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S. 3179 (114th): Carbon Capture Utilization and Storage Act


The text of the bill below is as of Jul 13, 2016 (Introduced). The bill was not enacted into law.


II

114th CONGRESS

2d Session

S. 3179

IN THE SENATE OF THE UNITED STATES

July 13, 2016

(for herself, Mr. Whitehouse, Mr. Tester, Mr. Schatz, Mr. Booker, and Mr. Kaine) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to improve and extend the credit for carbon dioxide sequestration.

1.

Short title

This Act may be cited as the Carbon Capture Utilization and Storage Act.

2.

Extension of enhanced carbon dioxide sequestration credit

(a)

In general

Section 45Q of the Internal Revenue Code of 1986 is amended to read as follows:

45Q.

Credit for carbon dioxide sequestration

(a)

General rule

For purposes of section 38, the carbon dioxide sequestration credit for any taxable year is an amount equal to the sum of—

(1)

$20 per metric ton of qualified carbon dioxide which is—

(A)

captured by the taxpayer using qualified carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Carbon Capture Utilization and Storage Act, and

(B)

disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (2)(B),

(2)

$10 per metric ton of qualified carbon dioxide which is—

(A)

captured by the taxpayer using qualified carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Carbon Capture Utilization and Storage Act, and

(B)
(i)

used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or

(ii)

utilized by the taxpayer in a manner described in subsection (e)(7),

(3)

the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon dioxide which is—

(A)

captured by the taxpayer using qualified carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Utilization and Storage Act, during the 12-year period beginning on the date the equipment was originally placed in service, and

(B)

disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (4)(B), and

(4)

the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon dioxide which is—

(A)

captured by the taxpayer using qualified carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Utilization and Storage Act, during the 12-year period beginning on the date the equipment was originally placed in service, and

(B)
(i)

used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or

(ii)

utilized by the taxpayer in a manner described in subsection (e)(7).

(b)

Applicable dollar amount; additional equipment; election

(1)

Applicable dollar amount

(A)

In general

The applicable dollar amount shall be an amount equal to—

(i)

for any taxable year beginning in a calendar year after 2015 and ending before 2026—

(I)

for purposes of paragraph (3) of subsection (a), the dollar amount established by linear interpolation between $22.66 and $50 for each calendar year during such period, and

(II)

for purposes of paragraph (4) of such subsection, the dollar amount established by linear interpolation between $12.83 and $35 for each calendar year during such period, and

(ii)

for any taxable year beginning in a calendar year after 2025—

(I)

for purposes of paragraph (3) of subsection (a), an amount equal to the product of $50 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting 2024 for 1990, and

(II)

for purposes of paragraph (4) of such subsection, an amount equal to the product of $35 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting 2024 for 1990.

(B)

Rounding

The applicable dollar amount determined under subparagraph (A) shall be rounded to the nearest cent.

(2)

Installation of additional carbon capture equipment on existing qualified facility

In the case of a qualified facility placed in service before the date of the enactment of the Carbon Capture Utilization and Storage Act, for which additional qualified carbon capture equipment is placed in service on or after the date of the enactment of the Carbon Capture Utilization and Storage Act, the amount of qualified carbon dioxide which is captured by the taxpayer shall be equal to—

(A)

for purposes of paragraphs (1)(A) and (2)(A) of subsection (a), the lesser of—

(i)

the total amount of qualified carbon dioxide captured at such facility for the taxable year, or

(ii)

the total amount of the carbon dioxide capture capacity of the qualified carbon capture equipment in service at such facility on the day before the date of the enactment of the Carbon Capture Utilization and Storage Act, and

(B)

for purposes of paragraphs (3)(A) and (4)(A) of such subsection, an amount (not less than zero) equal to the excess of—

(i)

the amount described in clause (i) of subparagraph (A), over

(ii)

the amount described in clause (ii) of such subparagraph.

(3)

Election

For purposes of determining the carbon dioxide sequestration credit under this section, a taxpayer may elect to have the dollar amounts applicable under paragraph (1) or (2) of subsection (a) apply in lieu of the dollar amounts applicable under paragraph (3) or (4) of such subsection for each metric ton of qualified carbon dioxide which is captured by the taxpayer using qualified carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Utilization and Storage Act.

(c)

Qualified carbon dioxide

For purposes of this section—

(1)

In general

The term qualified carbon dioxide means carbon dioxide captured from an industrial source which—

(A)

would otherwise be released into the atmosphere as industrial emission of greenhouse gas, and

(B)

is measured at the source of capture and verified at the point of disposal, injection, or utilization.

(2)

Recycled carbon dioxide

The term qualified carbon dioxide includes the initial deposit of captured carbon dioxide used as a tertiary injectant. Such term does not include carbon dioxide that is recaptured, recycled, and re-injected as part of the enhanced oil and natural gas recovery process.

(d)

Qualified facility and qualified carbon capture equipment

(1)

Qualified facility

For purposes of this section, the term qualified facility means any industrial facility—

(A)
(i)

the construction of which begins before January 1, 2024, and—

(I)

the original planning and design for such facility includes installation of qualified carbon capture equipment, or

(II)

construction of qualified carbon capture equipment begins before such date, or

(ii)

which is placed in service before January 1, 2024, and includes installation of qualified carbon capture equipment, provided that construction of such carbon capture equipment begins before such date, and

(B)

which captures—

(i)

in the case of a facility which emits not more than 500,000 metric tons of carbon dioxide into the atmosphere during the taxable year, not less than 25,000 metric tons of qualified carbon dioxide during the taxable year which is utilized in a manner described in subsection (e)(7),

(ii)

in the case of an electricity generating facility which is not described in clause (i), not less than 500,000 metric tons of qualified carbon dioxide during the taxable year, or

(iii)

in the case of a facility not described in clause (i) or (ii), not less than 100,000 metric tons of qualified carbon dioxide during the taxable year.

