Carbon capture advocates are objecting to an EPA proposal to scrap a greenhouse gas reporting requirement for dozens of industrial sectors, arguing that energy tax credits would be negatively affected.
“The potential wholesale rescission of the [Greenhouse Gas Reporting Program (GHGRP)] threatens to destabilize the fuels market, disrupt ongoing and planned projects, and ultimately undercut the significant investments that are helping to revive America's energy dominance,” Wayne Garrett, general manager of Chief Ethanol Fuels in Hastings, Nebraska, said in comments submitted to the agency.
EPA’s September proposal would eliminate reporting requirements for 46 industrial sources of greenhouse gases, including carbon capture, storage and utilization (CCUS), ammonia and lime manufacturing and phosphoric acid production.
The agency said in the proposal there is no statutory requirement to collect GHG emissions information for sectors other than the petroleum and natural gas source category, which are subject to the Waste Emissions Charge in the 2022 Inflation Reduction Act. That law imposed an annual charge on methane emissions from large emitters in the oil and natural gas sector, but delayed implementation until 2034.
EPA specifically asked for comments on the elimination of reporting requirements for four categories: suppliers of carbon dioxide, geologic sequestration of carbon dioxide, injection of carbon dioxide and geologic sequestration of carbon dioxide with enhanced oil recovery.
But ethanol producers say if finalized, the proposal could wreak havoc with carbon capture projects that can significantly lower ethanol's carbon intensity. Also, it would be more difficult to make use of the $85-per-ton 45Q tax credit in the IRA for permanently stored CO2.
Wayne Garrett (RFA photo)If the reporting program is repealed, "most investors and lenders would cease deploying capital into new CCUS projects until a replacement reporting mechanism is established,” American Carbon Alliance CEO Tom Buis said in comments. “Without certainty on how to measure, report, and verify emissions reductions under section 45Q, the CCUS industry will be paralyzed, jeopardizing the administration’s energy dominance priorities.”
Many companies involved in CCUS that are seeking the sequestration tax credit under 45Q, in addition to those pursuing the clean hydrogen production tax credit under section 45V, “currently rely heavily on the GHGRP's reporting mechanisms to provide verifiable evidence of the amount of CO2 they have successfully sequestered or prevented from being emitted through their projects,” Buis said.
Summit Carbon Solutions, which has been struggling for years to persuade landowners to allow use of their land for a planned 2,500-mile carbon dioxide pipeline, is an ACA member. The company’s efforts have stalled, in large part because South Dakota approved a law prohibiting use of eminent domain for carbon dioxide pipelines.
Chief Ethanol Fuels' Garrett said use of Section 45Z, a tax credit for low-carbon transportation fuels, also could be imperiled.
The Treasury Department and IRS haven't finalized rules clarifying the 45Z requirements for monitoring, reporting and verifying CI reductions attributable to carbon capture and sequestration, he said. However, "we believe it is likely the agencies will adopt an approach that is similar to the approach required for both 45Q and the section 45V clean hydrogen production tax credit (i.e., in cases where CCS is employed by the clean hydrogen producer)."
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The GHGRP “is a well-established and accepted reporting mechanism within the carbon management industry that, if eliminated, would leave taxpayers unable to claim 45Q,” Christian Flinn, public policy manager at the Carbon Capture Coalition, said at a public hearing last month.
Flinn cited 19 “commercial-scale facilities with the capacity to capture more than 21 million metric tons of CO2 per year” and said 45Q “has spurred over $77 billion in investments across announced and operating projects.”
Savings from elimination of requirement questioned
EPA said eliminating the reporting requirements would save industries $303 million per year through 2033. But commenters who objected to the proposal said those savings aren’t substantial, given that more than 8,000 facilities participate in the program.
The law firm White & Case said compliance costs are about $50 million for industries other than petroleum and natural gas. “When that figure is spread across all of the companies required to report, the total annual cost of the program appears to be fairly modest for most of the regulated industries,” the firm’s analysis says.
In addition, Flinn said EPA’s own estimate shows that compliance costs are “negligible compared to the scale of industry investment.”
“It is already standard practice for facilities that capture, sell, and store CO2 to measure the volume of CO2 in question thanks to widely available, cost-effective equipment installed at these facilities,” he said. “Therefore, for large and small companies engaged in the CO2 supply chain, reporting this information requires minimal additional effort.”
In addition to the carbon capture implications, the proposal has fertilizer manufacturers concerned.
Some members of The Fertilizer Institute take advantage of both 45Q and 45V tax credits; the latter apply to hydrogen. “Without an adequate replacement methodology in place by Treasury/IRS to meet its statutory obligations, The group's members may be unable to demonstrate the ability to qualify for these tax credits,” Tom Lynch, TFI senior vice president of government affairs, said in comments.
Tom Lynch (TFI photo)TFI recommended EPA keep some of the industrial sources in the reporting program on a voluntary basis for at least a year to allow the Treasury Department and Internal Revenue Service to put an alternative reporting system in place.
“A short-term voluntary GHGRP would provide near-term certainty to operators of active projects seeking to claim credits, allow industry time to agree upon a suitable replacement methodology and give Treasury/IRS further time to develop effective guidance replacing the GHGRP for future tax years,” Lynch said in comments.
TFI also encouraged EPA to work with the Commerce Department, U.S. Trade Representative, Treasury and industry “to ensure that a framework is provided to support the export of low-carbon products. Currently, the GHGRP – and the U.S. Department of Energy’s Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model on which it relies – “aids in the ability of U.S. exports of energy and other low-carbon manufacturing exports to key allies by providing a well-respected path for exporters to document emissions.”
The North Dakota Ethanol Producers Association also strongly opposes getting rid of the GHGRP for carbon capture.
“The proposed changes would create significant uncertainty for ongoing and future carbon capture and storage (CCS) projects that are essential to the ethanol industry’s success and to advance national decarbonization goals,” the group said in a letter. Signatories include association officers from Guardian Energy Hankinson, Harvestone Low Carbon Partners, Tharaldson Ethanol Plant, Gevo North Dakota and BI Biorefinery.
The repository for the carbon dioxide from Summit’s proposed pipeline, which has 57 ethanol plants signed up, is in North Dakota.
“Repealing these requirements would invalidate approved [monitoring, reporting and verification] plans, discourage new investment, and diminish ethanol’s role as a low-carbon, homegrown fuel under the Renewable Fuel Standard and emerging clean fuel markets,” they said.
Chief Ethanol Fuels' Garrett said, "the lower CI resulting from CCS helps ethanol remain highly competitive in U.S. and global markets where carbon reduction is required or rewarded, often opening significant new revenue streams for ethanol producers." He urged EPA to retain a voluntary reporting program.
