Abstract

The capture and subsequent geological sequestration of carbon dioxide (co2) – often referred to as carbon capture and sequestration or CCS – is considered a viable and sustainable approach to lowering anthropogenic greenhouse gas emissions. Various federal agencies within the United States have appropriated significant sums of money on producer subsidies that incentivize the use of CCS technology within the industrial sector. Despite this relatively large and prolonged investment, emissions data from the United States Environmental Protection Agency (EPA) suggests that CCS technology has a relatively limited impact on the net co2 emissions of an industrial facility employing said technology.

Introduction

In 2009, the United States Department of Energy (DOE) initiated a program designed to fund various industrial-scale CCS projects[1]. One such project, known as the Archer Daniels Midland CO2 Capture from Biofuels Production and Storage into the Mount Simon Sandstone Project (ADM Illinois ICCS) incurred a total cost of $208 million[2]. The DOE provided $141 million for this project and the remaining costs were covered by various other federal agencies with all appropriations ultimately originating from the American Recovery and Reinvestment Act of 2009[3].

In April of 2017, this industrial CCS facility, which is located in Decatur, Illinois, received a UIC Class VI injection well permit from the EPA and initiated commercial operations[4]. As a result, ADM – also known as Archer Daniels Midland – is required to submit Subpart RR annual monitoring reports for this facility to the EPA[5] and is also entitled to a 45Q(a)(1) federal tax credit that entitles ADM to reduce their total income tax liability by $20 for every metric ton of co2 that is sequestered by this facility[6].

In 2018, the United States Congress passed the FUTURE act, which is an amendment to the Internal Revenue Code of 1986 that will gradually ramp up the 45Q(a)(1) tax credit amount to $50 per metric ton of co2 over the course of 10 years[7-8]. According to both DOE and ADM press releases the maximum annual amount of co2 that can be sequestered by the Decatur CCS facility is one million metric tons[9-10].

Materials & Methods

The proceeding emissions and sequestration data has been sourced from the EPA’s Facility Level Greenhouse Gases Information Tool (FLIGHT). Financial data from both the United States Internal Revenue Service (IRS) and DOE has also been utilized.

Results and Discussion

Based on EPA facility-level data[11] total greenhouse gas emissions from ADM’s Decatur facility have remained relatively unchanged year-over-year despite CCS implementation. Moreover, co2 sequestration totals in both 2017 and 2018 have been roughly half of the stated maximum capability (one million metric tons) for the facility.

Average Annual GHG Emissions Totals (2010-2018) 4,547,433 Median Annual GHG Emissions Total (2010-2018) 4,507,309

Despite the significant taxpayer costs associated with bringing CCS technology online, the carbon footprint of the ADM facility appears to be relatively unchanged. Total EPA-reported greenhouse gas emissions during the years in which CCS was fully permitted and operational (e.g. 2017 and 2018) have been slightly below the 2010-2018 average for this facility (125 basis points below average in 2017 and 394 basis points below average in 2018). However, annual emissions for both 2017 and 2018 were well above the lowest annual total (4,206,309) which was recorded in 2016.

ADM’s 2020 Letter to Stockholders appears to confirm the limited impact that the Decatur CCS facility has had on overall greenhouse gas emissions for the corporation as a whole[12].

According to this graph, ADM realized approximately 500 basis points (e.g. an improvement from 10% to 15% net reduction) in greenhouse gas emissions reductions in 2017 and 2018, which are the two years that the EPA reported co2 capture and sequestration totals for the ADM CCS facility in Decatur, Illinois. However, it is worth noting that:

a) According to the EPA’s Facility Level Information on Greenhouse Gases Tool, ADM’s Decatur plant represents over 80% of total greenhouse gas emissions attributed to ADM facilities within the United States[13].

