More than 125 groups call on Congress to end carbon sequestration tax credits

Environmental and advocacy groups from across the country sent a letter to members of Congress asking for an end to 45Q tax credits which they argue are wasteful and make taxpayers foot the bill for the “extraction of uneconomic oil.” 

Companies that facilitate the sequestration of carbon dioxide are eligible for 45Q tax credits, which were created with the intent to help reduce carbon dioxide emissions in the atmosphere. 

Companies can also qualify for the credits if the carbon dioxide is used for enhanced oil recovery — a process where the captured CO2 is pumped strategically into the ground near oil wells to help boost the productivity of the wells. 

The letter, which was signed by more than 125 environmental and anti-oil groups, said funding enhanced oil recovery through the 45Q tax credit is “fiscally irresponsible and fundamentally at odds with the public interest.” 

“Not only do these subsidies support uneconomic oil and gas extraction, but they will also perpetuate dangerous pipelines and injection wells that exist within a regulatory regime that is demonstrably incapable of ensuring public safety or fiscal accountability,” the letter read. 

Proponents of a carbon sequestration pipeline that would stretch through Iowa and parts of Nebraska, Minnesota and potentially into North Dakota and South Dakota, have said access to enhanced oil recovery would provide an additional market for CO2 captured in these states. 

The proposed Summit Carbon Solutions pipeline would connect to biofuel refineries across Iowa and transport carbon dioxide from the plants to a sequestration site. By capturing and storing the carbon dioxide that would otherwise be released into the atmosphere, ethanol and biofuel producers could enter the growing ultra-low carbon fuel industry, which they say would in turn boost the agricultural economy.

While other carbon sequestration pipelines are up in running, such as the Tallgrass pipeline in Nebraska, the Summit pipeline has been the subject of political controversy, especially in Iowa, South Dakota and North Dakota.

Bold Alliance and Sierra Club, groups that have opposed the Summit Carbon Solutions pipeline project, were original signatories on the letter opposing 45Q. 

Paul Blackburn, an attorney and energy policy advisor at Bold Alliance, said in a news release that capturing carbon dioxide for either enhanced oil recovery or to stop climate change is a form of “political scheming to make the rich richer.” 

“We need real solutions to the challenges faced by everyday Americans — not handouts of taxpayer dollars to oil oligarchs,” Blackburn said in a news release. 

The letter cites U.S. Department of the Treasury data, that estimates tax expenditures of 45Q will total more than $43.6 billion from 2024-2034. 

“This level of public spending represents a massive transfer of taxpayer dollars to oil and gas companies at a time when families are already struggling with rising costs,” the letter reads. 

Jim Walsh, the policy director at Food & Water Watch, an environmental group that also signed on to the letter, said the letter shows a “growing, nationwide opposition” to the use of taxpayer dollars to “bankroll” oil companies. 

“At a time when families are feeling squeezed, Congress shouldn’t be writing blank checks to corporate polluters who are poisoning our water, pushing dangerous infrastructure onto communities, and destroying our climate,” Walsh said in a news release. 

The letter also holds that the 45Q program has “weak” oversight by federal agencies. 

Signatories on the letter ask Congress to “eliminate” the enhanced oil recovery portion of the 45Q tax credit and argue doing so is “necessary” to protect taxpayers, safeguard communities and restore integrity to federal energy and tax policy.