Abstract

(Minor revisions 25/06/2024) This article examines the legal issues that arise when negotiating carbon offtake and transportation agreements as key tools for ensuring the viability of Carbon Capture Utilization and Storage (CCUS) projects. The contractual arrangements help to identify relevant project risks and address barriers to firm commitments from potential developers, financiers, and investors in carbon capture technology applications. The discussion highlights the implications of emerging policy and regulatory measures in the US such as (a) tax credits for carbon sequestration and utilization under Section 45Q of the US Internal Revenue Code, and (b) developments in permitting of underground injection wells for CO2 storage. Such policy measures are relevant to determining the roles and obligations of the respective parties to offtake and transportation arrangements for CCUS projects. It is generally expected that the emerging policy measures will enhance the potential to commercialize and scale up CCUS applications if the main project output (i.e., the captured CO2) gets a sufficient value that supports necessary investments in carbon utilization pathways or permanent sequestration in a sustainable and secure manner.

This paper will be part of the OGEL Special Issue on "International Energy and Investment Law Implications of the US Inflation Reduction Act". More information here www.ogel.org/news.asp?key=762