Wyoming minerals committee hears push to revive CO2 enhanced oil recovery; drafts two incentive bills

Wyoming’s Joint Minerals Committee on Tuesday heard industry and state experts urge renewed incentives for carbon‑dioxide enhanced oil recovery (CO2 EOR), and the committee voted to draft two bills aimed at encouraging new CO2‑EOR projects.

The committee heard technical and financial testimony from Lon Whitman, director of the Enhanced Oil Recovery Institute (ERI); Tom Kropatch, oil and gas supervisor at the Wyoming Oil and Gas Commission; and Pete Obermueller, president of the Petroleum Association of Wyoming. After discussion, members instructed staff to draft language to (1) amend last session’s Senate File 17 to add a $5‑per‑ton state incentive to favor CO2 sales for EOR over permanent geological storage and (2) reintroduce a time‑limited severance tax exemption modeled on House Bill 54 (2003) for new CO2‑EOR projects covering 2026–2031.

Why it matters: supporters said the changes would lower operators’ upfront capital barriers for multi‑hundred‑million‑dollar Greenfield projects, accelerate local employment and sales‑tax receipts, and keep Wyoming competitive for capture projects and pipeline development now that federal 45Q tax credits provide parity between EOR and dedicated storage.

Lon Whitman summarized technical background and incentives. He told the committee, “We’re not aware of any aquifer damage ever in Wyoming,” and stressed that Wyoming CO2 EOR work has used conventional reservoirs that are not hydraulically fractured. Whitman said federal 45Q credit language moved from $60 per ton (for CO2 sold for EOR) to parity at $85 per ton for both EOR sales and permanent storage; that change eliminated the original rationale for the state’s prior $10/ton parity top‑up in SF17. He urged reconsidering the state’s toolbox, including Senate File 18’s severance‑tax concepts and revisiting the 2003 model of a time‑limited exemption.

Committee members pressed on design details and risk. Senator Cooper asked whether a five‑year exemption is long enough given long startup lead times; Whitman recommended tying the exemption to the start of measurable incremental production rather than arbitrary calendar dates, noting some historic Wyoming EOR projects took multiple years of injection before incremental oil flowed. Senator Rothfuss and others suggested a hybrid approach that would start the exemption period when incremental production begins, or consider a shorter per‑project window (five to seven years) to limit state exposure if a project fails to develop.

Fiscal and precedent evidence was a central talking point. Whitman and supporters pointed to Wyoming’s earlier experience: a five‑year, new‑project severance exemption enacted as House Bill 54 in 2003 preceded two major CO2 floods (Salt Creek and Patrick Draw/Monell). Whitman reported that initial incremental production tied to those projects generated roughly $29.4 million in severance tax receipts for the state during the exemption window and, over the life of the projects, produced a cumulative severance tax that the presentation characterized as roughly $236 million; Whitman summarized that the state’s net benefit since the exemption was on the order of “$207,000,000” (figures presented by ERI during the hearing).

Regulatory and safety questions surfaced from the Oil and Gas Commission. Tom Kropatch told the committee that Wyoming has primacy for Underground Injection Control (UIC) class 2 wells and that regulators set maximum injection pressures and monitor annulus pressures to avoid fracturing confining units. He said CO2 EOR in Wyoming is typically performed with water‑alternating‑CO2 injection to sweep oil from pore space and that regulators can require operators to document wellbore integrity before injection.

Industry advocates urged an expansive approach. Pete Obermueller of the Petroleum Association urged the committee to consider a range of incentives and a larger infrastructure fund to overcome the extraordinary up‑front capital costs of field reworks and pipelines. “We can’t play small ball,” he said in argument for a larger, long‑term reinvestment mechanism, and he suggested options such as a dedicated EOR infrastructure fund seeded from incremental tax revenue.

Committee action: after extended discussion the committee voted in favor of drafting (a) the $5 per ton amendment to Senate File 17 (mover: Senator Rothfuss; second: not specified; voice vote in favor) and (b) a new bill modeling a five‑year severance‑tax exemption similar to House Bill 54 (2003), applied to new CO2‑EOR incremental production with a 2026–2031 drafting window (mover: Senator Rothfuss; second: not specified; voice vote in favor). Members also discussed requesting an additional in‑person meeting to refine drafts and study interaction between potential measures.

Clarifying details from testimony: ERI presented a startup CapEx example for a three‑field project near Gillette of about $225,000,000 for the first field; Whitman cited incremental production totals for two historic floods (about 9,500,000 barrels incremental during 2003–2008 and about 76,400,000 barrels for a later period) and presented severance‑tax calculations tied to those periods. Federal 45Q parity now stands at $85/ton for both CO2 sold for EOR and CO2 stored in dedicated geologic storage; the older federal split was $60/ton for CO2 sold for EOR and $85/ton for dedicated storage.

What’s next: the committee asked staff to draft the two bills for consideration at a follow‑up meeting. Members signaled interest in targeted drafting (tie periods to measurable incremental production where practicable) and directed ERI, the Oil and Gas Commission and industry groups to flesh out fiscal estimates and the interaction between the two proposed incentives.

Sources: testimony from Lon Whitman, Enhanced Oil Recovery Institute; Tom Kropatch, Wyoming Oil and Gas Commission; Pete Obermueller, Petroleum Association of Wyoming; committee discussion and motions (Joint Minerals Committee hearing).