Committee approves subsidy to narrow federal 45Q gap and spur CO2 use for enhanced oil recovery
January 17, 2025 | Minerals, Business & Economic Development Committee, Senate, Committees, Legislative, Wyoming
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The Senate Minerals, Business & Economic Development Committee voted to approve Senate File 17, a measure to provide a $10-per-ton payment to carbon‑dioxide owners who make CO2 available for enhanced oil recovery (EOR) projects in Wyoming. The committee approved the bill by roll call, with Senators Cooper, Jones, Nethercott, Rothfuss and Chairman Anderson all voting aye.
Backers said the bill is designed to address a market distortion created by the federal Section 45Q tax credit, which currently provides higher per‑ton credits for permanent geologic sequestration than for CO2 used for EOR. Pete Obermueller, representing the Petroleum Association of Wyoming, said, “The idea here is to equalize 45Q between permanent sequestration and enhanced oil recovery,” and described the state payment as a partial offset to that federal gap.
The bill would require CO2 providers to qualify for the federal 45Q credit and for the CO2 to be produced and used in Wyoming. Under the bill as discussed in the committee, the state would seed a fund with an initial appropriation of $10,000,000; then, as incremental production from EOR projects occurs, 3 percent of the resulting severance tax would be deposited into the fund and used to pay the $10-per-ton equalization to CO2 owners. Committee testimony emphasized that the payments would go to CO2 owners, not to oil producers, and that the program is structured as an investment that initially costs the state money but is expected to return revenue over the long life of EOR fields.
Lon Whitman of the Enhanced Oil Recovery Institute described Wyoming experience with CO2 EOR and the long timelines involved: “Enhanced oil recovery using CO2 has in Wyoming a 100% success rate,” he said, and he briefed senators on projects in development and project timelines that can take years to reach maximum production. Witnesses and committee discussion noted that capture, transport and storage costs matter: Whitman and others said transportation and storage fees account for much of the $25-per-ton gap between sequestration and EOR economics, and that the bill’s $10 per ton was chosen to address the portion of the gap attributable to market incentives rather than full cost differentials.
The measure ties eligibility to the federal 45Q program; several witnesses and senators stressed that if 45Q were repealed the state program would likewise be moot. The committee adopted a conceptual amendment, moved by Senator Rothfuss and seconded by Senator Nethercott, to add explicit language that would end the state program if federal law equalizes the 45Q credit amounts.
State officials agreed to implement the program if enacted. Rob Krieger, executive director of the Wyoming Energy Authority, told the committee the authority is prepared to administer the program. Matt Sachet, administrator of the Mineral Tax Division at the Department of Revenue, clarified current severance tax practice: if CO2 is produced as part of a natural‑gas stream, the full stream is taxed at the natural‑gas severance rate. He said CO2 produced from coal‑fired or other industrial facilities that is not severed from the ground is not taxed as severance.
Committee members asked about timelines and returns. Sponsors and witnesses said the state’s return on investment is expected over many years — witnesses used an approximate eight‑year lag to begin seeing returns and characterized the lifetime return as substantial, but not immediate. Witnesses also described multiple projects under development and the significant upfront costs for field preparation and pipeline infrastructure.
The committee recorded a roll‑call vote advancing Senate File 17 to the floor (ayes: Cooper, Jones, Nethercott, Rothfuss, Anderson).
Backers said the bill is designed to address a market distortion created by the federal Section 45Q tax credit, which currently provides higher per‑ton credits for permanent geologic sequestration than for CO2 used for EOR. Pete Obermueller, representing the Petroleum Association of Wyoming, said, “The idea here is to equalize 45Q between permanent sequestration and enhanced oil recovery,” and described the state payment as a partial offset to that federal gap.
The bill would require CO2 providers to qualify for the federal 45Q credit and for the CO2 to be produced and used in Wyoming. Under the bill as discussed in the committee, the state would seed a fund with an initial appropriation of $10,000,000; then, as incremental production from EOR projects occurs, 3 percent of the resulting severance tax would be deposited into the fund and used to pay the $10-per-ton equalization to CO2 owners. Committee testimony emphasized that the payments would go to CO2 owners, not to oil producers, and that the program is structured as an investment that initially costs the state money but is expected to return revenue over the long life of EOR fields.
Lon Whitman of the Enhanced Oil Recovery Institute described Wyoming experience with CO2 EOR and the long timelines involved: “Enhanced oil recovery using CO2 has in Wyoming a 100% success rate,” he said, and he briefed senators on projects in development and project timelines that can take years to reach maximum production. Witnesses and committee discussion noted that capture, transport and storage costs matter: Whitman and others said transportation and storage fees account for much of the $25-per-ton gap between sequestration and EOR economics, and that the bill’s $10 per ton was chosen to address the portion of the gap attributable to market incentives rather than full cost differentials.
The measure ties eligibility to the federal 45Q program; several witnesses and senators stressed that if 45Q were repealed the state program would likewise be moot. The committee adopted a conceptual amendment, moved by Senator Rothfuss and seconded by Senator Nethercott, to add explicit language that would end the state program if federal law equalizes the 45Q credit amounts.
State officials agreed to implement the program if enacted. Rob Krieger, executive director of the Wyoming Energy Authority, told the committee the authority is prepared to administer the program. Matt Sachet, administrator of the Mineral Tax Division at the Department of Revenue, clarified current severance tax practice: if CO2 is produced as part of a natural‑gas stream, the full stream is taxed at the natural‑gas severance rate. He said CO2 produced from coal‑fired or other industrial facilities that is not severed from the ground is not taxed as severance.
Committee members asked about timelines and returns. Sponsors and witnesses said the state’s return on investment is expected over many years — witnesses used an approximate eight‑year lag to begin seeing returns and characterized the lifetime return as substantial, but not immediate. Witnesses also described multiple projects under development and the significant upfront costs for field preparation and pipeline infrastructure.
The committee recorded a roll‑call vote advancing Senate File 17 to the floor (ayes: Cooper, Jones, Nethercott, Rothfuss, Anderson).
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