Group of State and Local Officials Calls on Congress to End Tax Credits for Carbon Sequestration

Over 100 state and local officials from the Midwest and West, including Iowa, are asking the U.S. Senate to eliminate tax credits for carbon capture and sequestration as part of a federal budget reconciliation bill.

Established by Congress and then-President George W. Bush in 2008, the 45Q tax credits incentivize companies to capture carbon dioxide from processes such as ethanol production and sequester it underground, so it won’t contribute to climate change by acting as a greenhouse gas in the atmosphere. The carbon can also be sequestered as part of enhanced oil recovery, in which pressurized gas is used to push more oil to the surface.

Opponents say the credits don’t work as intended.

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"The 45Q tax credits really only make sense to the industries that are poised to make billions of dollars from them," said North Dakota state Sen. Tim Mathern, D-Fargo. "They are supposedly intended to reduce carbon emissions, but in fact, 45Q tax credits pay polluters for polluting and subsidize private oil production at the expense of the taxpayer."

Companies receive up to $85 per metric ton for regular sequestration and up to $60 per metric ton for sequestration via enhanced oil recovery — though there is a provision in a draft portion of the Senate reconciliation bill that would raise the maximum oil recovery credit to $85.

The repeal effort includes 27 officials from Iowa, as well as officials from Colorado, Indiana, Montana, New Mexico, North Dakota, South Dakota and Wyoming. A few of those officials held a virtual press conference Wednesday.

South Dakota state Sen. Joy Hohn, R-Hartford, described the tax credits as wasteful spending.

"We are concerned about preserving taxpayer dollars, and that’s the main gist of our conference today," Hohn said.

Mathern said repealing the tax credits would put projects like Summit Carbon Solutions' proposed five-state carbon dioxide pipeline "in dire danger."

"And that’s really positive," he said.

Iowa elected officials who signed letter

• Iowa State Sen. Jeff Taylor

• Iowa State Sen. Dennis Guth

• Iowa State Rep. and Majority Whip Henry Stone

• Iowa State Rep. Sean Bagniewski

• Iowa State Rep. Cindy Golding

• Iowa State Rep. Mark I. Thompson

• Iowa State Rep. Zachary Dieken

• Iowa State Rep. Mark Cisneros

• Iowa State Rep. Helena Hayes

• Adair County Supervisor Jodie Hoadley

• Emmet County Supervisor Lisa Kay Hansen

• Emmet County Commissioner Timothy Schumacher

• Green County Supervisor Down Rudolph

• Guthrie County Supervisor Michael Dickson

• Hancock County Supervisor Bud Jermeland

• Cerro Gordo County Supervisor Chris Watts

• Mitchell County Supervisor Pamela S. Marzen

• Montgomery County Supervisor Mark Peterson

• Mitchell County Supervisor Mark Hendrickson

• Webster County Supervisor Austin Hayek

• Wright County Supervisor Dean Wendell Kluss

• Wright County Supervisor Betty Ellis

• Worth County Supervisor Enos Loberg

• Brown County Commissioner Mike Wiese

• Denison Township Trustee Tim Baughman

• Estherville Township Trustee Brent Lewis Hopp

• Armstrong City Councilmember JoAnn Eaton

Summit’s project alone could qualify for more than $1 billion annually from 45Q credits. It aims to capture some of the CO2 emitted by dozens of ethanol plants and ship the carbon via pipeline to a sequestration area southeast of the oilfields in western North Dakota.

Earlier this year, South Dakota’s legislators and governor adopted a law banning the use of a legal process known as eminent domain to acquire land access for carbon dioxide pipelines. South Dakota regulators also rejected Summit’s project application, saying there was no path forward for the project under the eminent domain ban.

Those moves came after several years of anti-pipeline activism by landowners focused on property rights and the danger from potential leaks of toxic carbon dioxide plumes. The project has permits in other states, but some of those are being challenged in court.

Congressional Republicans are using the complex reconciliation process to move a budget package through Congress with simple majority votes in each chamber, avoiding the Senate’s 60-vote legislative filibuster. The House recently passed its version of the bill without a repeal of the 45Q tax credits. U.S. Rep. Dusty Johnson, R-South Dakota, voted for the bill.

A spokesperson for Johnson sent a statement when asked via email if the congressman supports repealing the tax credits: "While Dusty wished the reconciliation bill was more conservative, he voted in favor of it when it passed the House. We’ll see what the Senate passes."

A spokesperson for U.S. Sen. Mike Rounds, R-South Dakota, said Rounds met with a group of South Dakota lawmakers when they traveled to D.C. to voice opposition to the 45Q tax credits.

"Senator Rounds has long held the belief that many industry specific tax credits should not be perpetual, a belief which this group of landowners shares," the statement said. "However, he has not had a chance to hear details of President Trump’s interest in this program. While many in South Dakota may oppose 45Q, it has been a popular proposal for other states for almost two decades and was included in the House-passed reconciliation bill."

The office of Senate Majority Leader John Thune, R-South Dakota, sent a similar reply that did not disclose his position on the tax credits.

"As congressional Republicans work with President Trump to pass legislation that will create long-term strength, safety, and prosperity for America, Sen. Thune appreciated the opportunity to meet with and hear firsthand from state legislators who have been on the front lines of this issue."

Anti-pipeline activists are also concerned about a provision in an early draft of the House budget reconciliation bill that they said would have allowed federal regulators to approve natural gas and carbon dioxide pipelines over prohibitions in state law. That provision was removed before the bill passed the House. The rest of the statement from Thune’s office appeared to address that issue: "He understands their concerns, and he conveyed that the provision removed by the House is unlikely to be included in the final bill."