Sponsors (6)
The bill reduces taxpayer-funded subsidies and simplifies tax treatment for carbon-capture uses—limiting support for CO2-enhanced oil recovery—but at the cost of making many EOR-linked projects less financially viable, which risks investment, jobs, consumer prices, and could slow some CO2 storage deployment.
Taxpayers: federal spending on taxpayer-funded subsidies for enhanced oil recovery will be reduced because the bill prevents/reevaluates 45Q credits used to support EOR, lowering direct fossil-fuel subsidy outlays.
Tax administration and taxpayers: the bill clarifies and simplifies the Internal Revenue Code cross-references and the tax treatment of carbon-capture/EOR uses, reducing legal uncertainty and long-term IRS administrative complexity.
Local communities and the environment: by reducing incentives to use captured CO2 for enhanced oil recovery, the bill may lower some local pollution and environmental risks tied to expanded fossil-fuel production.
Owners/operators (utilities, energy companies, small businesses) and their investors: losing the 45Q credit for EOR use worsens project economics, can produce sunk losses on existing investments, deter new projects, and threaten jobs tied to those projects.
Consumers and taxpayers: reduced financing options and higher costs for firms may be passed through to consumers, potentially raising fuel and energy prices.
Climate and CO2 storage deployment: removing or restricting the credit may slow deployment of CO2-based EOR and related capture/storage infrastructure that some proponents rely on to achieve or finance long-term carbon storage, potentially hindering broader mitigation efforts.
Based on analysis of 3 sections of legislative text.
Removes the enhanced oil recovery tax credit and bars new facilities from using captured CO2 for the carbon capture credit when construction begins after enactment.
Introduced March 26, 2026 by Jeff Merkley · Last progress March 26, 2026
Ends the federal tax credit that subsidizes enhanced oil recovery (EOR) and stops new facilities built after enactment from using captured carbon dioxide as a qualifying injectant to claim the carbon capture credit. The changes take effect for taxable years beginning after the date of enactment and include technical updates to related tax-code cross-references. The bill leaves existing facilities that began construction before enactment unaffected by the new limitation on using captured CO2 for EOR, but removes the separate EOR tax credit going forward. The overall effect is to reduce tax subsidies for using captured carbon to boost oil production and to change tax treatment of some carbon capture projects built after enactment.