A group of companies involved in carbon management and related industries have submitted a letter to the U.S. Treasury Department asking for confirmation of how the carbon oxide sequestration tax credit under Section 45Q of the Internal Revenue Code will be implemented.
The companies, including Exxon and Honeywell, are requesting explicit confirmation in the regulations that carbon oxide (CO2 and CO) is fungible, meaning it can be treated as interchangeable when transported through shared infrastructure (e.g., pipelines) for sequestration or utilization.
They argue that because carbon oxide molecules cannot be traced to their source once mixed in a shared transportation system, regulations should allow for the allocation of qualified volumes to eligible disposal or utilization sites based on aggregate measurements, not on tracing individual molecules.
They propose updates to the 2021 regulations under Section 45Q to incorporate a verification system that accounts for carbon oxide transported in shared systems. This system would rely on measuring carbon oxide at the source and verifying that the same total volume is disposed of, injected, or utilized at the end points, regardless of the specific source of the molecules.
The letter provides examples of scenarios where the current regulations might create uncertainty, particularly when multiple sources of carbon oxide (both qualifying and non-qualifying) share the same transportation infrastructure. The companies argue that without clear rules allowing for the allocation of qualified carbon oxide volumes, the ability to claim the tax credit could be jeopardized.
Anew Climate, LLC, the American Carbon Alliance, Summit Agricultural Group, Climeworks Corporation, Battelle, Honeywell, and Calpine Corporation also signed onto the letter.
