The federal 45Q tax credit for CO2 sequestration. How it works, who collects it, and what mineral owners on CCS-eligible acreage need to know about lease language.
Get Your Free Mineral ValuationTL;DR The federal 45Q tax credit (Section 45Q of the Internal Revenue Code) provides a tax credit for capturing CO2 and either permanently sequestering it ($85/ton) or using it for enhanced oil recovery ($60/ton). The Inflation Reduction Act of 2022 expanded the credit. By default, the credit goes to the project developer, not the mineral or surface owner. Whether mineral or pore space owners share in the credit depends on the contractual lease language with the project developer.
Section 45Q of the Internal Revenue Code provides a federal tax credit for capturing carbon dioxide and either sequestering it permanently in deep geologic formations or using it for enhanced oil recovery (EOR). Originally enacted in 2008, the credit was substantially expanded by the Inflation Reduction Act of 2022, which raised the credit value and extended eligibility deadlines.
Current 45Q credit rates (per metric ton of CO2):
$85/ton for permanent geologic sequestration in saline formations
$60/ton for CO2 used in enhanced oil recovery (EOR)
$180/ton for direct air capture (DAC) with permanent storage
$130/ton for DAC with EOR use
By default, the 45Q credit goes to the party that owns the carbon capture equipment and is contractually responsible for sequestration — typically the project developer or operator. The credit is taxable-event-triggered; it accrues to the qualifying party at the time CO2 is captured and disposed of in qualifying storage.
Mineral owners and pore space owners do NOT automatically receive 45Q credits. Whether the mineral or pore space owner shares in the credit value depends entirely on the contract between the project developer and the mineral/pore-space owner — typically a CCS lease, pore-space lease, or surface-use agreement that addresses 45Q allocation.
For mineral owners on CCS-eligible acreage:
Existing oil and gas leases typically do not address 45Q. Pre-2020 lease forms predate the modern CCS framework and rarely contemplate sequestration rights.
Pore space ownership matters. 45Q is paid on sequestered CO2, which sits in pore space — typically owned by the surface owner under most state laws.
EOR overlap creates royalty opportunity. CO2 used for EOR on producing wells generates incremental oil production, which generates incremental royalty.
New CCS leases may include credit-sharing. Project developers negotiating new CCS leases sometimes share 45Q value with the surface or pore-space owner as part of the deal terms.
Mineral owners considering signing any document related to CO2 sequestration — CCS lease, pore-space lease, surface-use agreement — should
Active 45Q-eligible CCS projects are concentrated in:
Illinois Basin — Wabash Valley Resources hub (southwest Indiana), Mt. Simon Sandstone storage
Mississippi EOR/CCUS Fields — ExxonMobil's Tinsley, Heidelberg, Little Creek, Cranfield fields
Permian Basin — multiple operator EOR projects with CO2 from natural sources
Gulf Coast — multiple permitted Class VI projects in Louisiana and East Texas
Free written valuation. Buckhead Energy buys mineral interests across all major CCS-active basins.
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