Hammer to Hammer: Leaning into the Curbing Inflation Act

Tim Sowecke

It’s here, so might as well take advantage of it. On August 16, President Biden signed into law the Inflation Reduction Act. The IRA offers tax incentives and grants for solar, wind, hydrogen, nuclear, oil and gas, and carbon capture, utilization and sequestration projects. Given Oklahoma’s vast energy resources, infrastructure, and skilled workforce, there are significant opportunities for Oklahoma to prosper through the IRA.

The IRA amends Section 45Q of the Revenue Code to provide credits for the construction of carbon capture and utilization facilities. Any facility whose construction begins before January 1, 2033 will be eligible for credit 45Q. It increases the credit for carbon capture by industrial facilities and power plants to $85 per metric ton for carbon dioxide stored in deep geological formations, $60 per ton for the beneficial use of captured carbon emissions and $60 per ton for CO2 stored in oil and gas. the fields. In addition, for eligible direct to air installations, the credit increases to $130 per tonne for enhanced oil recovery and $180 for geological sequestration.

The IRA is also adding Section 45V to the tax code to provide credits for the production of qualified hydrogen produced at a qualified hydrogen production facility for a period of 10 years from the date the facility commences. his activities. The base tax credit is set at 60 cents per kilogram of hydrogen and increases to $3 per kilogram when the lifecycle carbon intensity of the hydrogen reaches certain minimum requirements.

To make these credits even more attractive, the IRA offers a direct payment option for the same amounts instead of a tax credit. Additionally, the IRA includes an option for taxpayers to monetize the credits by transferring them to other taxpayers. The IRA’s carbon and hydrogen pricing will undoubtedly spur innovative hydrogen and enhanced oil recovery projects in Oklahoma and elsewhere.

There is more! IRA includes tax credit extensions for wind and solar, grants to help measure and monitor methane emissions in oil and gas operations, grants to plug oil and gas wells orphans and tax credits for the replacement of electric heat pumps in buildings and electric vehicles. Fear not, this is not the death knell for conventional oil and gas, but an invitation to leverage IRA incentives to develop projects that exploit Oklahoma’s oil and gas resources and promote truly an “all of the above” energy policy.

Tim Sowecke is an attorney at Crowe & Dunlevy, crowedunlevy.com, and a member of the Energy, Environment and Natural Resources Practice Group.

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