Secure Geological Storage of CO₂ 

Issue Background  

Safe and secure geological storage of captured carbon dioxide (CO₂) is a critical tool the US and the world must deploy to help mitigate the worst impacts of our changing climate. To make the meaningful contributions necessary to meet emissions reduction goals and climate targets, carbon storage infrastructure must scale to millions of metric tons per year of commercially available, secure geologic storage. 

People and organizations representing a broad range of views agree on the need for technologies designed to address carbon emissions at the source and in the air — we must have confidence in the safe, permanent storage of CO₂ in appropriate geologic formations deep underground. 

Commercial interest in carbon management technologies is growing rapidly thanks to robust and bipartisan federal support for the economywide deployment of these climate-essential technologies, including the historic investments made in the Bipartisan Infrastructure Law and the enhancements to the federal Section 45Q tax credit enacted in 2022. Most announced capture and removal projects intend to store captured CO₂ deep underground safely and permanently in saline geologic formations. 

Safety & Permanence of CO₂ Storage 

CO₂ is injected and safely and permanently stored deep underground into appropriate rock formations. Storage typically occurs about one mile (1600 meters) below the earth’s surface, far beneath underground sources of drinking water. Before potential storage sites can move forward, they must provide highly detailed data and models to federal or state regulators that demonstrate safe and permanent storage of CO₂ and ensure the sites are continually monitored. The US has over 50 years of commercial experience safely capturing, transporting, reusing, and storing CO₂ at a large scale since projects began in the 1970s. In addition to commercial experience in the US, the US Department of Energy (DOE) has been studying and field-testing geologic storage for over 20 years. Their work has overwhelmingly demonstrated that geologic storage of CO₂ is a safe and permanent practice with a very low risk of CO₂ migrating outside the target geological formation when properly sited and carried out. 

45Q Background  

The Section 45Q tax credit is performance-based, meaning it is only awarded to projects after they successfully demonstrate the capture and subsequent secure geological storage of CO₂ or utilization in the production of low-carbon products that permanently isolate or displace emissions of CO₂. As a matter of law and design, 45Q cannot be used as a subsidy by companies that fail to capture and store CO₂. 

Additionally, thanks to broad bipartisan support for carbon management technologies, Congress has continued to make targeted, pragmatic reforms to the 45Q tax credit to ensure it remains a significant driver of emissions reductions. Currently, of the nearly 220 announced carbon management projects across a range of emitting industries, about 155 projects (i.e., more than 70 percent of announced projects) intend to store the captured CO₂ in saline geologic formations. 

Companies that install carbon capture equipment at a facility and securely store or reuse the captured CO₂ are eligible to claim 45Q. There are minimum capture amounts that a facility must meet to be eligible for the tax credit. The value of credits an eligible company may claim is based on the amount of CO₂ captured and subsequently stored or utilized.  

Regulatory Oversight Over Secure Geological Storage at EPA and IRS 

Federal and state regulatory authorities are central to ensuring safe and secure geologic storage in saline formations through a rigorous system of monitoring, verification, and reporting (MRV). Robust reporting protocols remain the foundational oversight mechanism for ensuring public and policymaker confidence in the 45Q tax credit.  

UIC Class II and Class VI Well Permits and Approved MRV Plans 

As established in section 45Q regulations finalized in 2021, the process to claim credits is overseen by both the Internal Revenue Service (IRS) and the Environmental Protection Agency (EPA). Secure geological storage of CO₂ first requires applicable permits from the EPA Underground Injection Control (UIC) Program or states that have been delegated primary enforcement authority—or primacy—over geological storage. The EPA oversees two types of storage wells for CO₂: Class II and Class VI.  

Class II is used for the storage of CO₂ in wells associated with oil and gas production, and Class VI is used for the storage of CO₂ in saline aquifers. All well classes regulated by UIC are designed to protect public health and underground sources of drinking water. Class II and VI well regulations ensure that geology in the project area can receive and permanently store injected CO_2. Ultimately, to claim the 45Q tax credit, claimants must demonstrate secure geological storage of captured CO₂ to the EPA and IRS.  

Compliance with EPA’s Greenhouse Gas Reporting Program 

To claim the credit, claimants must obtain approval for an MRV plan and report amounts of CO₂ geologically stored to the EPA’s Greenhouse Gas Reporting Program (GHGRP) Subpart RR or Subpart VV reporting pathways. The GHGRP Subpart RR and Subpart VV reporting pathways are designed to accurately quantify and publicly report the quantity of CO₂ geologically stored by a project. IRS and EPA maintain oversight over these projects through various programs, depending on the type of geological storage. For permanent storage in Class VI wells, operators must comply with the EPA’s GHGRP Subpart RR and the Class VI program’s MRV requirements. Operators using captured CO₂ for Enhanced Oil Recovery (EOR) to claim 45Q credits must report to GHGRP Subpart RR or comply with the International Organization for Standardization (ISO) 27916 standard and report to GHGRP Subpart VV. EOR operators must also comply with MRV protocols established under the EPA’s Underground Injection Control Program Class II.  

