Angela C. Jones wrote this CRS Report (13 April 2021):'Reporting Carbon Dioxide Injection and Storage: Federal Authorities and Programs' .
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Summary
Carbon capture and storage (CCS) of carbon dioxide (CO2) emissions is a suite of processes and technologies viewed by some stakeholders as essential for mitigating anthropogenic CO2 emissions into the atmosphere. Others have raised concerns about CCS technical efficacy and cost-effectiveness. As the application and deployment of these systems evolve, reliable monitoring, measurement, and reporting of carbon dioxide injection and storage could contribute to the assessment of CCS’s role in mitigating GHG emissions.
Under Clean Air Act (CAA) authorities, the U.S. Environmental Protection Agency (EPA) has promulgated regulations for mandatory reporting of greenhouse gases (GHGs) and administers the Greenhouse Gas Reporting Program (GHGRP). GHGRP regulations require reporting of GHG emissions from large sources of GHGs and certain other facilities, but do not limit GHG emissions. EPA has established 46 GHG source categories subject to the regulations, with nearly 8,000 facilities in the United States currently reporting GHG data. Facilities report on six GHGs, including CO2, and are required to follow source-specific requirements for measurement, reporting, and verification. In 2010, EPA issued GHGRP regulations for facilities injecting CO2 for geologic sequestration or enhanced oil recovery (EOR). Geologic sequestration is the process of storing a fluid, including condensed CO2, by injecting it deep into an underground geologic formation, where it can be permanently trapped or transformed. In some EOR operations, CO2 is injected into aging oil reservoirs to produce additional oil; most of the injected CO2 is pumped out during oil production, but a portion can be stored incidentally in the underground reservoir. Under the GHGRP regulations (40 C.F.R. Part 98, Subpart RR), facilities injecting CO2 for geologic sequestration must report the amount of CO2 injected and sequestered and other CO2 data to EPA annually and have an approved monitoring, reporting, and verification plan, among other requirements. Subpart UU of 40 C.F.R. Part 98 requires that facilities injecting CO2 for EOR, or for any purpose other than sequestration, report the amount of CO2 received on an annual basis. In general, Subpart RR requirements are more rigorous and comprehensive compared to Subpart UU requirements. For reporting years 2012-2019, five facilities have reported to EPA under Subpart RR, and 125 facilities have reported under Subpart UU.
EPA also requires certain tracking and reporting of CO2 through its underground injection control (UIC) authorities provided in the Safe Drinking Water Act (SDWA). Under SDWA, EPA has promulgated UIC regulations and established minimum federal requirements for injection wells, including wells used to inject CO2 for EOR (classified as Class II wells) and wells used to inject CO2 for geologic sequestration (Class VI wells). UIC regulations are intended to protect underground sources of drinking water from potential contamination associated with underground injection activity. UIC regulations require owners or operators of Class VI wells to report the quantity of CO2 injected for sequestration to the UIC program authority, either EPA or a state. EPA has not established comparable UIC CO2 reporting requirements for Class II wells. Most Class II wells are located in states with UIC Class II program oversight and enforcement authority (also known as primacy).
The U.S. Department of the Treasury (Treasury), through the Internal Revenue Code Section 45Q, requires taxpayers claiming the federal tax credit for carbon sequestration to calculate and report CO2 data. In the 2008 Consolidated Appropriations Act, Congress authorized the tax credit and directed Treasury to develop regulations for “secure geological storage” of CO2. For CO2 injected for geologic sequestration, taxpayers must report the amount of CO2 disposed in underground formations, measured at the source of capture. For CO2 injected for EOR, taxpayers must report the initial amount of CO2 injected, measured at the source of capture. In 2021, the Internal Revenue Service promulgated regulations establishing that to be eligible for the Section 45Q tax credit, geologic sequestration facilities must comply with all Subpart RR requirements, including requirements for measuring and verifying the amount of CO2 sequestered. EOR facilities may fulfill the requirement through compliance with either Subpart RR requirements or designated internationally adopted EOR standards.
