U.S. spending bill expands carbon tax credit, boosting oil producers

From Reuters - February 16, 2018

HOUSTON (Reuters) - A little-noticed addition to the U.S. budget deal approved last week will help Occidental Petroleum Corp and other oil producers by more than tripling a tax credit for injecting carbon dioxide back into the earth to increase crude output.

The tax-credit expansion, although supported by environmentalists and energy producers, had failed to move out of Congress during the 2016 presidential election. Its passage now likely will further boost already surging U.S. oil output in a year that production is forecast to hit 11 million barrels per day.

The injection process, used for more than 40 years to prolong output from traditional oil wells, also is being tested by Oxy and others as a way to speed more oil production from shale wells.

President Donald Trump last week signed the spending plan into law. It boosts for 12 years an existing tax credit to $35 per metric ton of carbon dioxide injected underground, up from $10 per ton.

This will be an economic driver for our nation, saidNorth Dakota Senator Heidi Heitkamp, a Democrat who had pushed for the credits expansion with a bipartisan group of senators. It will hopefully push a lot of innovative technologies across a range of industries, not just in coal or oil.

Oxy, Denbury Resources Inc and others inject more than 2 billion cubic feet of carbon dioxide each day into traditional oil wells, many of which came online more than 75 years ago.

The method harnesses the carbon dioxide produced during the extraction of oil or from electric-power plants, and forces it back into the fields. That helps drive more oil to the surface.


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