Last night the House passed HR 6899 by a vote of 236-189. The bill, which mainly focuses on relaxing the ban on coastal drilling, also provides tax incentives for many renewable energy projects. One of the disappointments among some House members was the decision by House Speaker Pelosi (D-CA) to shift away from including HR 6258 as part of the package. The Speaker last week had decided to include the bill, originally introduced by Reps. Boucher (D-VA) and Upton (R-MI), but, at the last minute, opted to include tax incentives for carbon sequestration rather than the whole bill.

The bill’s focus on carbon credits begins with sec.811, entitled “Expansion and Modification of Advanced Coal Project Investment Credit.” This section amends section 48 A of the Internal Revenue Code of 1986. Section 48A(d)(3)(A) is amended to increase the aggregate credits allowed under subsection (a) for projects approved by the secretary from $1.3 billion to $2.25 billion.

Section 48A(d)(3)(b) is also amended to put a time frame of three years established by the secretary for projects to be eligible to receive aggregate credits of $800 million for IGCC projects and $500 million for advanced coal projects. An additional $950 million of aggregate credits is available for advanced coal projects during a three year period which would follow the first three year period.

The code is also amended to define the method for qualifying projects. Added to the qualifying projects procedure is that a project must have equipment to capture and sequester at least 65 percent of the carbon dioxide emissions. A rate of 70 percent is necessary in the case of an application for reallocated credits. The code also states that higher priority is to be given to those projects that can capture and sequester a higher amount of the carbon dioxide emissions.

Section 812 of the bill addresses the expansion and modification of coal gasification investment credits. This section amends Sec. 48B of the IRC. Specifically Sec. 48B(d)(1) is amended to increase the total amount of credits under the program from a limit of $350 million to $350 million plus an additional $150 million for gasification projects that capture and sequester at least 75 percent of the carbon dioxide emissions. The section also amends its selection process to give higher priority to those projects that have a greater ability to capture and sequester carbon dioxide emissions.

The bill also seeks a carbon audit of the tax code in Section 815. This audit would call for the Secretary of the Treasury, along with the National Academy of Sciences, to conduct a review of the IRC of 1986 and identify the specific provisions that have the largest effect on greenhouse gas emissions. Within two years of enactment, the National Academy of Sciences shall file a report to Congress on the study.

The Federal RPS does not include carbon capture and storage.

Despite the passing of the bill by the House, its future in the Senate is very uncertain. The President has also threatened a veto of the bill which makes its future even bleaker.