Senate committee backs $10-per-ton stimulus to steer Wyoming CO2 to enhanced oil recovery

The Wyoming Senate Committee of the Whole approved legislation aimed at removing a federal market bias that favors permanent geological sequestration of carbon dioxide over its use in enhanced oil recovery (EOR).

Sponsor Senator Fred Rothfuss said the measure would give Colorado capture projects an incentive to put Wyoming‑sourced CO2 into EOR by providing a $10-per-ton state stimulus on top of existing federal 45Q benefits. “This legislation is intended to mitigate a market bias that was put in place by the Feds when the 45Q legislation was put forward,” Rothfuss said on the floor.

The bill directs the Wyoming Energy Authority to administer a $10-per-ton payment for Wyoming-captured CO2 that is used in in‑state EOR projects that already qualify for the 45Q federal tax credit. Under the bill the stimulus fund would be seeded by a $10 million transfer from the Legislative Stabilization Reserve Account to float early payments; repayments are programmed to flow back to the fund from future severance tax receipts tied to the incremental oil produced by the EOR projects. “The stimulus amount is equal to $10 for every 1 ton of carbon dioxide,” Rothfuss said.

Why it matters: Committee supporters argued the federal 45Q structure — which, as of Jan. 1, 2023, set different 45Q credit levels for permanent sequestration ($85/ton in the sponsors’ summary) and for CO2 used in EOR ($60/ton) — creates a financial incentive for capture projects to sell CO2 into permanent storage rather than to oil operators. Proponents said the state stimulus would level that playing field and preserve CO2 for Wyoming producers, increasing state severance receipts over time.

Debate and safeguards: Members pressed sponsors on the economic assumptions behind the $10 figure and on program risk if federal law changes. Rothfuss said the amount was developed with modeling from the state’s Enhanced Oil Recovery Institute and School of Energy Resources and is designed to be “market neutral” rather than an open-ended subsidy. He also said the program requires CO2 providers to qualify for 45Q first, so if the federal 45Q credit is changed to equalize credits the state stimulus would automatically stop. “If the 45Q program goes away at the federal level, this bill goes away,” Rothfuss said.

The bill requires the Wyoming Energy Authority to verify 45Q eligibility, confirm the CO2 originated in Wyoming and was used for Wyoming EOR, promulgate rules, and report disbursements to the governor, auditor and relevant committees. The stimulus account would be funded by transfers of a portion of severance tax on the oil produced by the EOR projects; disbursements would be prorated if funds are insufficient.

Supporters and risks: Oil and gas interests and minerals committee members framed the proposal as a way to capture additional long-term revenue for schools and local taxing entities by putting more oil back into production. Skeptics warned it could be unnecessary if federal policy changes or could fail if projects do not come online. Sponsors said Wyoming has a long record of successful CO2‑EOR projects and that reservoir testing and operator economics provide additional safeguards.

What’s next: The Committee of the Whole reported the bill favorably. The bill as passed out of the committee includes a standing committee amendment adding a trigger that ends the state stimulus if federal credits for EOR and permanent sequestration are equalized.

Ending note: Sponsors emphasized the measure is intended to correct a narrow market distortion rather than to take a position for or against carbon capture generally.