ForceUnited Transportation Union 
Enhanced Oil Recovery Institute, University of Wyoming Wyoming Outdoor Council
GE Energy 

 

NEORI observers:

Chaparral Energy LLCNorth American Carbon Capture and Storage Association
Core Energy, LLCSouthern States Energy Board
Interstate Oil and Gas Compact Commission 

 

 

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About C2ES
The Center for Climate and Energy Solutions (C2ES) is an independent non-profit, non-partisan organization promoting strong policy and action to address the twin challenges of energy and climate change. Launched in November 2011, C2ES is the successor to the Pew Center on Global Climate Change, long recognized in the United States and abroad as an influential and pragmatic voice on climate issues. C2ES is led by Eileen Claussen, who previously led the Pew Center and is the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

About the Great Plains Institute
The Great Plains Institute is a non-partisan, non-profit organization dedicated to transforming how we produce, distribute, and consume energy to be both environmentally and economically sustainable. Through research and analysis, consensus policy development, and technology acceleration, we are helping to advance clean, efficient and secure energy. Our collaborative efforts with public and private leaders focus on energy efficiency, renewable and low-carbon electricity and fuels, enhanced oil recovery, energy storage, smart grid and transmission.

 

Statements from Members of Congress in support of the National Enhanced Oil Recovery Initiative

 

Senator Max Baucus (D-MT) 

“I applaud the National Enhanced Oil Recovery Initiative for bringing together such a diverse group of stakeholders and presenting this set of policy recommendations. Enhanced oil recovery is a critical element of our broad, all-of-the-above approach to pursuing energy independence for America. It is also a clear example of American ingenuity that is re-invigorating oil fields. Along with bringing on more domestic oil and reducing carbon emissions, it brings more jobs and economic development to rural areas of our country. From a CO2 pipeline and injection project under development in the Bell Creek oil field in southeastern Montana to an innovative public-private carbon sequestration project in the Kevin Dome in Toole County, Montana is helping to lead the way. I look forward to working with members of the Initiative to make the existing federal incentives work better to promote a safer, cleaner and more prosperous American economy.”

Senator Kent Conrad (D-ND)

“The Department of Energy has estimated that standard oil recovery techniques leave as much as 80 percent of the original oil in place. As a result, our country has tens of billions of barrels of oil in existing oil fields that, until now, has been out of reach. ” Senator Conrad said. “Using CO2 enhanced oil recovery significantly increases the efficiency of oil recovery, resulting in a win-win situation that would increase domestic oil production while reducing our greenhouse gas emissions in a fiscally responsible manner.”

Senator John Hoeven (R-ND)

"Enhanced oil recovery is an important resource to get us to North American energy independence.  As home to one of the world's only commercial scale carbon sequestration operation, North Dakota is uniquely poised as a leader in energy production.  Expanding all areas of domestic energy production will help lower gas prices and make our country more secure."    

Senator Richard Lugar (R-IN) 

“Americans today struggle with high oil prices, and our economy is vulnerable to massive price spikes. Producing more domestic oil through enhanced oil recovery is a win for fiscal responsibility, a win for energy security, and a win for environmental stewardship. Addiction to foreign oil from unfriendly nations imperils United States’ national security and makes our economy more vulnerable to conflict, terrorist activity, and natural disasters far outside the United States. My Practical Energy Plan would enable 1.8 million barrels of new domestic oil production each day through enhanced oil recovery and earn an estimated $170 billion in federal revenue. Industries and utilities using Indiana’s coal would be able to sell their emissions, enabling a valuable economic boost in Indiana. I commend members of the National Enhanced Oil Recovery Initiative for taking up this opportunity and thank them for their recommendations.” 

Congressman K. Michael Conaway (R-TX) 

“I want to thank all the participants in the National Enhanced Oil Recovery Initiative for their hard work over the past eight months. This project has yielded many new relationships, some surprising common ground, and a couple of good recommendations for Members of Congress to consider. I have no doubt that the groundwork NEORI has laid will pay dividends long into the future.