EPA has robust reporting and verification protocols under the GHGRP. Over time, the agency has sought to continually improve data collection practices under the GHGRP, including, most recently, the agency’s proposed Revisions and Confidentiality Determinations for Data Elements Under the Greenhouse Gas Reporting Rule. The proposed changes were finalized in May 2024 and included the creation of Subpart VV under the GHGRP, creating equivalency between public reporting across all geologic storage projects. These and other changes to the GHGRP ensure transparency in reporting across reporting structures used by EPA. 

Necessary Reporting to Treasury, IRS, and EPA to claim 45Q 

Only when project operators comply with the above-outlined requirements may they claim the 45Q tax credit using IRS form 8933, which includes mandatory reporting and record-keeping requirements. In addition to the aforementioned EPA reporting structures for geologic storage of CO₂, IRS and EPA participate in a legally mandated inter-agency cooperative information exchange, as outlined in the 45Q regulations: “for contracts for the disposal of carbon oxide or use as a tertiary injectant in enhanced oil or natural gas recovery, the following information must be included: identifying information (name of operator, field, unit, and reservoir), the location (county and state) and the identification number assigned to the facility by the EPA’s electronic Greenhouse Gas Reporting Tool (e-GGRT ID number). The e-GGRT ID number will allow the IRS to reconcile information with data reported to the EPA’s GHGRP and otherwise receive technical assistance from the EPA.”  

Moreover, companies are not allowed to claim the tax credit for any year in which they fail to submit complete documentation in a timely manner, including the required certifications. The IRS only allows the credit to be claimed for a tax year for which complete documentation and certification have been submitted. In other words, inter-agency coordination is mandated by law and, most importantly, is working. 

Finally, misreporting under the EPA’s GHGRP carries criminal and civil penalties. According to EPA regulations, “any violation of any requirement of this part shall be a violation of the Clean Air Act, including section 114 (42 USC 7414). A violation includes but is not limited to failure to report GHG emissions, failure to collect data needed to calculate GHG emissions, failure to continuously monitor and test as required, failure to retain records needed to verify the amount of GHG emissions, and failure to calculate GHG emissions following the methodologies specified in this part. Each day of a violation constitutes a separate violation.”  

In addition to the EPA process, the Treasury has audit power over 45Q credits. Companies or individuals are subject to audit review of their tax returns and criminal penalties for submitting false information, including on forms used to claim the 45Q tax credit. 

Not only does the above reporting prove its function, but it also prescribes paths for remuneration and methods of holding violators accountable. Attempting to impose additional reporting requirements beyond these is likely excessive and duplicative. 

The Coalition’s role in advocating for robust, transparent reporting mechanisms  

The Coalition has long supported robust reporting structures and has maintained that public transparency, reporting, and oversight provisions are vital to maintaining public and policymaker support of the 45Q tax program. Integral to this confidence are the MRV plans the EPA must approve and the reporting requirements required for secure geological storage established through the EPA’s GHGRP. 

Both the Coalition, EPA, and IRS understand the importance of ensuring that captured CO₂ remains permanently stored and that the 45Q tax credit is only awarded to producers who comply with agency regulations. This is reflected in current regulations and was reaffirmed by the Coalition in comments submitted to EPA on the same matter in 2023. 

Conclusion  

Current MRV protocols surrounding the 45Q tax credit are working effectively as intended by law. The Coalition has had a direct hand in researching and recommending several practices to EPA and IRS and has seen firsthand the effectiveness of the methodology implemented in the final 45Q regulation. While occasional improvements to these procedures are necessary and desirable, they must be weighed against the possibility of overburdening project developers with duplicative regulations that do not provide EPA or IRS with new information – especially where newer technologies are concerned. The current reporting protocols continue to ensure that, as a matter of law and design, 45Q cannot be used as a subsidy by companies that fail to capture and store CO₂. 

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 Convened by the Great Plains Institute, the Carbon Capture Coalition is a nonpartisan collaboration of more than 100 companies, unions, conservation and environmental policy organizations, building federal policy support to enable economywide, commercial scale deployment of carbon management technologies. This includes carbon capture, removal, transport, utilization, and storage from industrial facilities, power plants, and ambient air.