Midstream’s Green Tax Incentive

[Editor's note: A version of this story appears in the April 2022 issue of Oil and Gas Investor magazine.]

When midstream companies compress gas at compressor stations along the pipeline route, excess heat is produced at temperatures as high as 900 degrees. This heat is usually allowed merely to dissipate and thus is a wasted source of potentially useful energy.

Instead of being allowed to dissipate, however, the heat can be harnessed to produce electricity through the installation of electricity-producing turbines. Because no incremental combustion of fossil fuels is associated with the production of such electricity, waste heat provides an emission-free source of clean or green power. According to the Department of Energy, there is an opportunity within the U.S. to produce 15 gigawatts of power from heat that otherwise would be wasted.

A federal tax credit recently became available for investment in the equipment to harness such energy, thereby giving midstream companies the opportunity to improve their sustainability or ESG profile by producing green power while offsetting a portion of the associated capex with a tax credit.