?The $700-billion economic stabilization package?has a?tax portion?that?includes more than $17 billion in tax relief, primarily for the energy industry, reports Vinson & Elkins law firm.?
The new law extends, and in some cases modifies, many existing production and investment tax credits for renewable energy. It also creates a significant new tax credit for the use of captured industrial CO2 in enhanced oil and gas recovery that could be worth at least $750 million for various qualifying taxpayers. Geologic storage of industrial CO2 is also eligible for new credits.
The credit is equal to $10 per metric ton of CO2 used for enhanced recovery and $20 per ton used for geologic storage—in a coalbed or saline aquifer. Credit amounts are inflation-adjusted after 2009.
The law appears to require a qualifying taxpayer both to capture the CO2 and to use it (or arrange contractually for its use) for enhanced recovery or storage. That could limit the availability of the credit in cases in which the industrial producer does not also own the carbon-capture facility. However, the law also appears to give the Treasury some leeway in approving other arrangements. In addition, only fairly large-scale carbon-capture projects are eligible (those trapping at least 500,000 tons annually).
Credits are available for CO2 captured after October 3, 2008. The total volume of credits is limited to those awarded prior to the end of the year when at least 75 million tons of qualified CO2 have been stored or used for enhanced oil and gas recovery. The law does not expressly limit the overall amount of credits or the proportion of credits that may be awarded to either storage or resource-recovery projects prior to the year when the cap is reached.
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