Enverus Intelligence® Research (EIR) has released a report accessing how the One Big Beautiful Bill Act (OBBA) impacts the equalization of 45Q tax credits, especially as it enhances the economics of carbon dioxide enhanced oil recovery (CO₂-EOR.)
EIR’s findings indicate that certain E&P operators stand to benefit, based on proximity to emitters and which CO₂ sources are best positioned for offtake via existing or planned pipelines.
“The 45Q tax credit receiving parity in the One Big Beautiful Bill Act is very positive for all players in the carbon capture, utilization and storage (CCUS) value chain, from E&Ps to midstream operators to emitters. It puts CO₂ utilization, including enhanced oil recovery, on an even footing with permanent sequestration at $85 per tonne,” said EIR Senior Analyst Jeffery Jen.
“Our analysis of the budget reconciliation bill found that the hike in the tax credit from $60 to $85 per tonne reduces conventional EOR production breakevens by more than 40%, dropping from $28 to $16 per barrel. This also puts the conventional EOR opportunity at a more cost-competitive production breakeven than the highest remaining unconventional inventory left in the Permian, which sits at $27 per barrel,” Jen said.
“Most operating CO2 pipelines in the U.S. are used for EOR. With this change in 45Q tax credits, these pipelines can connect nearby emitters to existing EOR floods instead of developing or partnering with Class VI injection wells with the same and potentially better economics. This is due to the incremental barrel of oil as well as avoiding lengthy Class VI permitting timelines,” said Jen.
Key takeaways from the report:
The passing of the OBBBA signifies a clear boost for CCUS momentum in the U.S. The act lifts the 45Q credit for CO2-EOR from $60-$85/tonne for point source capture and from $130-$180/tonne for direct air capture.
Modeled conventional EOR production costs are cut by more than 40%, reaching a PV-10 breakeven of $16/bbl, making it significantly more economic than the best remaining unconventional inventory.
Direct air capture (DAC)-EOR project viability still depends on obtaining carbon dioxide removal (CDR) credits to offset high capital costs, emphasizing the importance of integrated carbon credit strategies.
