Initiatives

Speech: Government Role in Low-Carbon Innovation

Eileen Claussen, President of C2ES
Opening Remarks for Low-Carbon Innovation Forum
Washington, D.C.
April 24, 2012

Thank you very much. On behalf of the Center for Climate and Energy Solutions, I want to welcome you to our latest forum on low-carbon innovation. As we gather here to talk about the role of innovation in addressing the twin challenges of energy and climate change, I am reminded of the story of the first-grade teacher who was reading the story of Chicken Little to her class. She comes to the part of the story where Chicken Little approaches the farmer and says to him, “The sky is falling, the sky is falling!” The teacher then asks her students, “And what do you think the farmer said next?”

One little girl in the front row of the class raises her hand and answers, “I suppose he said, ‘Holy cow! It’s a talking chicken!’”

In today’s political environment, it’s hard sometimes not to feel like that talking chicken when we bring up the important issues of energy and climate change. Sometimes it seems that no one really wants to pay attention to what we’re saying. It’s hard to get past the posturing and the politics to a place where there’s a possibility of real attention to these issues and real action.

Well, I am here to tell you this morning that we have to get to that place where people pay attention to us … and we have to get there as soon as possible. Spurring low-carbon innovation must be a national priority and I want to use my remarks to set the stage for the three excellent panels that will follow, dealing with the respective roles of business and government in this work.

Most of what we hear in Washington these days about public-private collaboration to advance low-carbon technologies revolves around a single example where things did not turn out well. I’m speaking, of course, of Solyndra. But whatever the truth ultimately proves to be —whether Solyndra is a case of undue political influence, or simply a casualty of a market shakeout — this one, overblown example hardly tells the full story. As we will hear in the course of the morning, both government and business have vital roles to play at every stage on the path to commercialization. And to ignore or undermine the role played by government is to risk losing the fight against climate change and our competitive positioning in the growing clean energy market.

It’s important to remember first and foremost what this work is about: it is about addressing two of the most important challenges facing our country and the world in the years ahead — the twin challenges of energy and climate change. And, even if you are an ardent skeptic of the science of climate change or of our ability to reduce emissions to a level where we can actually have a discernible impact on global temperature trends, the case for addressing our energy challenges should be motivation enough. 

Innovation in low-carbon technologies isn’t crucial solely because it will reduce greenhouse gas emissions, as important as that is. It is also crucial because it will reduce our dependence on fossil fuels, contribute to our energy security and our national security, and drive economic growth and U.S. competitiveness in the years ahead.  

When we do a full accounting of the environmental and the economic and national security costs of our energy status quo in this country, we see that the old ways of doing things just aren’t sustainable. So what’s the solution? 

Well, in the short term, there are steps we can take right now to conserve energy, switch to low-carbon fuels and deploy more efficient technologies. But over the long term, achieving change on the scale that is needed will require new technologies. And we need to seed the technologies of tomorrow by investing right now in low-carbon innovation. 

This is not just a necessity; it is also a huge opportunity. Business leaders from Bill Gates to Jeff Immelt to Andrew Liveris agree that energy innovation is the next great global industry. With world energy consumption expected to grow by 40 percent in the next two decades alone, this is a growth opportunity that could rival what we’ve seen in recent decades with the growth of computing and the Internet.

But our research at C2ES shows that innovation in the energy industry doesn’t come easy. It takes time and one of the keys to success is making sure you have the right industries and the right partners working together. 

Our research also shows that forward-thinking companies, including some of the companies you will hear from today, are developing innovative technologies that could be part of the long-term solution to our energy and climate challenges. Last October, we released a report called The Business of Innovating: Bringing Low-Carbon Solutions to Market, which was developed with members of the our Business Environmental Leadership Council (BELC) and included a survey of leading companies, a series of BELC workshops, and in-depth case studies of eight low-carbon innovation projects from four multinational companies. Here were some of the key findings:

  • First, companies emphasized the importance of business leaders or internal champions highlighting the strong contribution that low-carbon innovation can make to the bottom line and to future growth.
  • Second, business executives stressed that reductions in carbon emissions alone will not make low-carbon innovations successful in the marketplace; the innovations must also bring bottom-line value in terms of total cost reduction, enhanced performance, or competitive edge.
  • And third, the report notes the importance of balancing long-term vision and short-term profitability. Companies that are able to successfully commercialize low-carbon innovations have a constant focus on core competencies and customer needs today, while also studying the changing technical, market, and policy landscape of the future. 

