On July 13, 2022, the Department of Energy (DOE) issued a Notice of Intent (NOI) to fund six carbon capture and sequestration (CCS) demonstration projects through the $2.6 billion Carbon Capture Demonstration Projects Program (the Program) established as part of the bipartisan Infrastructure Investment and Jobs Act (IIJA). Pursuant to the Program, DOE intends to initially provide a total of $160 million to 12 commercial-scale CCS projects in the front-end engineering and design (FEED), permitting, and environmental review stages. The remaining $2.1 billion will be distributed to six of those CCS projects for advanced design, procurement, construction, and operation. The Program provides a unique opportunity — particularly with the enactment of an enhanced and expanded 45Q tax credit appearing unlikely to occur any time in the near future — for CCS projects to secure significant funding.
As required by the IIJA, of the six CCS projects that will ultimately receive a slice of the $2.1 billion in funds, two must be designed for new or existing natural gas electric-generating facilities, two must be for new or existing coal-fired electric-generating facilities, and two must be for new or existing non-electric-generating industrial facilities. The CCS projects receiving funding will have to demonstrate substantial improvements in the efficiency, effectiveness, cost, and environmental performance of CCS technologies. Eligible CCS projects must be capable of capturing and storing CO2 in a secure domestic storage facility with sufficient capacity for at least 12 years of the project’s captured emissions. Preference will be given to CCS projects that reduce all lifecycle greenhouse gas emissions — including upstream and downstream emissions — to the greatest extent.
Natural Gas and Coal-Fired Electric Generation. The four CCS projects to be located at natural gas and coal-fired electric-generating facilities must achieve a minimum unit-wide carbon capture efficiency rate of 95 percent once stable operations are achieved. They must also show that they can capture, transport, and store CO2 for a minimum of three years with ongoing monitoring and verification. The NOI also imposes carbon capture efficiency rates on these projects that must be met early in the Program’s funding timeline.
Industrial Facilities. The NOI identifies a number of industrial facility “sectors of interest” for eligible CCS projects, including chemical production (e.g., ammonia, hydrogen, petrochemicals), mineral production (e.g., cement and lime), pulp and paper, and iron and steel facilities. Eligible projects at these industrial facilities must be capable of capturing, transporting, and storing a minimum of 300,000 tonnes of CO2 per year from at least one process slipstream (although smaller industrial facilities may propose unit-wide CO2 capture at less than 300,000 tonnes. As with the CCS projects at natural gas and coal-fired electric-generating plants, industrial facility CCS projects must demonstrate 95 percent carbon capture efficiency from the proposed industrial process stream once stable operations are achieved.
DOE anticipates issuing a funding opportunity announcement for the Program in August or September of 2022. DOE will administer the program in four phases. At the end of each phase, DOE will make a “Go/No-Go” decision for each project. If the project is approved to move forward into the next phase, the applicant will be required to renew its application. DOE will use this “Survivor”-like down-select process to winnow the field of CCS projects receiving funding from 12 to six. All phases of the Program will have a requirement for at least 50% recipient cost share.
Phase 1. CCS Projects in Phase 1 will have the option of proceeding on a standard (30 months) or accelerated (15 months) timeline, depending on the project’s commercial viability. Given that — as the NOI notes — the 45Q tax credit is set to expire on January 1, 2026, all commercially competitive projects should aim to be considered in the accelerated timeline. To be accepted in Phase 1, eligible CCS projects will have to show, among other things and to varying degrees depending on a project’s timeline, FEED studies for the proposed CCS demonstration project; their project teams; proposed capture and storage host sites; initial environmental, health, and safety assessments; and project financing plans. Applicants should clearly describe where their project is in the development program timeline because DOE does not intend to fund redundant work.
At the end of Phase 1 and to be eligible to proceed to Phase 2, CCS projects on the accelerated timeline will have to show, among other things, that they have secured CO2 offtake agreements, host site letters of commitment, and a Class VI well permit to construct, and that they have produced FEED studies with technology integrated into the selected capture host site and initiated the NEPA compliance process.
Phases 2–4. Unlike Phase 1, the NOI provides little insight into what Program applicants can expect during Phases 2–4. The NOI does explain that Phase 2 is expected to last nine months and require the CCS projects to produce more-detailed design information. Applicants for Phase 2 will have to provide a final report detailing results they achieved in Phase 1, further budget justification, a technical narrative, and a project management plan. Phase 3 is expected to last up to 27 months and be primarily for procurement and construction. Phase 4 could last up to 36 months and will be for operations.
While many of the Program’s application details and requirements remain sparse, the NOI does shed light on the timeline, funding amounts, and project requirements that DOE intends to impose. The NOI also makes clear — consistent with other DOE-administered IIJA programs — that successful applicants will have to articulate how they will incorporate and track the environmental justice, community engagement and consent-based siting, equity, and workforce development effects of their CCS projects.
With $2.1 billion on the line for the six CCS projects that are ultimately selected, CCS project developers should begin assembling the key documents and other components that the Program requires now. CCS project developers interested in more information or pursuing DOE funding opportunities may reach out to Nixon Peabody’s energy team.