“Finding new ways to access the resources we have already found will continue to be an important piece of our domestic energy strategy for years to come. EOR is a critical tool that allows us to do just that - it breathes new life into old fields. Expanding our domestic energy production remains a top priority for me and many of my colleagues.  We all look to a time when our nation will import less oil, create more jobs, and has a growing economy, thanks in part to EOR and increased production of domestic energy.”

Congressman Rick Berg (R-ND)

“As the need for our nation’s energy independence increases, it’s important that we continue working to find ways to increase domestic oil production. In North Dakota alone, more than 250 million incremental barrels of oil could be produced from already discovered, currently producing conventional oil fields through carbon dioxide enhanced oil recovery. Using technology like this to expand our domestic energy production holds great potential to help lower energy costs for consumers as well as breaking our dependence on foreign oil.”

 

State officials welcome the National Enhanced Oil Recovery Initiative’s recommendations

Texas State Representative Myra Crownover, Vice-Chair, Energy Resources Committee (R)

"Increasing domestic energy production is essential to our national interest. Enhanced oil recovery combined with carbon capture and storage technology is one of the most promising developments for increasing the energy security of the United States. The work of the National Enhanced Oil Recovery Initiative has been a valuable first step in the conversation regarding this important policy area, and I want to commend all of the members of the Initiative for their hard work."

Doug Scott, Chairman, Illinois Commerce Commission

"The National Enhanced Oil Recovery Initiative (NEORI) addresses a number of concerns about energy policy, the economy and the environment. In Illinois, we have been exploring a number of carbon capture and sequestration (CCS) projects, such as Future Gen, a CCS demonstration by a major manufacturer, and several power generating facilities with CCS as part of their plans. These kinds of projects are all very expensive, and enhanced oil recovery (EOR) could provide economic incentives that would benefit them. Illinois is a major coal producer and coal user. Understanding how EOR works can help us to understand what role coal-fired generation can have in our state going forward.

"If successfully implemented on a larger scale, EOR would help reduce our dependence on foreign sources of oil, thereby strengthening our opportunity for energy independence. EOR can provide good-paying power- and manufacturing-sector jobs in this country and more tax revenue to governments. From an environmental perspective, EOR not only captures and reduces CO2 emissions, but it also more fully utilizes already-developed oil and gas fields.

"I have found that collaborative policy initiatives, involving many states, the federal government, the private sector and the non-governmental organizations can help to provide solutions to complex issues. The NEORI is just such a collaborative. I look forward to working with other states, to share best practices, and to work with NEORI and federal policy makers to insure that EOR policies make sense for the private sector, the states and the federal government. Having a federal policy will help to advance EOR technology to provide benefits in many areas."

Federal Agencies Respond to Risks of Climate Change

C2ES is pleased to release our updated report, Climate Change Adaptation: What Federal Agencies are Doing, which lays out the rapidly expanding efforts across the federal government to respond to the increasing economic risks of extreme weather and climate change.  

Federal agencies are under growing pressure to reduce costs, eliminate unnecessary regulations, and make certain the public is getting a good return on the tax dollars they invest in government. In the context of climate change, federal agencies are reviewing the programs they operate and the facilities and resources they manage to identify cost-effective steps to minimize their vulnerability and enhance their resilience to increased risks of extreme weather and a changing climate. With our nation having experienced a record number of extreme weather events last year, each causing economic damages exceeding $1 billion, it’s both common sense and smart fiscal policy to analyze and minimize the vulnerability of federal assets to extreme weather and climate impacts. 