The report also laid out the huge opportunities that are out there for businesses that embrace low-carbon innovation. By 2020, total investment in clean energy alone — that includes everything from renewable power to technologies that improve energy efficiency, such as the smart grid — is expected to reach $2.3 trillion. For the United States to sit back and allow other nations to assume a leadership role in meeting these needs would be, frankly, irresponsible.

Business is innovating, as we found in our report. But business cannot do this work alone. Our research confirmed that there are considerable barriers standing in the way of individual companies and industries as they try to move low-carbon solutions from the laboratory to full-scale commercialization. 

Among the companies we studied, one of the biggest of these barriers is what we refer to as “policy uncertainty.” Climate policy is on the back burner, as all of us know very well, and the nation’s elected leaders also can’t seem to come to agreement on a comprehensive energy policy. The result is that companies are left to guess for themselves what type of policy environment they will be operating in five or ten years from now. The current state of affairs makes it a huge challenge for business to make strategic bets on what energy products and services to bring to market.

I will say it again: Business and government each play critical roles in the innovation process. And if we want to develop the low-carbon technologies that will help us protect our environment, our energy security and our economy in the years to come, government needs to be a part of the solution.

And so in today’s panels we are looking at three of the ways in which government plays a vital role alongside business in advancing low-carbon innovation in this country. 

First … government must continue to support basic research, development, and demonstration. We need to keep evaluating and investing in the next generation of low-carbon energy technologies. Tools we rely on everyday — from the Internet to GPS — came out of research supported by the Department of Defense. 

Some of the breakthrough technologies enabling the natural gas boom in the United States were made possible by investments in research, development and demonstration from the Department of Energy and national labs.  It is estimated that U.S. shale gas can now meet our domestic gas needs for the next 100 years — that’s a pretty good return on our taxpayer investments. 

In 2007, Congress created ARPA-E — the Advanced Research Projects Agency for Energy — to help support the development of breakthrough energy technologies. It’s absolutely vital that government continue to invest in these types of efforts. 

The second role of government that we will explore today is government procurement. Through its purchasing power, the government can help create a market for innovative technologies. The government’s operational needs provide a large, early market for scaling up newly commercialized low-carbon technologies, which can then be adopted for private-sector use as well. For instance, the Department of Defense is the single largest consumer of energy in the country, and is very quickly realizing how improved energy technologies can save taxpayers millions. Military bases are becoming important markets for energy efficiency and renewable energy technologies. Other federal and state agencies also are adopting low-carbon technologies that can ease tight budgets by reducing energy expenses. Government procurement can quickly move technologies up the learning curve and down the cost curve, helping these innovations become competitive in the broader marketplace.

And last but not least, we will have a panel today discussing the role of government standards and incentives in driving mass deployment. Time and time again, such public policies have driven the adoption of innovative technologies across the economy. Government plays a critical role as “standards-setter” for industries. Federal and state standards create incentives for companies to make long-term investments in innovation, and create demand for the resulting products.  

A particularly strong example is the recent steps by the Obama Administration to significantly increase fuel economy and greenhouse gas standards for vehicles. In February, U.S. auto sales reached their highest level in four years, and the Big Three automakers all cite higher sales of smaller, fuel-efficient vehicles as a contributing factor. Two years ago, the Smart Car was the only conventional car available in the U.S. with a fuel economy rating of 40 miles a gallon or better. Today there are nine. The EPA estimates that the new standards will save the average driver $8,000 over the lifetime of a vehicle and reduce oil consumption by over 2 million barrels a day.

So those are three roles we will be exploring today as we talk about how government can help drive low-carbon innovation. Government as supporter of research, development and demonstration. Government as purchaser and market-creator. And government as a standard-setter driving mass deployment. It promises to be a very interesting and provocative morning, even though we don’t have any talking chickens on the agenda.  

Thank you very much. 

