An Aethon pump jack in the Moneta Divide oil and gas field east of Shoshoni. (Angus M. Thuermer Jr./WyoFile)
by Dustin Bleizeffer, WyoFile
A measure that would provide a $10 million “stimulus” to encourage greater carbon capture for use in the oil industry will be advanced to the next legislative session following a special hearing this week by the Joint Committee minerals, business and economic development. The stimulus measures, committee members say, are aimed at improving a federal tax credit program that they say favors direct storage of greenhouse gases rather than pumping them into oil fields to produce hard-pressed reserves to obtain.
“The intent of this bill is simply to level the playing field so that [oil] The producer is in the same financial situation as [an operator of] a permanent sequestration facility,” said Sen. Chris Rothfuss (D-Laramie).
Wyoming has wooed and coerced companies into collecting carbon dioxide – through direct air capture and in industrial smokestacks, for example – and created a legal and regulatory framework for injecting the planet-warming gas into formations deep salt mines for permanent storage.
But there is also growing demand for carbon dioxide in the oil industry, a key economic driver of the state.
Carbon dioxide is commonly injected into oil fields to “sweep up” the oil left after primary production methods such as pumps can no longer recover commercial volumes of oil – a practice that has been in place in Wyoming for about 37 years. years, according to Wyoming Enhanced Oil. Recovery Institute. But the industry fears there won’t be enough carbon dioxide available to meet growing demand.
The recently expanded federal 45Q tax credit program encourages both the direct storage of carbon dioxide and its use in “enhanced oil recovery” or EOR. But due to climate considerations, the program provides a greater financial incentive to simply “sequester” carbon dioxide. The federal program offers $85 per metric ton for simple sequestration, compared to $60 per metric ton for EOR.
The Minerals Committee wants to help close this federal incentive gap with the proposed Carbon Dioxide Enhanced Oil Recovery Stimulus.
To modifySign measurement. The bill would create a $10 million fund administered by the Wyoming Energy Authority, which would provide an additional $10 per metric ton to 45Q-eligible parties that capture carbon dioxide for use in tertiary oil production.
“For the oil industry, CO2 has always been considered a very valuable commodity,” said Lon Whitman, director of the Enhanced Oil Recovery Institute. Although the state encourages direct storage of carbon dioxide, Whitman added, it could earn more revenue if the gas was used to produce more oil, which would bring in hundreds of millions of dollars in severance payments, in royalties and property taxes.
“The problem is that there is an incentive for dedicated storage rather than enhanced oil recovery,” he said.
Potential dividends
The bill will be presented to the Senate during the budget session which begins on February 12. It includes a $10 million appropriation from the Legislative Stabilization Reserve Account, which would be filled by diverting half of the revenue from Wyoming’s 6 percent severance tax on produced oil. .
Supporters of the bill, including the Enhanced Oil Recovery Institute and the Petroleum Association of Wyoming, say a $10 million investment should bring a handsome return to state coffers – to the tune of hundreds of million dollars over eight years, according to a report
To modifyPanel written by Timothy Considine, professor of energy economics at the University of Wyoming.
“At a minimum, for every dollar spent on incentives, net severance pay and ad valorem taxes increase by $2.40,” the report concludes.
Who benefits?
Committee members stressed that the $10 per metric ton “stimulus package” should be offered only to the party that captures the carbon dioxide – not the party that injects the gas into the oil fields. So far, only two companies capture carbon dioxide in Wyoming: ExxonMobil at its Shute Creek natural gas processing plant near LaBarge and Contango Oil & Gas’ Lost Cabin natural gas processing plant , east of Shoshoni.
Rep. Scott Heiner (R-Green River) worried that the main beneficiaries of the stimulus would be a few big companies. But Wyoming Petroleum Association President Pete Obermueller said his members support the measure regardless of who benefits.
“It doesn’t matter where the carbon comes from, because Wyoming will benefit from it either way,” Obermueller said.
The Sheridan-based landowner advocacy group, the Powder River Basin Resource Council, has opposed several previous legislative efforts to provide tax breaks and incentives to the oil and gas industry. The group also changed its rhetoric on the EOR, which it generally supported.
In December, the council amended its 2011 resolution in favor of the practice to now oppose it, stating in part that “the technology is more likely to contribute to a greater atmospheric burden of greenhouse gases rather than to reduce anthropogenic emissions.
“There’s a reason why [Inflation Reduction Act] has a higher incentive for permanent storage,” said board attorney Shannon Anderson. “And of course, climate is not mentioned once” in the stimulus measure.
Whitman, of the Enhanced Oil Recovery Institute, says oil produced by pumping and storing carbon dioxide could actually be carbon negative. Regardless, there are no financial downsides to the stimulus measures and a high likelihood of revenue returns.
“What this bill says is, ‘We’re open for business,’” Whitman said. “We are trying to find ways to help the industry survive and grow despite the constraints and controls that are developing. »
This article was originally published by WyoFile and is republished here with permission. WyoFile is an independent, nonprofit news organization focused on the people, places and politics of Wyoming.
