The Senate Doesn’t Like House Republicans’ Carbon Capture Tax Credit Cuts

Senate Republicans don’t sound happy with how their counterparts in the House are treating carbon capture technology.

The House GOP’s reconciliation bill puts limitations on the carbon capture tax credit that have frustrated industry leaders and senators alike.

“Carbon capture credits are important for us, for natural gas and coal industries,” Sen. Shelley Moore Capito of West Virginia told NOTUS. “I know they shortened them, so I think we’ll take a look at that.”

Sen. Jim Justice — also from West Virginia, which is among the leading states in the nation for carbon capture projects — struck a similar tone.

“Carbon capture is really, really important, and we’ve got to solve that riddle,” he told NOTUS. “I think we’ve probably got a whole lot of a long way to go, and a whole lot of things will change when we get the final verbiage and everything.”

The House’s reconciliation bill massively scales down the transferability of tax credits for carbon capture projects. The ability for developers to sell carbon capture tax credits to another entity in exchange for cash is key to driving progress in the carbon capture and storage development space, experts told NOTUS.

“Transferability has really emerged as a powerful tool for project deployment,” Carbon Capture Coalition executive director Jessie Stolark told NOTUS. “To say that it’s not going to be there is, for some projects, really, really harmful, and it really endangers their ability to move forward.”

It’s a concern that’s also made its way into the halls of Congress, where carbon capture technology has historically seen a warm bipartisan reception. The House GOP’s bill kills the transferability option for projects that don’t start construction within a two-year window after the bill’s passage. The change was made alongside much more dramatic cuts to renewable energy tax credits, as House Republicans looked to unwind Biden’s climate legacy and find areas to cut spending.

“We’re really more interested in what the Senate is proposing as opposed to what the House is proposing,” Sen. Mike Rounds told NOTUS, though he noted that he hasn’t yet seen the specifics on carbon capture technology but wants to “get into it.”

Clean Air Task Force said in 2019 that the window for projects to commence construction should be at least three years long, and energy experts have suggested that an overall five-year timeline for projects to be fully operational, once proposed by the Environmental Protection Agency, is too restrictive for carbon capture and storage developers. The EPA also hasn’t met its 24-month goal for issuing a key permit on more than 10 carbon capture projects that are in progress. (The permit is for operators who want to inject carbon into underground wells as part of the storage process.)

“We’ve talked to project developers who are actively working on projects — these are real projects that are happening — and they’re very concerned that they won’t be able to meet that two-year deadline,” Stolark said.

While senators that NOTUS spoke to overwhelmingly said they haven’t looked at the specifics of the transferability rollback, they did indicate that changing the language around carbon capture development is on the table during the negotiation process.

“I’m not sure about that,” Capito told NOTUS when asked if she’ll push to restore transferability, “but I do want to see the ability to move forward with the innovation.”

Sen. John Hoeven told reporters that he’s on board with the phaseouts for solar and wind developers because those are “established” already. But he added that “we recognize the need for” carbon capture tax credits.

“I think there’ll be a lot of similarities to the House,” Hoeven said. But he added that “there might be something, we think, on the phaseouts” that could differ as the Senate debates the bill.

Hoeven introduced legislation in 2020 to expand access to carbon capture tax credits.

A number of other Republican senators have also backed carbon capture-boosting policy inside and outside Congress.

Sen. John Barrasso introduced legislation earlier this year that would amend carbon capture tax credits to offer equal credits to carbon capture developers regardless of whether their projects are for energy production, utilization or sequestration.

And Capito was influential in the EPA’s decision earlier this year to allow West Virginia its own jurisdiction over injecting carbon dioxide into underground wells as part of the carbon capture and storage process. She’s also advocated for carbon capture development support in Congress for multiple years.

However, the carbon capture industry wants lawmakers to act now, citing the budget reconciliation process as the best way to pave pathways for carbon capture technology developers. “There’s not going to be a lot of appetite, at least in the current Congress, to look at tax again” after the reconciliation process, Stolark said.

The conversations around carbon capture in Congress come after the Department of Energy’s cancellation of funding last week for at least 10 carbon capture projects.

Along with House Republicans removing transferability, people in the industry told NOTUS that the change of tone in Washington on carbon capture technology has left them confused.

“If you’re a climate-skeptical Republican, there are very strong reasons why you would support carbon capture for economic reasons, and I think that is part of the reason why it is bipartisan,” said Sam Bowers, the U.S. policy manager for carbon capture at the Clean Air Task Force. “Trying to understand what the administration is saying in terms of … the support for [carbon capture and storage] and then the actual actions, there’s a kind of a difference there.”

“The Senate has the opportunity to fix that,” he added.

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Shifra Dayak is a NOTUS reporter and an Allbritton Journalism Institute fellow.

This story was updated to clarify the EPA’s proposed timeframes for carbon capture and storage.