Issues for consideration by Congress related to reporting of CO2 injection and storage include oversight of EPA’s implementation of, and the effectiveness of, GHG reporting regulations under the CAA and Treasury’s verification of Section 45Q tax credit claims. Other issues that may be of oversight or legislative interest may include whether GHGRP regulations affect the development of commercial-scale CCS projects in the United States; how generally less-stringent federal requirements for EOR facility reporting may influence future CCS project deployment; and the implications of potential increases in the number of GHGRP reporting facilities and Section 45Q tax credit claims on federal agency capacity and resources.
Cutting to the chase...
Issues for Congress
Many analysts expect CCS to expand in the United States over the next few decades, resulting in more facilities handling increasing amounts of CO2 for injection and storage. According to the Global CCS Institute, in addition to the 12 commercial CO2 injection and storage projects currently operating in the United States, 10 new projects are in the advanced development stage. Growth in the number and size of geologic sequestration and EOR projects using captured CO2 could increase attention on CO2 reporting issues, including the scope of mandatory data collection and verification of data reported.Issues for consideration by Congress related to reporting of CO2 injection and storage include oversight of EPA’s implementation of GHG reporting regulations under the CAA and oversight of both Treasury’s verification of Section 45Q tax credit claims and implementation of Section 45Q regulations. Other issues that may be of oversight or legislative interest may include whether GHGRP regulations affect the development of commercial-scale CCS projects in the United States; how generally less-stringent federal requirements for EOR facility reporting may influence future CCS project deployment; and the implications of potential increases in the number of GHGRP reporting facilities and Section 45Q tax credit claims on federal agency capacity and resources.
One issue of potential oversight interest to Congress is verification of Section 45Q tax credit claims and CO2 sequestration amounts. In recent years, some Members of Congress have raised concerns regarding potentially fraudulent Section 45Q tax credit claims. In 2021, the IRS issued Section 45Q regulations to address the issue of secure geological storage, among other requirements. Congress may consider whether the IRS has adequately addressed concerns about improper claims through its responses to Congress, Section 45Q guidance, and its new regulations on secure geological storage for purposes of Section 45Q.
Another issue that may be of oversight or legislative interest is whether GHGRP regulations affect the development of commercial-scale CCS projects in the United States. In its oversight role, Congress may consider the implications of GHGRP regulatory requirements for overall CCS project development. Some stakeholders have raised concerns regarding the mandatory requirements in GHGRP Subpart RR regulations for CO2 injection for geologic sequestration and their potential impacts on development and deployment of CCS projects in the United States. In their view, monitoring, verification, and reporting of CO2 quantities could be burdensome for the development of geologic sequestration projects and the utilization of CO2 by industry.
In its oversight role, Congress may consider how generally less-stringent federal requirements for EOR facility reporting on CO2 injection and storage may influence future CCS project deployment. Some analysts have noted that federal statutes and regulations, along with economics and technology innovation, play a role in driving industry decisions of whether to inject CO2 for EOR projects or for geologic sequestration only. Most CO2 is currently injected for oil production rather than for geologic sequestration purposes. As Section 45Q tax credits are available for both types of projects, an oversight issue for Congress is whether different, and generally less burdensome, federal requirements for CO2 reporting from EOR facilities, in combination with the tax credit, influence the development of more CO2-EOR projects compared to geologic sequestration projects.
Another potential issue for Congress in its oversight and appropriations role is the potential implications of projected increases on agency capacity and resources and the potential need for enhanced coordination between agencies and programs. EPA, in the preamble to the proposed Mandatory Subparts RR and UU, notes that “CCS is poised to play a sizable role in mitigating U.S. GHG emissions” and that many CCS-related technologies currently commercially available “will be more widely demonstrated over the next 10 to 15 years.” In addition, Treasury’s Section 45Q tax expenditure estimates, published in February 2020, are $0.6 billion over the 2019-2023 five-year period and $2.3 billion from 2020 to 2029, suggesting an increase in tax credit claims in future years. Congress may consider the effects of potential increases in reporting on EPA and IRS program responsibilities for collecting and verifying GHGRP data andSection 45Q tax claims.
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