Recommended Modifications to the 45Q Tax Credit for Carbon Dioxide Sequestration

Recommended Modifications to the 45Q Tax Credit for Carbon Dioxide Sequestration

February 2012

Download the full report (PDF)

Press Release

Other resources:

Introduction:

The National Enhanced Oil Recovery Initiative (NEORI) recommends that Congress consider implementing a revenue-positive federal production tax credit to support deployment of commercial carbon dioxide (CO2) capture and pipeline projects. A new, more robust federal incentive is needed to increase the supply of man-made or anthropogenic CO2 that the oil industry can purchase for use in enhanced oil recovery (EOR) to increase domestic production from existing oil fields. 

NEORI also recommends that Congress undertake immediate modification of the existing Section 45Q Tax Credit for Carbon Dioxide Sequestration,[1] through legislative action and/or working with the Department of the Treasury to revise Internal Revenue Service program guidance. 

To avoid stalling important commercial CO2 capture projects under development, there is an urgent need to improve the functionality and financial certainty of this federal incentive to enable its effective commercial use. To make 45Q immediately accessible to US companies, Congress should pursue the following changes to the program: 

  • Designate the owner of the CO2 capture facility as the primary taxpayer; 
  • Establish a registration, credit allocation, and certification process; 
  • Change the recapture provision to ensure that any regulations issued after the disposal or use of CO2 shall not enable the federal government to recapture credits that were awarded according to regulations that existed at that time; and 
  • Authorize limited transferability of the credit within the CO2 chain of custody, from the primary taxpayer to the entity responsible for disposing of the CO2

The consensus recommendations below detail the specific 45Q program modifications requested, and the section-by-section summary provides further explanation and context. 

Background and Rationale 

Section 45Q makes available a per-ton credit for CO2 disposed of in secure geologic storage. The program provides $10 per metric ton for CO2 stored through EOR operations and $20 per metric ton for CO2 stored in deep saline formations. However, due to unforeseen issues in the original statute (§ 115 of the Energy Improvement and Extension Act of 2008), the 45Q program lacks sufficient transparency and certainty for companies to be able to use the credit to secure private financing for projects. 

Large-scale expansion of commercial EOR using industrially-sourced CO2 later in this decade requires that critical industrial capture projects begin construction now and enter commercial operation within the next few years. If Congress makes modest, functional improvements this year to 45Q that result in little or no additional fiscal cost, the program currently authorized at 75 million metric tons of CO2 stored can help several significant EOR projects nationwide secure private sector financing and move forward to commercial operation. 

Reference:

1. 26 USC §45Q provides a tax credit for carbon dioxide sequestration. Section 45Q was enacted by § 115 of the Energy Improvement and Extension Act of 2008.  

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February 2012 Newsletter

Click here to view our February 2012 newsletter.

Learn about the new international coalition aimed reducing short-lived climate pollutants, a framework for carbon capture and storage, and how federal agencies are incorporating climate adaptation into their decision making, the start of a clean energy standard conversation, and more in C2ES's February 2012 newsletter.

Carbon Dioxide Enhanced Oil Recovery: A Critical Domestic Energy, Economic, and Environmental Opportunity

Carbon Dioxide Enhanced Oil Recovery: A Critical Domestic Energy, Economic, and Environmental Opportunity

February 2012

Download the full report (PDF)

Press Release

Other resources:

Introduction:

Amidst economic uncertainty, fiscal crisis and political division over energy policy, carbon dioxide enhanced oil recovery (CO2-EOR) offers a safe and commercially proven method of domestic oil production that can help the United States simultaneously address three urgent national priorities: 

  • Increasing our nation’s energy security by reducing dependence on foreign oil, often imported from unstable and hostile regimes; 
  • Supporting job creation, increasing tax revenue, and reducing our trade deficit by keeping dollars now spent on oil imports here at home and at work in the U.S. economy; and 
  • Protecting the environment by capturing and storing CO2 from industrial facilities and power plants, while getting more American crude from areas already developed for oil and gas production. 

A largely unheralded example of American ingenuity, CO2-EOR was pioneered in West Texas in 1972 as a way to sustain oil production in otherwise declining oil fields. It works by injecting CO2 obtained from natural or man-made sources into existing oil fields to free up additional crude oil trapped in rock formations. In this way, CO2- EOR can significantly extend the lifespan and revitalize production of mature oil fields in the United States. 

