HR-1003-119
Referred to the House Committee on Ways and Means.
Sponsored by Kevin Hern (R-OK)
What it does
This bill would modify the existing Section 45Q federal tax credit for carbon oxide sequestration by consolidating the credit structure and establishing equal credit rates across different uses of captured carbon — including permanent underground storage, use in enhanced oil and natural gas recovery, and other approved utilization methods. It would set the base credit rate at $17 per metric ton (inflation-adjusted after 2026) and $36 per metric ton for secure geological storage, effective for tax years beginning after December 31, 2024.
Who benefits
Oil and natural gas companies that use captured carbon dioxide as a tertiary injectant in enhanced recovery projects, who would receive the same credit rate as those storing carbon permanently underground. Carbon capture technology developers and equipment manufacturers who would see broader market demand. Industrial facilities (power plants, cement, steel, and chemical plants) that capture carbon emissions and currently receive lower credits for certain uses. Investors in carbon capture projects who would benefit from more predictable and equalized incentives.
Who is hurt
Renewable energy developers who compete with fossil fuel industries for capital, as the bill may make enhanced oil and gas recovery more financially attractive. Taxpayers broadly, as expanding or equalizing tax credits reduces federal revenue. Environmental advocacy groups and communities concerned about climate change, who argue that crediting carbon used in oil and gas extraction undermines the climate rationale for the credit. Companies that had structured business models around the prior tiered credit structure may face adjustment costs.
Supporters argue
Supporters argue that the current tiered 45Q credit structure creates an arbitrary disparity that discourages investment in carbon capture at industrial facilities using enhanced oil recovery — a proven, commercially viable method of both sequestering carbon and producing domestic energy. They contend that parity across utilization methods would accelerate deployment of carbon capture technology across a broader range of industries, helping reduce emissions while supporting domestic energy production and the jobs that come with it.
Opponents argue
Opponents argue that equalizing credits for enhanced oil and gas recovery with permanent geological storage undermines the environmental purpose of the 45Q credit, since carbon used in oil recovery ultimately enables the extraction and combustion of additional fossil fuels, potentially resulting in a net increase in emissions. They contend that directing equivalent federal tax subsidies toward fossil fuel production methods — rather than reserving higher credits for permanent sequestration — misaligns public incentives with the goal of reducing overall carbon output.
Constitutional context
Tax credit bills must originate in the House under the Origination Clause (Art. I, §7, cl. 1), which this bill satisfies. The Taxing and Spending Clause (Art. I, §8, cl. 1) gives Congress broad authority to structure tax credits. No significant constitutional tension is present — this is a modification of an existing statutory credit within well-established congressional taxing authority.
Checks and balances
Congress holds authority to set and modify tax credit rates; the IRS administers and enforces 45Q credit claims; the Treasury Department issues implementing regulations. No branch gains new structural authority under this bill.
Historical precedent
The Section 45Q credit was originally enacted in 2008 and significantly expanded by the Bipartisan Budget Act of 2018 and the Inflation Reduction Act of 2022, which raised credit rates and broadened eligible uses — establishing a pattern of incremental legislative adjustments to the credit structure.