CALGARY—By increasing the 45Q tax credit for sequestering carbon dioxide through enhanced oil recovery, the One Big Beautiful Bill Act will have a significant effect on EOR project economics, a report from Enverus Intelligence® predicts.

The bill increases the 45Q tax credit for CO2 EOR from $60 a ton to $85 a ton, bringing it into line with the credit for permanent sequestration. Enverus says that will reduce production costs for conventional EOR projects more than 40%, allowing their PV-10 breakeven to fall from $28 a barrel to $16 a barrel. According to EIR Senior Analyst Jeffery Jen, that “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.”

The higher credit should benefit pipeline operators as well, Jen continues. “Most operating CO2 pipelines in the United States are used for EOR,” he observes. “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.”

Class VI injection wells are used for permanent sequestration.

In addition to increasing the CO2 EOR credit, OBBA raises the credit for direct air capture from $130 a ton to $180, EIR notes. “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,” the company says.

The report is available to EIR subscribers. For more information, see Making Enhanced Oil Recovery Great Again: OBBA 45Q Tax Credit Shift Cuts E&P Costs by 40%.