Today, over 3,900 miles (Dooley, et al., 2009) of pipelines in the United States annually transport approximately 65 million tons of CO2 (Melzer, 2012) that the oil industry purchases for use in EOR, producing 281,000 barrels of domestic oil per day, or six percent of U.S. crude oil production (ARI, 2011). The EOR industry has captured, transported, and injected large volumes of CO2 for oil recovery over four decades with no major accidents, serious injuries or fatalities reported. 

America has the potential to expand CO2-EOR significantly. Advanced Resources International (ARI) estimates that an additional 26-61 billion barrels of oil could economically be recovered with today’s EOR technologies, potentially more than doubling current U.S. proven reserves. Moreover, “next generation” EOR technology could yield substantially greater gains, potentially increasing recoverable domestic oil from EOR to 67-137 billion barrels, and storing 20-45 billion metric tons of CO2 that would otherwise be released into the atmosphere (ARI, 2011). 

The National Enhanced Oil Recovery Initiative (NEORI) was formed to help realize CO2-EOR’s full potential as a national energy security, economic and environmental strategy. Organized and staffed by the Center for Climate and Energy Solutions (C2ES) and the Great Plains Institute (GPI), the Initiative brought together a broad and unusual coalition of executives from the electric power, coal, ethanol, chemical, and oil and gas industries; state officials, legislators and regulators; and environmental and labor representatives.

NEORI was launched on July 17, 2011, in Washington, D.C., with bipartisan support from four U.S. Senators and a member of Congress. Project participants met on three occasions to define the scope and expectations of the project, provide feedback on technical matters, and offer policy guidance. They gathered in Washington, D.C., with the launch of the project on July 17, 2011; in Traverse City, MI, on September 21-22; and in Houston, TX, on November 1-2. The latter two meetings included field visits to commercial EOR operations and to a CO2 capture facility. 

NEORI participants also formed subgroups focused on developing policy recommendations, analysis and modeling, and communications and outreach materials. The subgroups held conference calls over several months, often on a weekly basis, to develop, refine, and reach consensus on recommendations and work products. 

This report presents NEORI participants’ consensus recommendations for targeted federal and state incentives to expand CO2-EOR. If implemented, these recommendations would significantly increase U.S. domestic oil production while generating net new tax revenues for the federal government and states struggling to fill budget gaps and jumpstart our nation’s economy. 

Rationale for Incentives to Support CO2-EOR

The Challenge: Limited Supply of Man-Made CO2 for Use in EOR

Today’s supply of CO2 available for purchase by the oil industry is simply inadequate to achieve the tens of billions of barrels of additional domestic oil production possible through EOR. In a fortunate, if ironic, twist of fate, a key to increasing America’s domestic energy security lies in capturing and productively utilizing a portion of our nation’s industrial CO2 emissions, thereby meeting a critical domestic energy challenge, while also helping to solve a global environmental problem.

Expanding the supply of CO2 available for EOR depends upon wide-scale deployment of carbon capture and compression equipment at a broad range of industrial sources, including natural gas processing; ethanol fermentation; fertilizer, industrial gas and chemicals production; gasification of various feedstocks; coal, natural gas and biomass-fueled power generation; and the manufacture of cement and steel. In addition, a substantial build-out of the existing CO2 pipeline network will be required to deliver CO2 from industrial facilities where it is produced to existing oil fields where it is needed.

The Solution: Reducing the Cost of Capturing and Transporting Man-Made CO2

NEORI’s federal and state incentive recommendations aim to bring down the cost of man-made, or anthropogenic, COcapture and transport over time to a level that private capital can finance without additional government support and based solely on crude oil prices and the economics of commercial EOR operations.