b) As demonstrated in the preceding analysis, the EPA’s Facility Level Information on Greenhouse Gases Tool points to a net increase in greenhouse gas emissions at ADM’s Decatur plant in both 2017 and 2018. Considering this net increase coupled with the fact that the Decatur plant represents over 80% of total greenhouse gas emissions attributed to ADM it is difficult envision a scenario that would allow ADM to realize the aforementioned 500 basis point reduction in overall corporate greenhouse gas emissions alluded to in their 2020 Letter to Stockholders. Even if this net reduction in emissions was realized it is fairly minimal considering the $208 million in tax revenue that was allocated to facilitate construction of the CCS facility in Decatur coupled with the substantial tax credits that ADM is entitled to on an annual basis due to the amount of co2 being captured and sequestered in their Decatur facility.

Based on the aforementioned IRS 45Q(a)(1) tax credit, ADM was entitled to a $10,133,000 reduction in their total income tax liability in 2017 and a $10,500,040 reduction to their total income tax liability in 2018. When the tax credit ramps up to $50 per metric ton of co2 sequestered ADM will be entitled to roughly $25 million in annual reductions to their total income tax liability based on the current amount of co2 being sequestered at the the Decatur, Illinois facility. This is a relatively large amount of annual post-tax subsidization considering the relatively minimal impact that ADM’s CCS facility has had on the company’s net greenhouse gas emissions.

According to the IRS, nearly 60 million metric tons of co2 have been claimed as of May 14, 2018[14-15]. It is not possible to ascertain the exact dollar value of the tax credits being issued in exchange for this vast amount of captured co2 that has been claimed because:

a) The 45Q tax credit allots two different dollar amounts of credit depending on what is done with the co2 once it has been captured; $20 if the captured co2 is geologically sequestered on a permanent basis and $10 if the captured co2 is used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project (ER/EOR)[16].

b) The IRS has not provided any details regarding how the nearly 60 million metric tons of captured co2 that have been claimed through May 14, 2018 have been categorized (e.g. $10 vs. $20 credits).

However, what is known is that only three facilities have ever complied with EPA Subpart RR reporting requirements[17], which the IRS has stipulated as a prerequisite to claiming the 45Q tax credit.

The only available data set that compares the total amount of co2 that was captured and subsequently used for ER/EOR[18] versus the amount of co2 that was captured and geologically sequestered on a permanent basis as is the case for the ADM CCS facility in Decatur[19] is provided by the EPA but only contains data that was captured through the end of 2014. According to this data, well under 2% of the total co2 was captured and geologically sequestered whereas over 98% was used for ER/EOR[20]. This would suggest that the vast majority of the nearly 60 million metric tons of co2 that have been claimed for the purpose of 45Q qualify for the $10 tax credit associated with the capture of co2 that is subsequently used for ER/EOR.

Assuming that the aforementioned 1:49 ratio is accurate, the dollar value of 45Q tax credits awarded through May 14, 2018 would be roughly $600 million. An FOIA request was submitted to the IRS in an effort to ascertain the actual total through 2019 as well as a breakdown of the entities that have claimed the 45Q tax credit and whether those entities qualified for the $10 vs. $20 credit amount, but the IRS denied the request due to regulations stipulating that third-party tax information cannot be released to the public. A follow-up FOIA request was submitted to the IRS in an effort to ascertain the aggregate number of corporate entities that received 45Q tax credits awarded in 2018 as well as the aggregate dollar value of those tax credits, with no information on which specific entities received those credits. The IRS denied the request due to the assertion that the agency does not track or capture either of these statistics.

Opportunities for Future Research

While the primary focus of this study is CCS, it is worth noting that the large number of tax credits appear to be claimed for ER/EOR merit further investigation because according to multiple IRS documents any entity claiming the 45Q tax credit must report the amount of co2 being captured to the EPA[21-23], yet in 2018 just one of the 109 entities listed in the EPA’s subpart UU data set (e.g. entities participating in ER/EOR) have reported co2 capture totals. This would appear to suggest that entities are qualifying for 45Q tax credits without demonstrating the positive climatological impact (e.g. the amount of co2 being captured and injected underground) that is the basis for earning the tax credit in the first place.

