Congress Extends Carbon-Capture Incentives

WASHINGTON – — While renewable energy is seeing significant growth across the country and around the world, supporters of coal are still finding backers in Congress who included key support for the troubled industry in the federal government’s year-end spending plan.

In legislation that brought together economic stimulus programs along with continued funding of the federal government, Congress included several provisions that would advance so-called carbon capture, utilization and storage (CCUS) technology, which offers the potential to use coal for electricity production while significantly reducing carbon emissions.

Specifically, the legislation extends and expands key tax credits for CCUS technology that can help fund the nascent technology as researchers, utilities and other energy concerns continue developing it for wide-scale commercial use. Since the legislation passed, the Internal Revenue Service announced rules for taking advantage of the credit.

“Carbon capture is the future of reliable, low emissions energy, and North Dakota is a national leader in the development and use of this technology. With the administration’s long-awaited guidance finalized, investors can now take advantage of the carbon capture tax credit with confidence and clarity,” said U.S. Sen. Kevin Cramer (R-N.D.)

Environmental groups are split on whether to back carbon capture. For example, the National Resources Defense Council ultimately decided not to support the legislation in Congress, arguing that while it supported capturing carbon and storing it, by allowing captured carbon dioxide to be used for oil recovery methods would promote continued use of fossil fuels. 

But carbon capture technology has received the backing of the BlueGreen Alliance, which brings together labor unions and environmental groups. The alliance cited CCUS as one of the technologies the country should pursue as it attempts to eliminate carbon dioxide emissions by 2050.

And fossil fuel industry supporters hail the legislation as critical for preservation of the coal industry.

“The 2020 omnibus spending package includes vitally important provisions that mark a critical next step toward a federal policy framework for economy-wide deployment of carbon capture and removal to put our nation on the path to achieving net-zero emissions to meet mid-century climate goals, while preserving and creating high-wage domestic energy, industrial and manufacturing jobs,” said Carbon Capture Coalition Director Brad Crabtree.

Carbon capture, utilization and storage is technology that captures the carbon dioxide released from the combustion of fossil fuels at power plants and either reuses it, or safely stores it, usually deep underground in geological formations, according to the U.S. Energy Department. The department has consistently invested in CCUS technology, as its Office of Fossil Energy has funded a carbon storage program since 1997. 

One common use for captured carbon dioxide is for enhanced oil recovery, where the gas is used to help extract hard-to-capture oil in rock formations. The U.S. Chamber of Commerce’s Institute for 21st Century Energy estimated that 6% of oil recovered from U.S. fields comes from carbon dioxide powered oil recovery methods. 

Most recently, the department announced $72 million in research and development for CCUS technology, which follows  $11.5 million in grants for its Flexible Carbon Capture and Storage program awarded in June. It awarded $110 million in research funding in 2019.

North Dakota seeks to be the epicenter of carbon capture technology, as the Minnkota Power Cooperative, along with the University of North Dakota’s Energy and Environmental Research Center, is building what it claims is the world’s largest carbon capture facility. Located at its Milton R. Young Station near Center, N.D., Project Tundra is expected to capture more than 90% of carbon dioxide from one of the plant’s generators before storing it nearly a mile underground.

“This tax credit is an important part of our efforts to support the development of CCUS technologies, like Project Tundra, enabling our nation to continue utilizing its abundant coal reserves while also reducing emissions. That’s a win for our economy, environmental stewardship and America’s energy security.” said U.S. Sen. John Hoeven (R-N.D.) 

With both policy and consumer sentiments focused on renewable energy, the coal industry has felt the brunt of the energy transition, as utilities have been shutting down coal-fired power plants to reduce carbon emissions, resulting in thousands of lost jobs for coal miners. (The latest figures from the U.S. Bureau of Labor Statistics show coal mining employment at the end of 2020 stood at 44,000, down about 7,000 from a year earlier.)

Advocates of the coal industry have touted CCUS as a means to help preserve the fossil fuel’s prominent use as a fuel in the nation’s electrical grid. Since coal has the highest levels of emissions for any fossil fuel, advocates view carbon capture as a critical technology to keep coal relevant while governments seek emission reductions to meet climate change targets.

While the developers behind Project Tundra seek to begin construction in 2022, a similar project is struggling with the economic realities of a “post-carbon” energy economy. 

NRG Energy’s Petra Nova project captures carbon dioxide emissions from a coal-fired power plant in Thompsons, Texas, with the purpose of using the captured cas to extract oil from nearby fields. However, backers of the project were relying on increased oil and gas production to help pay for its $1 billion price tag. But as oil and gas prices dropped with decreasing demand, the project became uneconomical to consistently operate, reports the Energy and Policy Institute.

“As the only coal carbon capture project in the U.S. and the largest post-combustion carbon capture project in the world, the failure of the Petra Nova project represents a major setback for proponents of coal carbon capture projects,” the institute’s report said.

Other energy industry analysts have raised questions about the viability of Project Tundra, arguing that the costs are too great, with too few benefits for ratepayers. 

“Adding carbon capture to the plant is only going to raise its costs, and ratepayers and customers are likely to end up stuck with the bill for the whole risky venture,” said David Schlissel, the Institute of Energy Economics and Financial Analysis’ director of resource planning analysis.

(Edited by Matthew B. Hall and Bryan Wilkes)