As interest and the pursuit of decarbonization continues to grow, carbon capture technologies, such as the recently proposed $100 billion carbon storage project by Exxon Mobil Corp., offer a promising avenue to achieving the low-carbon future targeted in the energy transition.

However, regulatory constraints have formed paramount hurdles to the widespread deployment of carbon capture projects such as the use of carbon capture, utilization and sequestration (CCUS), according to experts during a recent United States Energy Association (USEA) webinar.

“The regulatory process has always been the big bugaboo in this,” Kenneth J. Nemeth, Southern States Energy Board’s Secretary and Executive Director, said. “If we could get a clean regulatory process, with a promise not to go further, we might do well.”

The issue at hand is a process Nemeth defined as “regulatory ratcheting,” where existing regulatory policies are routinely clouded by new amendments instead of providing clarification.

Nigel Jenvey, global head of carbon management at Gaffney, Cline, & Associates, said achieving at-scale deployment will require industry and government collaboration, improved policies and financial incentives, broad-based innovation and technology development, and an increased understanding and confidence in CCUS.

Over the next 25 years, Jenvey said Congress will have to take measures like amending the 45Q tax credit, revising the Class VI permit process to be site-specific risk and performance-based, and developing CO₂ pipeline infrastructure.

“The 45Q tax credit is effectively a production tax credit that is paid overtime, so it mainly helps with operating costs,” he said. “We need other policies to come into place to support the investment costs.”

In 2019, the National Petroleum Council conducted a CCUS deployment study that showed improving murky policies like the 45Q Tax Credit would activate an additional 25 to 40 million tonnes per annum of CCUS capacity. It would also support 236,000 U.S. jobs, provide $21 billion annually and drive an incremental investment of $680 billion.

Although there has been bipartisan support in Congress for CCUS, Hunton Andrews Kurth Partner Fred Eames said he fears there will be attempts to make CCUS and EOR more difficult.

“We should think about oil produced by a CCUS as low-carbon oil,” he said. “The emissions from combustion on the back end are offset to a degree by storage of the CO₂ and the oil formation during the production process. If the world is going to continue using oil for years and years, which it is, production should involve the storage of CO2.”

Eames added: “Making CO₂ EOR regulations tougher to discourage people from doing that really hurts low-carbon oil.”

If the U.S. actually builds the amount of carbon capture projects needed to hit emission reduction targets, Eames noted that there will be a permitting capacity problem with the EPA and the states on Class VI permits for dedicated carbon capture and storage (CCS). “That’ll get worse if we push people away from CO2 EOR,” he said.

Dynamic valuation of the costs and benefits of certain carbon capture projects is an area that also poses a threat to CCUS, he continued. This concern is that favored clean energy projects will get a better cost-benefit evaluation standard than disfavored ones, which would skew the market toward a particular outcome.

“I haven’t seen that yet, but I am staying alert to the possibility,” he said. “We want both CCS and CCUS to be favored and so far the Biden administration has been very positive on CCUS.”

The upside to the regulatory process, according to Eames, is that it provides some stability in regards to public opinion on CCUS.

“The public should have a say in what happens in our communities, but if companies react only to the loudest voices then nothing is going to get built,” he said.

Despite the barriers, he said Congress has been eager to provide additional incentives that will help with reducing greenhouse-gas emissions.

The recent developments include:

  • Deadline extension for projects to be under construction until Jan. 1, 2026;
  • Legislation to increase the credit for direct air capture to $120 a tonne for CO2 stored in dedicated or non-productive storage and $75 a tonne for EOR;
  • Proposals to encourage the buildout of a CO2 pipeline network; and
  • Implementation of the USE IT Act, which reduces federal regulatory burdens for building CCUS infrastructure.