Appropriations panel advances $10 million to steer CO2 toward enhanced oil recovery

CHEYENNE — The Appropriations Committee on Thursday advanced Senate File 17 by a 6-1 vote to create a state-funded incentive intended to make enhanced oil recovery (EOR) sales of Wyoming-sourced carbon dioxide economically comparable to permanent geologic sequestration under the federal 45Q tax credit.

The bill would appropriate $10 million as an upfront fund to pay $10 per ton for Wyoming CO2 sent to EOR projects. The committee heard an extended presentation from Mr. Obermueller, a presenter for the measure, who said the appropriation functions "really in name only" as a repayable incentive and that the program is structured to be replenished by taking 3 percent of severance tax revenue from oil produced through EOR.

Supporters told the committee the federal tax codesection commonly referenced as 45Q currently provides a larger tax credit for permanent sequestration ($85 per ton) than for CO2 used in EOR ($60 per ton), creating a roughly $25-per-ton federal advantage for sequestration. "The initial amount to pay the $10 per ton comes from this $10,000,000 appropriation," Mr. Obermueller said during the presentation. He argued a $10-per-ton state payment would be sufficient to close the practical gap once transportation and other cost differences are considered.

Committee members pressed for details on mechanics, timeline and risk. Representative Sherwood asked about the plan if the federal government changed 45Q; Mr. Obermueller said there are "multiple off ramps" in the bill and that the measure would repeal itself if 45Q were repealed or if federal legislation fully equalized credits. He added the bill also contains stair-step language to adjust the state incentive if the federal credit is partially changed.

The presenter cited an economic analysis by the School of Energy Resources estimating the upfront fund would be repaid by incremental severance tax receipts over time. He told the committee the analysis projects roughly an eight-year break-even on the initial funds and an estimated 35 percent return over the life of the EOR projects, though he cautioned that projects require significant capital and pipeline construction and may be staged over decades. He said if no projects develop, the money would revert to the state.

Committee members also asked whether the subsidy would apply to existing EOR operations. Mr. Obermueller said it would be available to existing and new EOR contracts so long as contract terms and eligibility requirements in the bill are met.

Opponents or skeptics were limited in the record; Representative Smith cast the sole no vote during the roll call. The committee did not amend the underlying mechanics during the hearing.

Votes at a glance: Senate File 169 do pass (roll call recorded; unanimous in committee); Senate File 17 do pass (6-1, Representative Smith recorded a no vote).

If enacted as written, sponsors said the program is intended not to subsidize new capture activity directly but to equalize the after-tax economics of where already-captured CO2 is sent. The bill references federal 45Q credits, uses a state severance-tax set-aside to replenish the account, and includes off-ramps tied to federal changes. The committee advanced the measure to the next stage of the legislative process.