Moreover, according to the International Energy Association roughly 70% of the co2 that is used for ER/EOR in the United States is sourced from naturally-occurring underground deposits[24] as opposed to being captured from co2-emitting facilities such as the ADM facility in Decatur, Illinois. And since as much as 20% of the co2 that is used for ER/EOR eventually makes its way back into Earth’s atmosphere[25] this naturally-sourced co2 would appear to have negative climatological ramifications, which would run contrary to the inherent purpose of 45Q.

As for the 30% of co2 that is captured in co2-emitting facilities and is subsequently used for ER/EOR, the concern here is quite elementary in that this methodology requires a recursive loop of sorts wherein one co2-emitting facility, such as a coal plant, captures a fraction of the co2 that is emitted in said facility and that captured co2 is subsequently injected underground for the purposes of another co2-emitting activity; oil and/or natural gas extraction.

These and other facets of ER/EOR suggest that its long-term scalability and sustainability are questionable and therefore provide opportunities for future research, particularly since the relatively low net emissions reduction from the ADM facility in Decatur, Illinois appears to validate published research relating to the net impact that carbon capture has on greenhouse gas emissions[26].

References

1) United States Department of Energy, Archer Daniels Midland Illinois ICCS Project (2020). https://www.energy.gov/fe/archer-daniels-midland-company

2) Massachusetts Institute of Technology, Decatur Fact Sheet: Carbon Dioxide Capture and Storage Project (2016). https://sequestration.mit.edu/tools/projects/decatur.html

3) Hettinger, Claire , Tom Lisi. $208 million project stores ADM’s carbon deep beneath Decatur. Herald & Review . 1 Oct. 2017, https://herald-review.com/news/local/million-project-stores-adm-s-carbon-deep-beneath-decatur/article_b0c2fea2-4929-5190-b833-46dddd909e02.html. Accessed 6 Apr. 2020.

4) United States Environmental Protection Agency, Archer Daniels Midland – Final Modified Permit Attachments (2017). https://www.epa.gov/uic/archer-daniels-midland-final-modified-permit-attachments

5) United States Environmental Protection Agency, Subpart RR Annual Monitoring Reports (2020). https://www.epa.gov/ghgreporting/subpart-rr-annual-monitoring-reports

6) United States Department of the Treasury Internal Revenue Service, Form 8933 Carbon Oxide Sequestration Credit (2020). https://www.irs.gov/pub/irs-pdf/f8933.pdf

7) Library of Congress, S.1535 – FUTURE Act (2020). https://www.congress.gov/bill/115th-congress/senate-bill/1535/text

8) Great Plains Institute, Primer: Section 45Q Tax Credit for Carbon Capture Projects (2019). https://www.betterenergy.org/blog/primer-section-45q-tax-credit-for-carbon-capture-projects/

9) United States Department of Energy, Official Celebration Launches Illinois ICCS Project (2020). https://www.energy.gov/fe/articles/official-celebration-launches-illinois-iccs-project

10) ADM Worldwide, ADM Begins Operations for Second Carbon Capture and Storage Project (2017). https://www.adm.com/news/news-releases/adm-begins-operations-for-second-carbon-capture-and-storage-project-1

11) United States Environmental Protection Agency, Facility Level Information on Greenhouse Gases Tool data for Archer Daniels Midland 4666 Faries Parkway, Decatur, Illinois, 62521 (2020). https://ghgdata.epa.gov/ghgp/service/facilityDetail/2018?id=1005661&ds=E&et=&popup=true

12) ADM. (2020). Letter to Stockholders 2020. Retrieved from https://assets.adm.com/Investors/Shareholder-Reports/2019/ADM-Proxy-Materials.pdf

