The U.S.’ Inflation Reduction Act (IRA) has been hailed as both a jobs-creating infrastructure stimulus and a clean energy booster. To ensure bi-partisan support in the otherwise polarized United States, it also provides generous tax credits for investments in carbon capture and sequestration or carbon capture and storage (CCS) technologies. Beyond the $12 billion in other government support for CCS, bonus funds are now available to prove out experimental “Direct Air Capture” (DAC) technology. Recently Airbus bought 400,000 tons of carbon removal credits from a planned DAC facility in Texas’ oil-soaked Permian Basin. When operational in 2024, owner Occidental Petroleum promises it will be capable of sucking one million tons of CO2 out of the sky every year. And as lead blogger and podcaster Michael Buchsbaum reviews, Oxy will then use that CO2 to produce millions of barrels of climate friendlier “net-zero oil.” Confused? Welcome to America’s suck rush.

Taxing Credits

Going forward, under the in 2022 passed IRA, CCS facilities are eligible for a suite of very generous tax credits for each metric ton of carbon dioxide injected into the ground.

The oil and gas industry-backed Global CCS Institute believes these enhancements to the U.S.’ so-called 45Q federal tax credit for CCS could increase the deployment of the technology by 13-fold, or more than 110mtpa, by 2030 compared with existing policy.

Changes to 45Q now provide up to $85 per ton of CO2 “permanently” stored in geologic, saline, or in deep wells dug into other suitable deposits.

They also increase enhanced oil recovery (EOR) subsidies – i.e. money rewarding companies for “sequestering” captured CO2 by injecting it into petroleum reservoirs in order to produce more crude – from $35 to $60 per ton.

Bonus credits are also available for DAC projects: $180 per ton of permanently stored CO2 and $130 for EOR or other uses.

Additional changes significantly reduce the capacity requirements for eligible projects while locking in a seven-year extension to qualify for the tax credit, meaning that projects have until January 2033 to begin construction.

As we reviewed in the first part of this series, currently 20 of the world’s 30 operating CCS facilities “store” their captured CO2 via EOR.

Meaning between 28 and 31 million tons out of the roughly 40 million tons of CO2 captured globally is reinjected and sequestered in oil fields to push more oil out of the ground.

11 of the US’ 13 currently operating CCS plants support EOR. And just four EOR projects account for two-thirds to three-quarters of all estimated carbon sequestered in the United States.

Considering that as of this writing, West Texas Crude prices per barrel are above $70, and industry rule of thumb is that producers can bring up two barrels of crude per each ton of injected CO2, producers like oil major, ExxonMobil – the world’s largest carbon capturer, stands to make $200 or more for each ton of CO2 they can send downhole including the value of the oil they’ll later sell.

Though the 45Q program is ostensibly a program to fight climate change, since nearly all subsidized CO2 injections are being used for EOR, clearly it has just become another oil production subsidy.

Though the Internal Revenue Service does not provide information about who gets them, it issued more than $1 billion of these credits as of 2020.

In backing CCS, oil and gas is simply shifting their decades-long disinformation fight, writes Dr. Charles Harvey. Now a professor of environmental engineering at the Massachusetts Institute of Technology, 14 years ago, he chaired a CCS start-up. But in a recent New York Times piece entitled “Every Dollar Spent on This Climate Technology Is a Waste,” he warned against a wave of new CCS projects that are simply “masquerading as climate change solutions.”

Instead of spreading doubt about climate science, Harvey says the industry is now championing CCS to create false confidence about how we can continue to burn fossil fuels while efficiently cutting emissions.

 Fire sales

None of the handful of CCS facilities now in operation across the U.S. produce any energy.

Despite decades of support, some 15 projects burnt through billions of dollars of public money without sequestering any meaningful amount of carbon dioxide.

To date, no U.S. coal or gas-fired power plant has successfully operated a carbon capture system.

The most recent example of failure is the Petra Nova CCS plant.

Planned to strip CO2 from one coal-fired unit of the larger 3.5 Gigawatt W.A. Parish Generating Station near Houston, Texas, though the U.S. Department of Energy sunk over $195 million into it, operators NRG Energy and JX Nippon Oil & Gas couldn’t get the technology to work.

Without much captured CO2 to sell for EOR, they couldn’t make any money with it either.

Not long after inauguration, it closed in 2020 having captured significantly less CO2 than intended.

In late September, NRG sold its 50% stake in for just $3.6 million, less than a half-percent of its roughly $1 billion construction costs. Nippon O&G remains sole owner of a white elephant.

Giant Sucking machines

In late 2022, US oil giant Occidental Petroleum (Oxy) along with Canadian junior partner Carbon Engineering hope to begin constructing a Direct Air Capture (DAC) plant in Texas’ Permian basin that will suck 500,000 tons of CO2 out of the atmosphere annually.

Slated to be 120 times bigger than the world’s largest facility using similar technology, after signing a lease on 100,000 acres of the historic King Ranch for the new plant, Vicki Hollub, Occidental’s chief executive officer, said commercial operations could begin in late 2024.

Still in its nascent stage and often criticized as too expensive, nevertheless it’s increasingly securing support from governments as well as billionaires like Bill Gates.

Here’s how it works: As air passes through a filter lined with chemicals, tiny amounts of CO2 is captured. Once separated, it can be stored underground.

There are about 423 CO2 particles per million in the atmosphere, meaning giant fans have to suck in a lot of air to capture just one ton.

By contrast, in pre-industrial times, the atmosphere held only 300 parts per million.

Yet, how Oxy intends to fund their project and what they’ll be doing with the CO2 they capture is astonishing.

To meet eventual climate goals, Oxy is counting on the future sale of “net-zero oil” that it will soon produce by injecting it’s air-captured CO2 deep into oil reservoirs.

Already one of the world’s leading EOR-producers, currently Oxy only uses CO2 from underground mines or by purchasing previously-captured CO2.

However, Oxy is already making money by selling the plant’s newly minted carbon offsets.

“Our intention is to use DAC to provide carbon removal credits that other industries and companies, particularly those that are hard to decarbonize like aviation, or net-zero pledged companies, can purchase to reach their climate goals,” William Fitzgerald, a spokesperson for Occidental subsidiary 1PointFive told The Verge in an email.

French Connection

Recently Oxy’s subsidiary, 1PointFive, sold 400,000 metric tons of carbon removal credits to Europe’s government-supported aerospace company, Airbus. Spread over four years, Airbus has an option to buy more in the future.

Oxy is already raking it in without actually removing any CO2 at all.

In the next blog, we’ll look at how the European Union and Saudi Arabia are embracing CCS too.