When Congress negotiated the reconciliation bill and debated ways to cut federal spending, it ignored a government giveaway that costs taxpayers hundreds of billions of dollars, endangers rural communities, and is ripe for – and plagued with – fraud, waste, and abuse. Called the 45Q tax credit, it funds carbon capture and sequestration projects. Eliminating it could have saved taxpayers as much as $835 billion – the current projected cost of the tax program over the next 19 years, based on the already-proposed projects it would fund.
Eliminating it could also prevent disasters from happening in rural communities across the West and Midwest, where the development of pipelines and other infrastructure for carbon transport and sequestration are most likely to occur or have already been proposed. These projects heap all of the risks on our communities, but all of the profit goes to the few companies that take advantage of the tax credit. That’s why your District 9 Representatives joined with more than 100 other elected officials in Colorado, Indiana, Iowa, Montana, New Mexico, North Dakota, South Dakota, and Wyoming in a letter to our U.S. Congressman, including Senator Thune, Senator Rounds and Congressman Johnson, calling on U.S. members to eliminate 45Q, or, at the very least, address the fraud, waste, and abuse it invites. It also asked Congress to keep federal permitting out of the reconciliation bill.
Established by Congress in 2008, the 45Q tax credit program pays companies to capture carbon dioxide from ethanol, natural gas, and other plants and transport it to where it can be injected into the ground for sequestration or used for enhanced oil recovery (EOR), a process for extracting the last bit of oil from a reserve. It entails transporting CO2 across vast distances – such as ethanol plants in Iowa to North Dakota and other places where the geological formation allows for sequestration or where it can be used for EOR.
An earlier House draft of the budget reconciliation bill contained a provision that would have allowed the federal government to preempt state and local pipeline permitting laws and ordinances, but was later taken out. Our letter to Congress urged them to keep the language out in order for local officials to maintain control over regulatory and permitting decisions that keep their communities safe from the kind of disasters that have already occurred when CO2 pipelines rupture and carbon dioxide is released in the atmosphere.
That happened in Satartia, Mississippi in 2020. As NPR reported at the time, “More than 200 people evacuated and at least 45 people were hospitalized. Cars stopped working, hobbling emergency response. People lay on the ground, shaking and unable to breathe. First responders didn’t know what was going on.”
The only reason that companies even consider engaging in such an expensive and potentially disastrous practice as carbon capture and sequestration is because of the exorbitant payoff they receive through the 45Q tax credit program. Without it, there would be no financial incentive.
Before The Big Beautiful Bill was signed, companies received $85 per metric ton for sequestration and $60 per metric ton for Enhanced Oil Recovery (EOR). Now a provision in the current reconciliation bill raised that amount to $85 per metric ton for EOR, enabling them to make staggering profits. As an example, ExxonMobil has proposed a 45Q financed project that would transport CO2 from somewhere in Wyoming (the company won’t disclose where) to southeastern Montana, where the company plans to sequester 150 million tons of carbon dioxide in the ground over the life of this project. If that occurs, the government may pay the corporation as much as $13 billion.
But the public will never know how much tax credit ExxonMobil claims because all tax returns are confidential. Moreover, companies are allowed to self-report the amount of CO2 they sequester or use for oil recovery. The government does not have meters in place at any point of capture, pipeline transport, sequestration, or EOR that keep track. The absence of transparency around 45Q has already enabled massive fraud. In 2020, a Treasury Department inspector general found that 10 taxpayers claimed over $1 billion in 45Q tax credits from 2010 to 2019, roughly 99% of total credits claimed. Credits worth $894 million of that amount did not comply with Environmental Protection Agency’s requirements for reporting on sequestered carbon..
45Q is, if anything, a monstrous scam, and it’s allowing the likes of ExxonMobile and other Fortune 500 companies to fleece American taxpayers and imperil rural communities throughout the U.S. We are not locked into the carbon capture industry. By addressing the wasteful 45Q tax credit, Congress could have created space for newer, safer, and more cost-effective technologies to develop and emerge.
We are disappointed that Congress did not take action and stand for the American people.
Respectfully submitted,
District 9 Representatives,
Senator Joy Hohn
Representative Tesa Schwans
Representative Bethany Soye
