Hoeven’s proposal would incentivize use of emission-reducing technologies for coal plants

U.S. Sen. John Hoeven (R-ND) this month unveiled a bipartisan bill that supports innovative new energy technologies that would improve the carbon emission profile of coal plants. 

The Carbon Capture Modernization Act, S. 407, would modify the Section 48A Advanced Coal Tax Credit to incentivize the use of emission-reducing carbon capture and sequestration (CCS) technology, specifically, according to a one-page summary of the bill provided by the senator’s office.

“We worked hard with energy stakeholders and researchers in North Dakota and Minnesota to craft legislation that modernizes the 48A tax credit and will better advance the use of CCS technology,” said Sen. Hoeven, referring to the lead original cosponsor of S. 407 U.S. Sen. Tina Smith (D-MN). 

“This technology is vital to helping ensure our nation can continue to make use of all of its abundant energy resources,” Sen. Hoeven said. “Updating this tax credit will help make efforts like Project Tundra more commercially viable, leading to greater energy production with fewer emissions.”

In 2005, Congress established the Section 48A Credit for Investment in Clean Coal Facilities tax credit in the Energy Tax Incentives Act of 2005, which authorized $1.3 billion in tax credits to support advanced coal-based generation technology, but which didn’t include CCS technology, according to Hoeven’s summary.

In 2008, such technology was added to the Expansion and Modification of Advanced Coal Project Investment Credit under the Energy Improvement and Extension Act of 2008, which Congress authorized to provide another $1.25 billion in tax credits. Sen. Hoeven said this increased the value of the tax credit to 30 percent of the eligible investment and imposed a new requirement to capture and store at least 65 percent of the carbon dioxide (CO2) in order to be eligible for both tax credits. 

Thus far, however, few coal plant CCS projects have materialized, according to his summary, and the cumulative impact from both laws has made the use of the credit for CCS retrofits impossible. 

If enacted, S. 407 would reconcile the intent of the 2005 and 2008 laws and would relax the efficiency requirements for new and retrofit projects if they include CCS, according to the text of the bill.

Sen. Hoeven noted that the 2008 CO2 capture and sequestration 65 percent requirement is too high for retrofit applications. 

“The sizing of the CO2 capture equipment for large units likely to undertake CCS projects fits well up to about 60 percent capture,” according to the summary he provided. “Beyond that, inefficiencies in size, operations and project economics limit implementation of the technology on existing units. To reflect this, the Carbon Capture Modernization Act designates a requirement of a minimum 60 percent CO2 capture and sequestration for existing units.”

Such reform under S. 407 would make the eligibility standards for the Section 48A tax credit technically and economically more feasible for CCS retrofit projects, such as the Project Tundra project in North Dakota.

In fact, Mac McLennan, CEO of Minnkota Power Cooperative, said that S. 407 will help move forward its plans for Project Tundra, a proposed carbon capture project at the Milton R. Young Station, a two-unit, lignite coal-based power plant located near Center, N.D.

“Minnkota appreciates the leadership of Senator Hoeven and Senator Smith as they work together to advance the use of clean coal technologies,” McLennan said. “By making important modifications to the Section 48A Advanced Coal Tax Credit, the senators are providing another tool to help utilities and researchers implement innovative new energy technologies.”

S. 407 also has garnered support from several other groups, including the National Rural Electric Cooperative Association, the Carbon Utilization Research Council (CURC), the International Brotherhood of Boilermakers, the International Brotherhood of Electrical Workers, and the Minnesota Rural Electric Association, among several others.

“This bill makes important technical changes to the program that will unlock the unused tax credits in the way Congress intended – to invest in carbon capture technologies that will significantly reduce emissions from the utilization of coal to produce dispatchable electricity and allow our nation to benefit from the economic potential of making carbon a valuable commodity,” said Shannon Angielski, CURC’s executive director.

U.S. Sen. Steve Daines (R-MT) also this month signed on as a cosponsor of S. 407, which is under consideration by the U.S. Senate Finance Committee.