The Nickel Report

In recent weeks, the House Committees on Energy & Commerce and Natural Resources considered several legislative proposals that contemplate amendments to, among other things, the Federal Power Act, National Environmental Policy Act, and federal oil and gas leasing policy.

This article follows up on two prior articles published by Hunton Andrews Kurth LLP attorneys focusing on the Department of the Interior’s (“DOI”) funding of state orphaned well programs[1] and the Biden Administration’s promise of a greater emphasis on consulting with indigenous people and acknowledging their communities’ cultures, customs, sacred sites, and historical knowledge in the contexts of environmental planning, sustainability, and justice, and in ongoing and forthcoming federal decision making and regulatory rulemaking.[2]

“Decommissioning” is the process of terminating oil and gas operations at offshore platforms. It includes dismantling and removal of platforms and related infrastructure to restore the ocean and seafloor to pre-lease conditions. As elaborated in a prior post, decommissioning may involve partial structure removal or toppling in place, including the creation of artificial reefs. The U.S. Department of Interior’s Bureau of Safety and Environmental Enforcement (BSEE) estimates that about 3,700 active oil and gas platforms are under its jurisdiction, 40 percent of which are over 25 years old and likely to require decommissioning soon.

The Treasury Department and IRS have issued long-awaited Proposed Regulations regarding the tax credit for carbon capture and sequestration under Section 45Q of the Code1 (the “section 45Q credit”).

Generally, the amount of the section 45Q credit and the party that is eligible to claim the credit depend on whether the taxpayer captures qualified carbon oxide using carbon capture equipment originally placed in service at a qualified facility before February 9, 2018 (“Old 45Q Facility”), or on or after February 9, 2018 (“New 45Q Facility”), and whether the taxpayer disposes of the qualified carbon oxide in geological storage (“sequestration”), uses it as a tertiary injectant in a qualified enhanced oil or natural gas recovery project (“EOR”), or utilizes the carbon oxide in certain specified ways (“utilization”). The effective date of the amendments to the Code extending and expanding the section 45Q credit is February 9, 2018 (the “Credit Effective Date”). The Credit Effective Date appears throughout the Proposed Regulations to distinguish between Old 45Q Facilities and New 45Q Facilities and establishing the effective date for certain provisions.