The IRS requested comments on February 12 on Notice 2009-83 that provides guidance on determining eligibility for, and the amount of, the section 45Q carbon dioxide sequestration credit. Section 45Q was enacted as part of the Energy Improvement and Extension Act of 2008 and provides that a credit for CO2 sequestration is generally available to a taxpayer that captures qualified CO2 at a qualified facility and disposes of the CO2 in secure geological storage within the United States. The credit is equal to $20 per metric ton of qualified CO2 that is captured and disposed of in secure geological storage and must not be used as a tertiary injectant. If it is used as tertiary injectant, an alternative $10 credit of $10 per metric ton of qualified CO2 that is captured is available if the qualified CO2 is disposed of in secure geological storage. One issue practitioners have struggled with is the definition of "industrial facility" in the Notice.
The Notice states that a qualifying industrial facility: 1) Produces a CO2 stream from a fuel combustion source, a manufacturing process, or a fugitive CO2 emission source; and 2) Does not produce CO2 from CO2 production wells at natural CO2-bearing formations. Practitioners have argued that the credit was meant to apply to facilities that produce CO2 as a byproduct of their operation. Natural gas and oil are often found in CO2 bearing formations and a consequence of the Notice is that CO2 sequestered from natural gas and oil wells does not qualify for the credit. It is believed that congressional intent was that only independent extraction of CO2 for its intrinsic economic value be excluded.
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