(2)

Qualified carbon capture equipment

For purposes of this section, the term qualified carbon capture equipment means—

(A)

carbon capture equipment placed in service before January 1, 2024, and

(B)

carbon capture equipment the construction of which begins before such date.

(e)

Special rules and other definitions

For purposes of this section—

(1)

Only carbon dioxide captured and disposed of or used within the United States taken into account

The credit under this section shall apply only with respect to qualified carbon dioxide the capture and disposal, use, or utilization of which is within—

(A)

the United States (within the meaning of section 638(1)), or

(B)

a possession of the United States (within the meaning of section 638(2)).

(2)

Secure geological storage

The Secretary, in consultation with the Administrator of the Environmental Protection Agency, the Secretary of Energy, and the Secretary of the Interior, shall establish regulations for determining adequate security measures for the geological storage of carbon dioxide under subsection (a) such that the carbon dioxide does not escape into the atmosphere. Such term shall include storage at deep saline formations, oil and gas reservoirs, and unminable coal seams under such conditions as the Secretary may determine under such regulations.

(3)

Tertiary injectant

The term tertiary injectant has the same meaning as when used within section 193(b)(1).

(4)

Qualified enhanced oil or natural gas recovery project

The term qualified enhanced oil or natural gas recovery project has the meaning given the term qualified enhanced oil recovery project by section 43(c)(2), by substituting crude oil or natural gas for crude oil in subparagraph (A)(i) thereof.

(5)

Credit attributable to taxpayer

(A)

In general

Except as provided subparagraph (B) or in any regulations prescribed by the Secretary, any credit under this section shall be attributable to—

(i)

in the case of qualified carbon dioxide captured using qualified carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Carbon Capture Utilization and Storage Act, the person that captures and physically or contractually ensures the disposal, utilization, or use as a tertiary injectant of such qualified carbon dioxide, and

(ii)

in the case of qualified carbon dioxide captured using qualified carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Carbon Capture Utilization and Storage Act, the person that owns the qualified carbon capture equipment and physically or contractually ensures the capture and disposal, utilization, or use as a tertiary injectant of such qualified carbon dioxide.

(B)

Election

If the person described in subparagraph (A) makes an election under this subparagraph in such time and manner as the Secretary may prescribe by regulations, the credit under this section—

(i)

shall be allowable to the person that disposes of the qualified carbon dioxide, utilizes the qualified carbon dioxide, or uses the qualified carbon dioxide as a tertiary injectant, and

(ii)

shall not be allowable to the person described in subparagraph (A).

(6)

Recapture

The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified carbon dioxide which ceases to be captured, disposed of, or used as a tertiary injectant in a manner consistent with the requirements of this section.

(7)

Utilization of qualified carbon dioxide

(A)

In general

For purposes of this section, utilization of qualified carbon dioxide means—

(i)

the fixation of such qualified carbon dioxide through photosynthesis or chemosynthesis, such as through the growing of algae or bacteria,

(ii)

the chemical conversion of such qualified carbon dioxide to a material or chemical compound in which such qualified carbon dioxide is securely stored, or

(iii)

the use of such qualified carbon dioxide for any other purpose for which a commercial market exists (with the exception of use as a tertiary injectant in a qualified enhanced oil or natural gas recovery project), as determined by the Secretary.

(B)

Measurement

(i)

In general

For purposes of determining the amount of qualified carbon dioxide utilized by the taxpayer under paragraph (2)(B)(ii) or (4)(B)(ii) of subsection (a), such amount shall be equal to the metric tons of carbon dioxide which the taxpayer demonstrates, based upon an analysis of lifecycle greenhouse gas emissions and subject to such requirements as the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, determines appropriate, were captured and prevented from escaping into the atmosphere through use of a process described in subparagraph (A).

(ii)

Lifecycle greenhouse gas emissions

For purposes of clause (i), the term lifecycle greenhouse gas emissions has the same meaning given such term under subparagraph (H) of section 211(o)(1) of the Clean Air Act (42 U.S.C. 7545(o)(1)), as in effect on the date of the enactment of the Carbon Capture Utilization and Storage Act, except that product shall be substituted for fuel each place it appears in such subparagraph.

(8)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2009, there shall be substituted for each dollar amount contained in paragraphs (1) and (2) of subsection (a) an amount equal to the product of—

(A)

such dollar amount, multiplied by

(B)

the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting 2008 for 1990.

(f)

Application of section for certain carbon capture equipment

In the case of any qualified carbon capture equipment placed in service before the date of the enactment of the Carbon Capture Utilization and Storage Act, the credit under this section shall apply with respect to qualified carbon dioxide captured using such equipment before the end of the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that 75,000,000 metric tons of qualified carbon dioxide have been taken into account in accordance with paragraphs (1) and (2) of subsection (a) during the period beginning after October 3, 2008.

(g)

Regulations

The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, including regulations or other guidance to—

(1)

ensure proper allocation under subsection (a) for qualified carbon dioxide captured by a taxpayer during the taxable year ending after the date of the enactment of the Carbon Capture Utilization and Storage Act, and

(2)

determine whether a facility satisfies the requirements under subsection (d)(1) during such taxable year.

.

(b)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.