 

Advanced Research Projects Agency - Energy (ARPA-E): Innovation through the U.S. Department of Energy

Advanced Research Projects Agency - Energy (ARPA-E): Innovation through the U.S. Department of Energy

April 2012

Download the full brief (PDF)


Summary

Creating a low-carbon future for the United States requires innovative clean energy technologies that are cost-effective compared to the fossil fuels the country has long relied on. The U.S. Department of Energy’s Advanced Research Projects Agency – Energy (ARPA-E) was established in 2007 to help achieve this goal by supporting the research, development and demonstration of potential breakthrough technologies.

ARPA-E received $858.8 million in federal funding through early 2012, and supported 180 technology projects with $521.7 million of awards. Projects ranged from enhancing wind turbine designs to creating underground energy storage and improving carbon capture and storage technologies. Beyond direct support, ARPA-E awards have helped companies leverage more than $200 million in additional private investment. This brief provides an overview of ARPA-E and highlights of supported projects.

 

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Low-Carbon Innovation Forum

Promoted in Energy Efficiency section: 
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Watch the videos of the low-carbon innovation forum.

Low-Carbon Innovation Forum

Tuesday, April 24, 2012
8:45 am - 12:00 pm 
7th Floor Knight Conference Center at the Newseum 
555 Pennsylvania Ave., N.W., Washington, DC
 

Innovating the next generation of low-carbon technologies is essential for combating climate change. It is also an enormous economic opportunity, especially for early market leaders. The troubles encountered by clean tech ventures such as Solyndra have sparked debate in Washington over government’s role in advancing low-carbon technologies. This Forum brings together representatives of industry and government to explore the vital roles played by each along the path to commercialization – from development and demonstration to scale-up, then mass deployment – and how to ensure U.S. success in the growing low-carbon market. Topics will include collaborative R&D in electric power, the military’s role in driving energy efficiency, and how tougher fuel economy standards have helped revitalize the U.S. auto industry.


Keynote Remarks


 

Teaming Up on R&D

  • Dr. Cheryl Martin, Deputy Director for Commercialization, ARPA-E
  • David Mohler, Chief Technology Officer, Duke Energy
  • Revis James, Director, Energy Technology Assessment Center, EPRI


 

The Power of Procurement

  • Dr. Dorothy Robyn, Deputy Undersecretary for Installations & Environment, 
    U.S. Department of Defense
  • Mark Wagner, Vice President, Government Relations, Johnson Controls Inc.
  • John Sindelar, Client Industry Executive, HP Enterprise Service


 

Driving Mass Deployment

  • Ronald Medford, Deputy Administrator, NHTSA
  • Mike Robinson, Vice President, Sustainability and Global Regulatory Affairs, 
    General Motors
  • Brad Markell, International Representative, United Auto Workers

 

Listen to a podcast of C2ES President Eileen Claussen discussing the roles business and government play in advancing low-carbon innovation.

Follow the event on Twitter using #BizInnovate

March 2012 Newsletter

Click here to view our March 2012 newsletter.

Learn about new EPA power plant rules, an action plan to get more electric vehicles on the road, recommendations from the National Enhanced Oil Recovery Intiative to boost domestic oil production while cutting CO2 emissions from power plants, and more in C2ES's March 2012 newsletter.

Bloomberg Editors Endorse NEORI Recommendation

March 27, 2012
Bloomberg Editorial

In a March 27 editorial, Bloomberg editors addressed how the U.S. can learn from China's push for capturing carbon and highlighted the work of the National Enhanced Oil Recovery Initiative (NEORI), a group of industry, state, environmental and labor leaders convened by C2ES and the Great Plains Institute. In the piece, Bloomberg endorses NEORI’s recommendation that Congress create a production tax credit for power companies that capture CO2 and send it to oil companies for enhanced oil recovery. Below is an excerpt from the editorial.

The federal government, too, could help push the technology forward, by taking up a smart strategy that has been suggested by a coalition of oil industry executives, environmentalists and state officials called the National Enhanced Oil Recovery Initiative. It has to do with the other side of the carbon- capture equation -- what to do with the CO2 once you’ve taken it out of the power-plant exhaust.

China’s Huaneng plant sells its carbon dioxide to companies that make carbonated drinks and dry ice. Duke envisions turning it into solid carbonate to be used for building materials or road construction. Some innovators are feeding CO2 to microscopic algae to produce either fuel or proteins used in nutrition supplements or animal feed.

