Geoscience Policy Monthly Review
february 2018

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Bipartisan expansion of tax credits for carbon dioxide sequestration signed into law

February 15, 2018

The Bipartisan Budget Act of 2018, signed into law by President Donald Trump on February 9, contained language that provides tax incentives for carbon sequestration under a section of the Miscellaneous Provisions. The legislation expands the carbon capture, utilization, and storage (CCUS) tax credits and allows new CCUS technologies, such as direct air capture (DAC), to qualify. The bill amends Section 45Q of the Internal Revenue Code to eliminate the tax cap on qualifying projects, make credits available to claim for 12 years, and increase credits to $50 per ton of carbon dioxide for utilization and $35 per ton for permanent storage. This language was initially proposed in the Furthering carbon capture, Utilization, Technology, Underground storage, and Reduced Emissions (FUTURE) Act (S.1535), which was introduced by Senator Heidi Heitkamp (D-ND) on July 12, 2017, and received no committee action before it was enacted as part of the Bipartisan Budget Act.

Some coal industry leaders believe increased tax credits will help bring down the cost of clean coal technology, the commercialization of which they believe is imperative to the survival of their industry. Oil and gas industry leaders view the increase in utilization tax credits for Enhanced Oil Recovery (EOR) as an incentive for an environmentally friendly practice that helps their bottom line. The renewable energy sector also benefits from the FUTURE Act incentives because the new Section 45Q tax credits are greater than the preexisting Renewables Production Tax Credit (PTC). Some environmentalists argue that EOR tax credits are perpetuating fossil fuel reliance rather than paving the way to cleaner, renewable energy. Furthermore, some view the omission of energy storage technologies within FUTURE Act as a blow to renewable energy and ultimately a clean electrical grid.

Sources: American Coalition for Clean Coal Electricity, Carbon Capture Coalition, Center for Climate and Energy Solutions, Clean Air Task Force, E&E News, Energy Storage Association, Library of Congress, New York Times, U.S. House of Representatives

U.S. District Court overrules suspension of Methane Venting and Flaring Rule as BLM proposes revisions

February 22, 2018

On February 22, the U.S. District Court for Northern California issued a preliminary injunction against suspension of the Bureau of Land Management’s (BLM) 2016 rule on Waste Prevention, Production Subject to Royalties, and Resource Conservation. The Obama-era rule seeks to reduce methane waste from venting, flaring, and leakage during oil and gas production on onshore federal and Indian lands.

The latest court decision is one in a series driven by legal sparring between proponents and opponents of the measure, which began almost immediately after the rule was finalized in November 2016. Within a few weeks of rule finalization, western states and industry groups filed legal challenges in the U.S. District Court of Wyoming arguing that the BLM did not have the authority to regulate air pollution. Although the court denied their request in January 2017 for a preliminary injunction to suspend the rule, or to effectively halt the rule’s implementation pending court proceedings, litigation is still ongoing.

Congressional attempts to undo the rule began on February 3, 2017, when the House passed H.J.Res.36 to overturn the rule in perpetuity using provisions of the Congressional Review Act. Shortly afterward, President Donald Trump issued the Executive Order for Promoting Energy Independence and Economic Growth (E.O. 13783) on March 28, followed by Interior Secretary Ryan Zinke’s Secretarial Order on American Energy Independence (S.O. 3349) issued the next day, prompting administrative review of the rule by the BLM. However, the Senate narrowly rejected the congressional resolution on May 10, 2017.

Despite the Senate’s rejection of H.J.Res.36, BLM temporarily delayed the implementation dates of certain aspects of the rule, pursuant to Section 705 of the Administrative Procedure Act (APA), in light of the ongoing litigation in Wyoming. California, New Mexico, and 17 environmental and tribal groups swiftly responded and filed two lawsuits against the BLM in July, challenging BLM’s overly-broad use of the APA. The U.S. District Court for Northern California sided with the states and overturned BLM’s rule delay on October 4, 2017. An appeal was filed on December 4 by the Department of Justice on behalf of the Department of the Interior and is currently pending review.

On December 8, BLM issued a broad one-year implementation delay of certain rule provisions, citing undue compliance costs associated with provisions that “may be rescinded or significantly revised in the near future.” This once again prompted California, New Mexico, and the same 17 environmental and tribal groups to file another suit against BLM on December 19. On February 22, 2018, the California court once again sided with the plaintiff and issued a preliminary injunction against the rule suspension, stating that the BLM did not provide a reasoned analysis for the rollback.

This recent court ruling casts doubt on the legal foothold for the BLM’s newest proposed rule, which relies on a similar arguments relating to excessive financial burden and duplicative regulatory measure. The proposed revisions would effectively repeal the current venting and flaring requirements altogether, replacing them with pre-2016 requirements, which have remained unchanged for over 30 years (NTL-4A). BLM is accepting comments on these revisions until April 23, 2018.

Sources: Climate Change Litigation, Columbia Law School, Department of the Interior, E&E News, Library of Congress, Natural Gas Intel, The Oil & Gas Journal