Overview of the Expanding Carbon Capture through Enhanced Oil Recovery Act of 2014

Introduced on May 5, 2014, the Expanding Carbon Capture Act through Enhanced Oil Recovery Act of 2014 (S. 2288) expands and reforms the existing Section 45Q Tax Credit for Carbon Sequestration. The bill adopts several aspects of the National Enhanced Oil Recovery Initiative’s (NEORI) consensus recommendations for advancing carbon dioxide enhanced oil recovery (CO2-EOR) in the United States.

A decades-old, proven commercial practice, CO2-EOR involves injecting CO2 into already developed oil fields to coax additional production. According to the National Energy Technology Laboratory (NETL), increasing the supply of CO2 captured from man-made sources has the potential to increase American oil production by tens of billions of barrels, while safely storing billions of tons of CO2 underground.

Expanding the 45Q tax credit

The growth of the CO2-EOR industry depends upon capturing substantially more CO2 from man-made sources.  Authorized to only provide tax credits for 75 million tonnes of CO2, the existing 45Q program is insufficient to take advantage of CO2-EOR’s potential. Already, 21 million tax credits have been claimed, and the remaining pool of tax credits likely will be exhausted in the next several years.

A 45Q expansion will enable the development of numerous CO2 capture projects and supply the EOR industry with necessary CO2. New 45Q tax credits will be awarded:

  •  Via competitive bidding: a CO2 capture project developer will bid for a certain level of credit; the lowest bid will win. Bids reflect the difference between the cost to capture and transport CO2 and revenue from selling the CO2 for use in EOR; and
  •  Through separate tranches: to ensure that credits are available for the range of potential man-made sources of CO2. There will be separate tranches for electric power, lower-cost industrial, and higher-cost industrial projects.

Reforming the 45Q tax credit

To increase certainty for CO2 capture project developers, the bill also will introduce certain reforms for allocating new 45Q credits. A certification process will allow CO2 capture projects to reserve newly-allocated 45Q tax credits and ensure that projects move forward toward construction and completion in a timely manner. Reserving 45Q tax credits for future use will help CO2 capture projects in obtaining private sector investment.

Additional reforms include scheduling periodic reviews of the 45Q program and providing authority to the Secretary of the Treasury to ensure that new tax credits will be revenue positive to the federal government over time.

According to NEORI’s analysis, new 45Q credits allocated over ten years would generate more than 8 billion barrels of oil, while storing 4 billion tonnes of CO2 underground over 40 years.


NEORI is a broad coalition of companies, environmental groups, labor unions, and state officials (list of NEORI participants) formed to help realize CO2-EOR’s full potential as a national energy security, economic, and environmental strategy.