May 15, 2013
Domestic Energy Producers Alliance voices support for preserving CO2 enhanced recovery tax deduction
May 12, 2013
FOR MEDIA RELEASE
Contact: Sarah Catalano (405) 424-1699
The Board of Directors of the Domestic Energy Producers Alliance (DEPA) voted at its April meeting to proactively support preservation of the current tax deduction framework for tertiary injectants. The addition to the DEPA oil and gas tax agenda was requested by Denbury Resources, which operates some of the nation’s largest carbon dioxide enhanced oil recovery projects.
“The Section 193 deduction provision allows the cost of carbon dioxide to be deducted in the year it is injected, instead of over the productive life of the field,” Denbury points out. “These CO2 projects require large, upfront capital expenditures. Sometimes the project timelines involved are up to four years before the first ‘new oil’ is recovered,” the company says.
The Sec. 193 deduction helps keep the door open for development and ultimate recovery of as much as 40-80 billion barrels of additional oil reserves in several states, plus the CO2 EOR projects create a potentially huge new market for anthropogenic CO2, incentivizing industrial emitters to capture the value of the CO2 by partnering with oil producers.
“US industrial facilities are facing increasing permitting requirements to control CO2 emissions,” Denbury states. “EOR is the only cost-effective means to sequester large volumes of industrial CO2, and the Sec. 193 deduction is a powerful incentive for the oil industry to move forward with these high-cost projects.”
The expansion of DEPA’s independent producer agenda was considered for months by the organization’s board. “We have been purposeful in our narrow focus in support of only the most crucial tax provisions,” DEPA Governmental and Regulatory Affairs Director Mike Cantrell said. “But the preservation of the Section 193 deduction, joining our unwavering support for protecting IDCs and percentage depletion, makes sense for US independent producers, royalty owners and our service industry partners.”
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