Hello! Welcome back to another week of The Carbon Corner!

This week we have lots of interesting news, including new wells, proposed legislation, and a brief from Taxpayer for Common Sense claiming an issue with historically rewarded 45Q credits!

LSB Industries, Inc. and Lapis Energy LP File for Class VI Well Permit

Earlier this week, LSB Industries, Inc. (LSB) and Lapis Energy LP (Lapis) announced their joint filing of a Class VI well permit application with the U.S. Environmental Protection Agency (EPA). The project is set to take place at LSB's facility in El Dorado, Arkansas.

Once the application is approved, Lapis will begin construction on the carbon capture and sequestration structure. The company expects to reduce the plant's emissions by 25% and sequester more than 450,000 metric tons of carbon annually. LSB also plans to produce over 375,000 metric tons of "blue" ammonia.

Reg Manhas, Lapis Energy's CEO, stated, "We are very pleased to have submitted the Class VI permit application to the EPA. We conducted extensive up-front research, computational modeling, and tests in order to confirm the efficacy to permanently sequester CO2 at LSB's El Dorado facility and believe that the quantity and quality of the data will facilitate the EPA process. This project benefits from the presence of geological formations that provide high-capacity storage with excellent injection potential directly beneath the facility. These conditions allow for a very short pipeline within LSB's property to transport the CO2 from the ammonia plant. We look forward to working with the EPA towards approval of this important Class VI well application."

Chevron Australia Furthers Investment in CCS Research

The Australian Petroleum Production & Exploration Association (APPEA) recently raised funding needs to the attention of the Australian federal government. In response, Chevron Australia stepped in with a contribution of US$26 million toward research in Western Australia and Victoria.

Of the funds, US$15 million will go towards the Barrow Dampier CCS Regional Study. This study will provide a 3D seismic and storage assessment of carbon capture and storage areas in the Carnarvon basin. The remaining US$11 million will advance the infrastructure development at the Otway International Test Centre. It will allow for more OC2 migration testing.

Major Permitting Backlog for EPA Approval

They say, "Good things take time," but how long is long enough? At a hearing earlier this month, Senator Joe Manchin, D-W.V, who serves as the Senate Energy and Natural Resources Committee chairman, brought the EPA's slow paced permit review process to the spotlight. He asked why only two carbon storage well permits had been granted. The problem is apparent, with the department reviewing more than 30 underground storage projects, some dating back to 2020.

Senator Manchin is one of many to raise issues with the process. Louisiana Governor John Bel Edwards sent a letter to EPA administrator Michael Regan requesting contact and an update on the state's application filed years ago.

In 2021, Congress gave $75 million to the EPA solely to expand its permitting staff and capacity for project reviews. People are now speaking up on the still seemingly lacking process. Luke Bolar, the spokesman for the Clearpath Foundation, a conservative environmental group, said, "These projects can't move forward if they don't have the means to sequester the carbon. There's a lot of pent-up demand out there."

Governor Dunleavy Proposes a New Carbon Storage Plan for Alaska

Alaskan governor Mike Dunleavy, has proposed a new plan that capitalizes on the state's prosperous oil and gas industry while generating additional funds through carbon storage. Alaska is known for its abundant traditional resources, like oil, gas, minerals, and timber. The governor plans to keep existing interests intact while setting up programs where companies could buy credits to offset their emissions.

Dunleavy believes the state could earn billions annually without raising taxes for Alaskan residents. Currently, each resident receives checks annually from the state's oil-wealth fund and does not pay statewide sales or personal income taxes.

The proposed plan also includes shipping carbon dioxide to Alaska to be stored. Projects are still testing this technology in Europe, so the details are unclear surrounding this initiative. However, it would be a step towards establishing a protocol for underground injection and mass storage by the Department of Natural Resources.

Matt Jackson, climate program manager with the Southeast Alaska Conservation Council, said, "[The governor] will be the first person to tell you it doesn't have anything to do with climate change, and it doesn't have anything to do with solving Alaska's energy needs." Dunleavy himself confirmed this by saying, "The reason we landed on this is it doesn't gore any ox, and more importantly, it's in line with what Alaska does, and that's resources."

Taxpayers for Common Sense Brief Claims 90 Percent of Carbon Sequestration Tax Credits were Rewarded Based on Fraud

Last week, Taxpayers for Common Sense published a briefing that analyzed the 45Q tax credits distributed by the U.S. Internal Revenue Code (IRS) between 2010 and 2019. The report found that of the $1 billion in credits granted, $894 million did not comply with the EPA requirements for reporting on sequestered carbon.

One of the main focuses of the brief is the tax credits rewarded towards Enhanced Oil Recovery (EOR) projects that do not have net negative emissions throughout the project's entire life.

Taxpayers for Common Sense Vice President Autumn Hanna said, "No one can deny the oil and gas industry's non-compliance and fraudulent 45Q claims. Tax credits for CO2 storage have a failed history. The expansion of 45Q is particularly worrisome since it could open the floodgates to more fraud and abuse. Based on the most recent information available, there is little assurance that 45Q will do more than pad the pockets of special interests, primarily oil and gas companies and the ethanol industry."

To download the new 45Q issue brief from Taxpayer for Common Sense, visit:

​https://www.taxpayer.net/wp-content/uploads/2023/02/Carbon-Capture-and-Sequestration-Credit-45Q-Issue-Brief_Feb2023.pdf​

That is all the news we have for this week! Check back next week for updates and fresh information!

Schaper Energy Consulting is a professional engineering firm offering carbon strategy services to CCS site developers. Check out some examples of our projects here: https://schaperintl.com/carbon-strategies/

If you have questions or comments, please contact us at info@schaperintl.com.

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