With US CCS Policy in Flux, Exxon Makes Its Pitch

Companies considering carbon capture and storage (CCS) projects need per-ton government fiscal incentives to roughly double in the US if the technology is to make a significant dent on the country’s carbon emissions, an Exxon Mobil official argued Monday.

“In that $100/ton range, you would make a very, very significant impact, particularly where the heavy industry is in places like the Gulf Coast,” Neil Chapman, senior vice president for Exxon Mobil who oversees the company’s upstream operations, said at the Energy Intelligence Forum 2021.

The remarks come as lawmakers in Washington debate different measures aimed at expanding the existing tax incentive program for carbon capture known as 45Q. It is just one of many issues in play as lawmakers seek to advance both a Democrats-only spending package and a bipartisan infrastructure bill.

The bipartisan package includes funding for government agencies to process permits at the state and federal level; cash to implement a new Department of Energy program aimed at building pilot plants; and establishes cost-sharing grants for commercial-scale hubs in fossil fuel regions or natural gas plants.

Halfway There

Exxon’s massive Houston Hub CCS concept to join facilities around the Houston ship channel could get a boost from some of those policy changes, but Chapman’s remarks underscore that the company and others are looking for additional government tax breaks to move carbon capture projects forward.

That hub, if it materializes, would likely involve facilities with waste streams that have lower concentrations of carbon dioxide, such as refineries and chemical plants, making it more expensive to recover.

“You’ve got to do something to concentrate the CO2, and that can be an expensive step … $50 [per ton] 45Q won’t get you there,” Chapman said, referring to the existing credit payment program. “So there has to be policy support at some stage to be able to get after the bulk of the CO2 emissions.”

Chapman’s $100/ton point is roughly in line with other estimates for more complicated industrial carbon capture projects. A Rhodium Group analysis published in April found refineries needed a tax credit in the range of $75-$101 per ton to retrofit most existing facilities. Cement would require a $75-$95/ton credit and iron and steel facilities would need $82-$104/ton, according to the study.

Natural gas processing and ethanol facilities both come in under the current $50/ton credit, because CO2 is relatively concentrated in those gas streams. But Chapman noted these concentrated sources make up a small fraction of the economy’s single-point emissions.

Lawmakers are also considering multiple other changes, including increased payments for carbon capture at industrial and power sites; direct payment options that allow developers to avoid complicated project structures; increased value for direct air capture; and the elimination of eligibility requirements to enable smaller facilities to qualify.

Chapman told the Forum that Exxon is engaging with the Biden administration to explain the level of incentives needed to spearhead meaningful CCS installations. The Exxon executive says those conversations have been met with “great receptivity,” although the fate of expanded incentives is largely dependent on the spending packages up for debate on Capitol Hill.