American Oil and Gas Reporter - March 2018 - 28

Federal Update

Spending Bill Includes CO2 EOR Credit
WASHINGTON-The federal spending
bill approved by Congress in early February contains a number of tax tidbits,
including a provision to increase and extend a tax credit for enhanced oil recovery
utilizing carbon dioxide injection.
However, the same bill also reactivates
the Oil Spill Liability Trust Fund (OSLTF)
excise tax and authorizes the sale of additional crude oil from the Strategic Petroleum Reserve.
A few days later, President Donald
Trump released his infrastructure plan
and a fiscal 2019 budget outline that together would cut environmental regulation,
speed pipeline and other infrastructure
permitting, and promote offshore oil and
gas development.
Contained within the budget deal
agreed to by Congress and signed by
President Trump on Feb. 9 was the Carbon
Capture Utilization and Storage Act introduced by Senators Heidi Heitkamp,
D-N.D., Shelley Moore Capito, R-W.V.,
Sheldon Whitehouse, D-R.I., and John
Barrasso, R-Wy.
According to Heitkamp's office, the
bill extends and increases a tax credit for
industrial CO2 captured and either sequestered, used for another end product
or used in enhanced oil recovery that was
enacted as part of the Energy Improvement
and Extension Act of 2008. The original
credit amounted to $20 a metric ton for
qualified CO2 that was captured and disposed of in secure geological storage,
and $10 a ton for CO2 captured and used
in a qualified EOR project.
Heitkamp reports the new law extends
the credit to 12 years for qualifying facilities that commence construction by
Jan. 1, 2024, and increases the amount
of the credit to $50 a metric ton for permanent geologic storage and to $35 a
ton for CO2 used for EOR.
However, the National Ocean Industries
Association notes that the budget deal
also restores the OSLTF tax on domestic
production and imported crude oil and
petroleum products to 9 cents a barrel effective March 1. According to a report
cited by the Texas Alliance of Energy
Producers, the tax had lapsed at the end
of last year when Republican leaders decided against renewing it in December.
According to the Congressional Research Service, the OSLTF generated an
average of $500 million a year and had a
balance of $5.8 billion at the time it lapsed.
Published reports say the budget agreement also mandates the sale of 100 million
28 THE AMERICAN OIL & GAS REPORTER

barrels of SPR crude during the next 10
years and authorizes the sale of another
$350 million of government-owned crude
in FY 2018 that was called for initially
in a 2015 budget bill to be used for maintaining the reserve (AOGR, December
2015, pg. 28).
At the beginning of February, the reports indicate, the SPR held 665 million
barrels of oil. If all the sales take place
as called for, the volume of oil will drop
to about 406 million barrels, or 56 percent
of total SPR capacity, the reports say.
A number of other energy tax credits
either were enacted or extended in the
budget bill, other reports say, including:
* An 18-cent a kilowatt-hour credit
for nuclear power plants larger than 6,000
megawatts;
* Credits ranging from $4,000 to
$40,000 for fuel-cell vehicles;
* A $1.00 a gallon credit for blending
biodiesel that expired at the end of 2016;
* A 30 percent deduction for the cost
of installing infrastructure for alternative
fuels, including biodiesel and natural gas
pumps; and
* Credits for installing combined
heat and power turbines as well as microturbines.
Trump Budget Proposal
On Feb. 12, President Trump released
an FY 2019 budget proposal that would
"return the Environmental Protection
Agency to its core mission" and reduce
"unnecessary reporting burdens on the
regulated community," according to published reports.
An EPA statement notes that its $6.1
billion budget request-25 percent less than
its 2017 spending authorization-includes
trimming $598.5 million from programs
"that create unnecessary redundancies or
those that have served their purpose and
have accomplished their mission."
Some of the specific changes reportedly
anticipated by the administration budget
proposal are amending the Clean Air Act
to eliminate the requirement for EPA to
review other agencies' environmental impact statements, and to amend the Clean
Water Act so as to eliminate EPA's ability
to veto an Army Corps of Engineers' infrastructure project.
In addition, other reports say, the
Trump budget aims to cut funding for
climate programs at the Office of Science
and Technology from $762 million to
$489 million.
The Independent Petroleum Association

of America notes that Trump's budget
plan also would cut funding for several
activities related to the Endangered Species
Act and direct remaining monies "to the
recovery of the more than 1,660 species
listed domestically as threatened or endangered, nearly 400 of which were listed
between 2010 and 2017."
Among Trump's ESA proposals, IPAA
says, are:
* Cutting funds allocated to listing
activities from $20.4 million to $10.9
million;
* Decreasing funding for habitat conservation from $71.0 million to $46.0
million; and
* Eliminating all $53.0 million earmarked for Cooperative Endangered
Species Conservation Fund grants.
Promote Energy Development
NOIA praises Trump's budget proposal
for the Department of the Interior as "forward thinking . . . to enable industry to
evaluate and explore for offshore energy
resources safely while protecting the environment."
"The budget proposal maintains a sensible offshore revenue sharing program.
It also addresses the specter of exorbitant
offshore inspection fees," says NOIA
President Randall Luthi.
DOI's Bureau of Safety and Environmental Enforcement says its FY 2019
budget request of $199.9 million "will
support the administration's objective of
facilitating energy dominance through increased domestic oil and gas production
by reducing unnecessary regulatory burdens
while maintaining or advancing the level
of safety and environmental protection."
The agency adds that its director's
Change Management Action Plan revolves
around improving and streamlining
processes that include such things as an
"inspection strategy incorporating a riskbased inspection protocol."
The Bureau of Ocean Energy Management says its budget proposal mandates
it develop and implement a new Outer
Continental Shelf oil and gas leasing program. The agency says $9.4 million of
its total $179.3 FY 2019 request will go
toward building a new OCS program that
considers and begins implementing the
25 planning areas identified in the 201924 program announced in January.
Overall, published reports say, Interior
Secretary Ryan Zinke is requesting $11.7
billion in FY 2019, compared with $13.5
billion Congress authorized for the agency
American Oil and Gas Reporter - March 2018

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