But it can also be used to coax more oil out of the earth. Since 1972, oil companies have injected carbon dioxide taken from natural sources to free up crude trapped in rock formations. The industry operates 3,900 miles of pipelines carrying 65 million tons of CO2 per year, and “enhanced oil recovery,” as the technique is known, accounts for 6 percent of U.S. oil production.

With new technology and enough CO2, the industry could use enhanced recovery to increase production by 67 billion to 137 billion barrels, according to a report from the National Enhanced Oil Recovery Initiative. The report envisions using 20 billion to 45 billion metric tons of CO2 from carbon capture -- the total amount expected to be produced by power plants for the next 10 to 20 years.

We endorse the coalition’s recommendation that Congress create a production tax credit for power companies that capture CO2 and send it to oil companies for enhanced recovery. By increasing domestic oil production, such a credit is estimated to be able to pay for itself within a decade.

Click here to read the full editorial

 

Capturing CO2 Emissions to Produce Domestic Oil: NEORI and CO2-EOR’s Unique Solution

Bloomberg editors endorse NEORI's production tax credit recommendations

Few policy options can be a win-win for both political parties, as well as industry, environmental advocates, and labor. Similarly, increasing oil production and decreasing carbon emissions are thought of as conflicting goals. Yet, a solution may be on the horizon. On February 28, the National Enhanced Oil Recovery Initiative (NEORI) released its recommendations for advancing enhanced oil recovery with carbon dioxide (CO2-EOR). NEORI is a broad coalition of industry, state officials, labor, and environmental advocates

While NEORI participants might not agree on many energy and environmental issues, each participant recognizes the vast potential of CO2-EOR and worked toward producing a set of policy recommendations for its expansion. CO2-EOR already produces 6 percent of U.S. oil, and it could potentially double or triple existing U.S. oil reserves. In comparison to other options, CO2-EOR offers an extraordinarily large potential expansion of domestic oil production, while also advancing an important environmental technology.

Judi Greenwald Discusses Enhanced Oil Recovery on E&E TV

Watch the interview

March 6, 2012

Is enhanced oil recovery (EOR) the missing link in the United States' energy policy? During today's OnPoint, Judi Greenwald, vice president for technology and innovation at the Center for Climate and Energy Solutions and Robert Baugh, executive director of the AFL-CIO Industrial Union Council, outline the recommendations of the National Enhanced Oil Recovery Institute, a coalition of business and environmental groups. Greenwald and Baugh call on Congress to pass an enhanced oil recovery tax credit to spur innovation and growth in carbon capture and storage. They also address the environmental concerns associated with EOR. Click here to watch the interview.

 
Click here for additional information about the National Enhanced Oil Recovery Institute.

PEV Dialogue Group

The Center for Climate and Energy Solutions convened the PEV Dialogue Group. The original group assembled the Action Plan collaboratively. Each group member participated by providing valuable input that was instrumental in shaping the Action Plan. The Plan’s recommendations reflect the input from the group as a whole, not necessarily those of individual organizations.

Since publishing the Action Plan, the group has expanded to include other partners that are active in the electric vehicle market. The group continues their collaboration in through the PEV Dialogue Initiative, focusing on implementation of the Action Plan.

  • A123 Systems
  • AASHTO
  • Argonne National Laboratory
  • Alliance of Automobile Manufacturers
  • Center for Climate and Energy Solutions
  • ChargePoint
  • City of Raleigh
  • Daimler
  • U.S. Department of Energy
  • Edison Electric Institute (EEI)
  • Electric Drive Transportation Association (EDTA)
  • Electrification Coalition
  • Electric Power Research Institute (EPRI)
  • General Electric
  • General Motors
  • Georgetown Climate Center
  • Indiana Utility Regulatory Commission*
  • Johnson Controls Inc.
  • Metropolitan Washington Council of Governments
  • Michigan Public Service Commission*
  • North Carolina Department of Transportation
  • Northeast Utilities System
  • Natural Resources Defense Council (NRDC)
  • NRG Energy
  • PJM Interconnection
  • Rockefeller Brothers Fund
  • Rocky Mountain Institute
  • Southern California Edison
  • U.S. Department of Transportation
  • Union of Concerned Scientists
  • University of Delaware
  • Washington State Department of Transportation
  • World Wildlife Fund (WWF)

  *The role of these group members must be limited to technical contribution because of their organizational function.

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."

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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