Carbon sequestration credits are turning into a battleground between gas producers and others.

The US tax code allows tax credits to be claimed for capturing carbon dioxide and sequestering it underground so that the carbon dioxide does not add to global warming. The CO2 must be captured at an “industrial facility” owned by the taxpayer. The credits are $20 per metric ton of CO2 stored underground. They are $10 per metric ton for CO2 used as a tertiary injectant to recover oil or gas.

Gas producers want credits for removing CO2 from the gas they produce. US Senator Kay Bailey Hutchinson sent a letter to the IRS commissioner on behalf of gas producers last summer. Hutchinson is from Texas. Others say that this is not capture at an “industrial facility.” There was a meeting with senior Treasury tax officials in early April.

The stakes are high. The IRS is supposed to track how much CO2 has been sequestered on account of the tax credits and announce when 75 million tons are reached. No more tax credits may be claimed after the year in which the 75-million-ton target is reached. Total US greenhouse gas emissions are about 6.8 billion tons a year, of which roughly a third come from power plants.

Keith Martin