Notwithstanding the financial tumult that has characterized early 2009, industries and investors with an interest in carbon capture and sequestration (CCS) technology have received positive news from Washington.  CCS investment played a prominent role in last month’s American Recovery and Reinvestment Act (ARRA) and could be expanded further in the Omnibus spending bill, which passed in the House and is expected to reach the Senate floor for a vote tomorrow.  These bills provide a range of CCS investment incentives, covering both coal and non-coal industrial CCS applications. 

ARRA:  The economic stimulus bill signed by the President last month appropriated $3.4 billion for various fossil-fuel programs, most with either express or potential application to the CCS industry, including:

• $1,000,000,000 for unspecified fossil energy research and development programs (While the final bill is silent as to what programs would qualify for these funds, members of the Illinois Congressional delegation have already argued that the $1 billion appropriation for unspecified “fossil energy research program” activities should be directed to rejuvenating the Futuregen project in Mattoon, IL);
• $800,000,000 for the Department of Energy’s Clean Coal Power Initiative (CPPI) Round III Funding Opportunity Announcement (FOA);
• $1,520,000,000 for industrial carbon capture and energy efficiency improvement projects, including a small allocation for innovative concepts for beneficial CO2 reuse;
• $50,000,000 for a competitive solicitation for site characterization activities in geologic formations; and
• $20,000,000 for geologic sequestration training and research grants. 

The tax provisions of ARRA provide billions more in tax incentives for CCS and other clean energy investments, including:

• $2.4 billion to expand the qualified energy conservation bond program (tax credit bonds allocated to states and large local governments to finance clean energy projects, including projects incorporating CCS technology); and
• $2.3 billion for an advanced energy property investment credit, providing a 30 percent credit for investment in property designed to capture and sequester carbon dioxide as part of qualified advanced energy manufacturing projects.”

The Department of Energy, on March 4, 2008, issued “Notices of Intent” to issue funding announcements in four areas, including:

• Geologic Sequestration Training and Research            
• CCS from Industrial Sources           
• Site Characterization of Promising Geologic Formations for CO2 Storage            
• An Amended FOA for Round 3 of the Clean Coal Power Initiative.

Omnibus Bill:  The proposed Omnibus spending bill that passed in the House and is now under consideration in the Senate would make hundreds of millions more available for CCS projects.  Specifically, the “statement accompanying the Bill” describes proposed appropriations to include:

• $288,174,000 in additional funding for CPPI;
• $73,000,000 in funding for Futuregen;
• $404,235,850 to support research and development into “Fuels and Power Systems,” including funding for a pre-feasibility analysis of the technical, economic and environmental aspects of a clean coal biomass polygeneration plant equipped with carbon capture using a range of coals to produce chemicals, fuels and power at diverse locations; and
• $43,864,150 for Congressionally-directed projects, many of which are related either directly or indirectly to the development of CCS technology for power generation and industrial systems.

Between the stimulus bill and the proposed Omnibus bill, power producers, manufacturers, investors and related industries should have a variety of opportunities to obtain federal support for CCS research, development and commercialization efforts.

For further information about this topic, please contact Akin Gump.