(Reuters) - Tax credits in the $430 billion U.S. climate and tax bill set to be signed into law this week will kickstart carbon sequestration projects, say oil and gas proponents, offsetting startup costs for some of the anti-pollution initiatives.
Carbon capture and storage hubs that take gases from chemical, power and gas producers and oil refineries have become the energy industry's preferred way to combat climate warming. But large-scale development has snagged over costs and lack of guaranteed revenue.
The Biden administration's Inflation Reduction Act, which was approved by lawmakers last week, provides a tax credit of up to $85 per ton for burying carbon dioxide produced by industrial activity, and up to $180 per ton for pulling carbon dioxide (CO2) from the air.
The bill also greenlit new leases of federal land for oil and gas development, without considerations of climate impacts. Importantly, it automatically approved high bids from a November 2021 offshore auction that included a drilling project intended for a carbon-burying scheme.
"It's a pretty big deal," said Tim Duncan, chief executive of Talos Energy Inc (TALO.N) , an offshore oil and gas producer that is building a business around carbon sequestration. Talos has launched four projects and signed up big backers including Freeport LNG and Chevron Corp (CVX.N) .
“This is going to unlock a significant amount of emissions that could become economic for capture,” added Chris Davis, a senior vice president at Milestone Carbon, which develop carbon projects for mid-sized companies.
Over the last two decades, companies have tentatively tried and largely struggled to make a business from using CO2 to boost oil production. More recently, big investors want firms to address global warming, and the oil industry aims to show it takes climate change seriously.
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