From FEW: 45Q represents opportunity for ethanol

By Lisa Gibson | June 11, 2019

Under new size specifications for the 45Q tax credit, almost all ethanol plants are eligible, said Jamey Cline, in business development for Christianson PLLP. With revenues trending downward since 2018 and falling below operating expenses, diversification of revenue streams is crucial, he added.

Cline was a speaker during a carbon market panel discussion during the International Fuel Ethanol Workshop & Expo June 11 in Indianapolis.

The 45Q tax credit awards credits per ton for carbon sequestered and injected, including for enhanced oil recovery. An update to the regulation in 2018 removed the cap on credits. Perhaps more important, the credit amounts were boosted. Straight storage of carbon dioxide in saline aquifers was credited at $20 per ton, but now will increase incrementally to $50 by 2025. For storage of carbon dioxide through enhance oil recovery and for carbon dioxide used to produce other fuels, chemicals or products, the old $10-per-ton credit will incrementally increase to $35. Amounts will be adjusted annually for inflation. The original 45Q, enacted in 2008, included multiple provisions that effectively barred the ethanol industry from taking advantage of it, for either geologic storage through enhanced oil recovery operations or for storage in saline aquifers. 

Ethanol plants can capture and depress carbon for enhance oil recovery for about $25 per ton, Cline said. But that does not include transportation, which requires a pipeline. “Each plant is going to have a different situation,” he said. Some geological formations will be ideal, he added.

Multiple areas of the tax credit remain unclear. “Overall, the technology is immature,” Cline said. “We are at the early stages of understanding how it will affect the industry. … There are a lot of details up in the air, as this rule has not been promulgated.”

 But 45Q is structured to increase revenue streams, while reducing carbon intensity, he said.

The U.S. Department of the Treasury has asked for comments on the rule by July 4. Cline urged producers to evaluate their unique situations and submit a comment.