The EOR industry currently purchases CO2 on the open market. Market prices support using anthropogenic CO2 only in those cases where the costs of capture from a particular industrial source are low, and the amount of CO2 produced justifies private financing of pipeline infrastructure. 

However, CO2 capture technologies for some applications, notably electric power generation and some other industrial processes, are not yet fully commercialized and remain expensive to deploy, even at today’s oil prices. Also, the costs of building trunk pipelines to deliver CO2, especially from smaller industrial sources, often exceed the scope of what individual EOR projects can privately finance without the addition of incremental incentives recommended in this report.

Overview of Recommendations:

Federal Production Tax Credit for CO2-EOR: A Revenue-Positive Policy for Domestic Energy Security 

NEORI’s centerpiece recommendation is a competitively awarded, revenue-positive federal production tax credit for capturing and transporting CO2 to stimulate CO2- EOR expansion. Crucially, this federal tax credit would more than pay for itself. Indeed, analysis of the incentive outlined below indicates that federal revenues from existing tax treatment of additional incremental oil production would exceed the fiscal cost of the incentive itself by $100 billion over 40 years. Further, modeling shows that this incentive program, properly designed, would become revenue-positive within the ten-year timeframe typically used by Congressional budget score-keepers. 

Analysis undertaken by NEORI suggests that this tax credit would result in the production of an additional 9 billion barrels of American oil over 40 years, quadrupling CO2-EOR production and displacing U.S. oil imports. At the same time, the proposed incentive would save the United States roughly $610 billion in expenditures on imported oil, while storing approximately 4 billion tons of CO2 captured from industrial and power plant sources, thereby reducing total U.S. CO2 emissions in the process. 

Focusing Incentives on Industrial Suppliers of CO2, not the Oil Industry 

With oil at around $100 per barrel, world-class experience and expertise in the U.S. oil industry, and private capital available to invest, why are new financial incentives needed to expand CO2-EOR? To be sure, EOR represents an American can-do commercial success story, and the U.S. oil industry does not need or seek additional financial incentives to sustain EOR production at present levels. 

While the business model of the U.S. EOR industry has worked profitably for decades utilizing existing sources of natural and man-made CO2, the principal constraint on the EOR industry’s ability to expand domestic oil production is the lack of sufficient additional CO2 at current market prices. Therefore, NEORI recommends that incentives be primarily directed to capture and pipeline projects serving industrial facilities and power plants, rather than to EOR operators. 

This approach will enable a variety of industry sectors to market new sources of CO2 to the oil industry and develop the technological and operational experience that will drive innovation and cost reduction in CO2 capture, compression, and transport over time. In addition to increasing CO2 supply for the oil industry, these projects will benefit participating industries by helping them to reduce their carbon footprint in response to emerging and expected state and federal regulatory requirements and by making them more competitive in a global marketplace that increasingly values lower-carbon products and services. Finally, the deployment of CO2 capture and pipelines for use in EOR will establish a national infrastructure that can eventually be utilized by many industries for long-term carbon capture and storage (CCS) in geologic formations beyond oil and gas fields. 

Complement Federal Policies with State Incentives 

States also have an important role to play in fostering CO2-EOR deployment by implementing incentive policies that can complement the federal production tax credit recommended in this report. A number of states have already taken the lead, filling the current vacuum left by the absence of adequate federal policy. Therefore, this report identifies existing state policies that NEORI members believe should serve as models for policy-makers in other states to adopt and tailor to their particular needs. 

Multiple Benefits of CO2-EOR Can Marshall Broad Support for Policy Change 

The federal and state policy recommendations in this report will, if implemented, create a virtuous circle of linked and growing benefits to the American people: expanding CO2 supply, increasing domestic oil production and associated job creation, expanding federal and state  revenues, and declining CO2 emissions. Thus, at a time when our nation’s energy policy is mired in regional, partisan and ideological debate, CO2-EOR can help lay the groundwork for a different policy path forward, one that weaves together a broad coalition of Americans united by common interests. 

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