Can section 45Q tax credit foster decarbonization? A case study of geologic carbon storage at Acid Gas Injection wells in the Permian Basin

Abstract

• Permian Basin with over 7000 oil and gas fields producing 40 % of U.S. oil and 15 % of U.S. gas is a promising region for carbon capture utilization and storage. • We examined the cost effectiveness and economic feasibility of deployment of Carbon Capture and Storage for Midstream processing facilities with Acid Gas Injection wells. • We found that our estimated cost for CCS deployment in AGI is lower than that for the coal fired power plant, natural gas fired power plant, and bioenergy with carbon capture and sequestration. • With section 45Q tax credits for 12 years, we found that any existing facilities with an annual injection rate over 10,000 MT are economically viable to deploy CCS and for new AGI wells construction the rate should be 100,000MT. Carbon capture, utilization, and storage (CCUS) is an important pathway for meeting climate mitigation goals. While the economic viability of CCUS is well understood, previous studies do not evaluate the economic feasibility of carbon capture and storage (CCS) in the Permian Basin specifically regarding the new Section 45Q tax credits. We developed a technoeconomic analysis method, evaluated the economic feasibility of CCS at the acid gas injection (AGI) wells, and assessed the implication of Section 45Q tax credits for CCS at the AGIs. We find that the compressors, well depth, and the permit and monitoring costs drive the facility costs. Compressors are the predominant contributors to capital and operating expenditure driving the levelized cost of CO 2 storage. Strategic cost reduction measures identified include 1) sourcing of low-cost electricity and 2) optimizing operational efficiency in well operations. In evaluating the impact of the tax credits on CCS projects, facility scale proved decisive. We found that facilities with an annual injection rate exceeding 10,000 MT storage capacity demonstrate economic viability contingent upon the procurement of inputs at the least cost. The new construction of AGI wells were found to be economically viable at a storage capacity of 100,000 MT. The basin is heavily focused on CCUS (tax credit – $65/MT CO 2 ), which overshadows CCS ($85/MT CO 2 ) opportunities. Balancing the dual objectives of CCS and CCUS requires planning and coordination for optimal resource and pore space utilization to attain the basin's decarbonization potential. We also found that CCS on AGI is a lower cost CCS option as compared to CCS on other industries.

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