10.09.16

The Legislation that Energy States and Climate Advocates are Backing

LOGAN, W.Va. — One of the most intriguing potential tools to ease the economic stress on the coal industry goes by a name unlikely to make your pulse jump with excitement.

45Q.

The name, which is a reference to its section of the federal tax code, might not be a grabber but it is getting some attention — at least among those who pay very, very close attention to energy issues –because of the disparate interests lining up to support it in Congress.

“Strange bedfellows seek tax fix for sequestration projects,” wroteEnvironment & Energy Publishing.

“Coal companies, enviros back tax incentive extension for carbon capture projects,” noted Utility Dive.

45Q gives tax credits to power plants that capture carbon dioxide and store it securely underground.

It’s already law, but it is capped at a national limit of 75 million tons of carbon dioxide. After that, it would expire.

About 60 percent of the limit has already been reached, so new power plant projects being conceived couldn’t count on having the tax credits available while they seek financing.

Legislation under consideration in both houses of Congress would remove that cap.

The legislation also would increase the credit per ton, providing more incentive for power plants to take on the expense of carbon capture projects.

Environmental advocates like the legislation because of its incentives for reducing carbon dioxide in the atmosphere, potentially curbing global warming.

Those affected by struggling energy markets are embracing the legislation for its potential to bring fossil fuels like coal back into competition.

So, Hillary Clinton has stated her support. Her vice presidential pick, Tim Kaine, is signed on as a cosponsor in the Senate, along with prominent Democrats like Dick Durbin and Cory Booker. Hey, and there’s Al Franken!

On the other side of the aisle, Senate Majority Leader Mitch McConnell is on board along with Republican senators like Lindsey Graham and Senate Energy Committee Chairwoman Lisa Murkowski.

Outside of Congress, supporters include Peabody Energy, Arch Coal, the AFL-CIO and the Center for Climate and Energy Solutions.

From a West Virginia perspective, Sen. Shelley Moore Capito is involved to the point that her name comes with the Senate version of the bill, the “Heitkamp-Whitehouse-Capito legislation” — also introduced by Sens. Heidi Heitkamp (D-ND) and Sheldon Whitehouse (D-RI).

“We’re always looking for common ground,” Capito said last week after a congressional subcommittee meeting about the Clean Power Plan that was held offsite in Logan.

“If we can marry the elements of the economy and the environment, that’s a good thing. The more bipartisan buy-in you have gives it a better chance for success.”

When U.S. Energy Secretary Ernest Moniz visited West Virginia last month for the Mid-Atlantic Region Energy Innovation Forum, he touted the tax credit extension.

“Getting the tax credits this year would be a very, very big deal. Having the tax credits in place and the trajectory for carbon reductions, in my view, is what the investment community needs,”said Moniz before several dozen state energy leaders.

Congressman David McKinley, a Republican, and Senator Joe Manchin, a Democrat, were along for his visit and agreed that the tax credit extension would be a useful tool to spur more low-pollution energy development.

McKinley signed on to the House version of the 45Q bill, as did Congressman Evan Jenkins of southern West Virginia. McKinley’s office contends that federal regulations like the Clean Power Plan make affordable carbon capture technology crucial.

“If we do not extend these tax credits, more coal miners could be sent to the unemployment line,” according to a statement from McKinley’s office.

Such bipartisan support on energy issues is not uncommon among West Virginia’s congressional delegation, but cooperation is especially likely in this case, observed Erin Burns, clean energy policy adviser for Third Way, a centrist think tank that is one of the groups advocating for 45Q.

Burns is a Kenova native and a former Manchin staffer, so in addition to her official role she’s particularly attuned to West Virginia’s stake in this issue.

“I don’t think it’s surprising because the West Virginia delegation works together on a lot of issues that they see eye-to-eye on,” Burns said. “More specifically, as it comes to 45Q and carbon capture, there are a lot of reasons to support it.”

Carbon capture has long been a hope of the fossil fuels industry, but its expense has kept it from catching on. Plants using carbon capture technology may capture 90 percent of carbon dioxide emissions and permanently store them underground.

Both sides of the climate debate agree that some mix of fossil fuels will be part of the nation’s energy mix well into the future.

Carbon capture technology will be essential to meet mid-century climate goals of keeping global temperature rise within 2 degrees Celsius of preindustrial levels, according to — hang on for this title —the Intergovernmental Panel on Climate Change Fifth Assessment Synthesis Report.

So that’s why, from various perspectives, the tax credit is considered a crucial incentive.

“We have to create a future in which utilities can build new, clean efficient coal plants,” said Eugene Trisko, counsel to the United Mine Workers. “That future depends on the ability to deal with the carbon issue in an inexpensive way.”

The current tax credit is $20 a metric ton for carbon dioxide that is captured and disposed in secure geological storage or $10 per metric ton for CO2 that is captured and then used as a tertiary injectant in projects meant to increase the amount of oil that can be extracted from an oil field.

Under the legislation under consideration, the tax credits would increase to $50 or $35.

Even with incentives, carbon capture technology may still prove too expensive for many utilities planning to build new plants, said Jeri Matheney, communications director for Appalachian Power.

“We just can’t take advantage of the tax credits because even with the credits, carbon capture and storage isn’t economically viable,” Matheney said.

“It’s never a closed door for us because we’re always looking at what might work for our customers, but for right now it’s not something we’re pursuing. When we look at next generation, it’s going to be gas or it’s going to be renewables.”

If the tax credits could be extended indefinitely, rather than capping, that would at least give utilities some certainty as they approach new, expensive projects, said Jeff Bobeck, senior advisor for policy at theGlobal Carbon Capture and Storage Institute, which advocates for the development and deployment of carbon capture.

“Carbon capture projects are big, they’re expensive. They will be effective,” Bobeck said. “The only way they’ll be effective is if they’re financed and built.”

Because power plant projects are so expensive and may take five to 10 years to build, those financing such projects need to know very soon what tax credits might be available, said Fatima Maria Ahmad, solutions fellow for the Center for Climate and Energy Solutions think tank.

Ahmad, like others, has some hope Congress will act on the tax credits when it reconvenes after Election Day and before the new year.

“It’s really impressive that we have such leaders in Congress signing off as cosponsors,” Ahmad said. “That gives me a lot of hope for the end of the year.”

She said clean energy development — including wind, solar and carbon capture — all require stable, long-term policy incentives.

“It just shows that in this particular area, there’s a lot of consensus, even though in energy policy we think of gridlock. In this issue we find consensus that cuts across all that.”


By:  Brad McElhinny
Source: Metro News