13) United States Environmental Protection Agency, Facility Level Information on Greenhouse Gases Tool Data for all Archer Daniels Midland Facilities in the United States (2020). https://ghgdata.epa.gov/ghgp/main.do#/listFacility/?q=archer%20daniels%20midland&st=&bs=&et=&fid=&sf=11001000&lowE=-20000&highE=23000000&g1=1&g2=1&g3=1&g4=1&g5=1&g6=0&g7=1&g8=1&g9=1&g10=1&g11=1&g12=1&s1=1&s2=1&s3=1&s4=1&s5=1&s6=1&s7=1&s8=1&s9=1&s10=1&s201=1&s202=1&s203=1&s204=1&s301=1&s302=1&s303=1&s304=1&s305=1&s306=1&s307=1&s401=1&s402=1&s403=1&s404=1&s405=1&s601=1&s602=1&s701=1&s702=1&s703=1&s704=1&s705=1&s706=1&s707=1&s708=1&s709=1&s710=1&s711=1&s801=1&s802=1&s803=1&s804=1&s805=1&s806=1&s807=1&s808=1&s809=1&s810=1&s901=1&s902=1&s903=1&s904=1&s905=1&s906=1&s907=1&s908=1&s909=1&s910=1&s911=1&si=&ss=&so=0&ds=E&yr=2018&tr=current&cyr=2018&ol=0&sl=0&rs=ALL

14) United States Internal Revenue Service, Internal Revenue Bulletin 2018-20. Notice 2018-40. https://www.irs.gov/pub/irs-irbs/irb18-20.pdf

15) Noël, John. Carbon Capture and Release: Oversight Failures in the Section 45Q Tax Credit for Enhanced Oil Recovery (p. 8). Clean Water Action/Clean Water Fund. (2018). https://www.cleanwateraction.org/sites/default/files/docs/publications/Carbon%20Capture%20and%20Release%20-%20Clean%20Water%20Action%20-%20May%202018%20-%20Web%20Resolution.pdf

16) United States Department of the Treasury Internal Revenue Service, Form 8933 Carbon Oxide Sequestration Credit (2020). https://www.irs.gov/pub/irs-pdf/f8933.pdf

17) United States Environmental Protection Agency, Subpart RR Annual Monitoring Reports (2020). https://www.epa.gov/ghgreporting/subpart-rr-annual-monitoring-reports

18) United States Environmental Protection Agency, Subpart UU – Injection of Carbon Dioxide (2020). https://www.epa.gov/ghgreporting/subpart-uu-injection-carbon-dioxide

19) United States Environmental Protection Agency, Subpart UU – Geologic Sequestration of Carbon Dioxide (2020). https://www.epa.gov/ghgreporting/subpart-uu-injection-carbon-dioxide

20) United States Environmental Protection Agency, Capture, Supply, and Underground Injection of Carbon Dioxide (2020). https://www.epa.gov/ghgreporting/capture-supply-and-underground-injection-carbon-dioxide

21) United States Department of the Treasury Internal Revenue Service, Internal Revenue Bulletin: 2009-44 (2009). https://www.irs.gov/irb/2009-44_IRB#NOT-2009-

22) United States Department of the Treasury Internal Revenue Service, Section 1: Oil and Gas Handbook, 4.41.1.3.5 (2013). https://www.irs.gov/irm/part4/irm_04-041-001#idm139662020024880

23) United States Department of the Treasury Internal Revenue Service, “Internal Revenue Bulletin 2018-20, Notice 2018-40 (2018). https://www.irs.gov/pub/irs-irbs/irb18-20.pdf

24) International Energy Agency, Can CO2-EOR really provide carbon-negative oil? (2019). https://www.iea.org/commentaries/can-co2-eor-really-provide-carbon-negative-oil

25) Herzog, Howard J., Ken Caldeira, and Eric Adams. Carbon Sequestration Via Direct Injection . MIT CC&ST Program. https://sequestration.mit.edu/pdf/direct_injection.pdf. Accessed 8 Apr. 2020.