August 18. 2021

US SCALE Act of 2021
(Storing CO2 And Lowering Emissions Act)


Despite decades of related R&D and billions in related investment and funding, commercially viable carbon capture remains elusive. Attempting to address this challenge, the US House of Representatives is taking up the infrastructure bill that passed the Senate 69-30 with bipartisan support on August 10, 2021, and that includes the Storing CO2 And Lowering Emissions Act (the “SCALE Act”). The SCALE Act is intended to support the buildout of transport and storage infrastructure for carbon dioxide (CO2) and is premised on the view that carbon capture, use and sequestration (“CCUS”) technologies are key to reducing carbon emissions from the industrial sector, including by direct air capture, and must be deployed at large-scale to meet climate goals. The SCALE Act recognizes that CO2 transport and storage infrastructure is vital to enable CCUS deployment at scale by connecting storage sites and emitters, realizing economies of scale and creating a carbon management market.

Key components of the SCALE Act are:

  • CO2 Infrastructure Finance and Innovation Act (“CIFIA”) program:  
    • The CIFIA program makes available to the Department of Energy (“DOE”) $600 million in each of the fiscal years 2022 and 2023 and $300 million in each of the fiscal years 2024 through 2026 to establish and administer a program to provide low-interest loans, loan guarantees and grants to CO2; transportation projects. To be eligible for loans or loan guarantees, projects must be creditworthy and demonstrate a reasonable prospect of repayment. While this “reasonable prospect of repayment” is a different standard from the creditworthiness requirements adopted under TIFIA and WIFIA (which provide similar federal credit assistance for transportation and water infrastructure projects, respectively), the DOE may still look to the tools for creditworthiness evaluation that have been used by these other programs when evaluating projects under CIFIA. These tools include ratings for senior debt and/or the federal credit instrument; appropriate security features, such as coverage ratios, rate covenants and reserves; an in-depth credit analysis of the revenues identified to repay the federal credit instrument and other project obligations (including third-party studies); and an in-depth credit review of the project sponsors/borrowers. Projects are required to have anticipated project costs equal to or greater than $100 million, and the program will prioritize large-capacity common carrier infrastructure projects that have demonstrated demand, enable geographic diversity of carbon capture projects and are sited within or near existing pipeline corridors so as to minimize environmental disturbance. Loans can be used for eligible project costs, including development-phase activities; construction and procurement activities, including acquisition of real property; capitalized interests; and associated transaction costs. Secured loans are available up to 80 percent of anticipated eligible project costs at an interest rate not less than the interest rate of similar term US Treasury securities and for a term of 35 years after substantial completion or, if earlier, the end of the useful life of the project.  
    • In addition to loans and loan guarantees, the program establishes grants to cover the cost of constructing new transportation pipelines and related infrastructure with capacity in excess of initial demand in order to facilitate growth of the industry. The grants are available to cover the difference in cost of constructing such pipelines at an increased flow rate sufficient to meet capacity in excess of initial demonstrated demand, provided that the excess capacity is reasonably expected to be used at some point during the 20-year period beginning at substantial completion.
    • The program also includes $100 million for front-end engineering and design studies for the development of CO2 transportation technologies and projects.
  • Expansion of the Department of Energy (“DOE”) CarbonSAFE program: The SCALE Act expands the DOE CarbonSAFE program, which was set up to focus on the development of geologic storage sites for captured and processed CO2. The program is tasked with “evaluating the quantity, location, and timing of geologic carbon storage deployment that may be needed, and developing strategies and resources to enable deployment” and establishing a commercialization program for sequestration projects and associated transportation infrastructure. The expansion of this program provides cost-sharing mechanisms for large-scale saline geologic CO2 storage projects by giving priority to those projects that will serve as hubs for storing CO2 from multiple sources. The budget provided for the CarbonSAFE program is $2.5 billion for the period of fiscal years 2022 through 2026.
  • Increased funding to the Environmental Protection Agency (“EPA”) for CO2 storage well permitting: For each of the fiscal years 2022 through 2026, an additional $5 million in funding is provided to the EPA for the permitting of Class VI wells. Class VI wells are wells used to inject CO2 for long-term geologic sequestration. (Class II wells are used to inject CO2 for enhanced oil recovery and storage.) States can elect to run their own well permitting programs in accordance with federal regulations, and there is $50 million appropriated for the period of fiscal years 2022 through 2026 for grants to states that run their own underground injection control program for permitting Class VI wells. This is intended to ensure rigorous and efficient CO2 storage permitting in saline geologic formations.
  • State and local government grants for procuring CO2 utilization products: The SCALE Act provides for grants to state and local governments to be used for the procurement of products made from captured CO2. The secretary of energy is also tasked with establishing standards and certifications to facilitate commercialization of such products. There is between $41 million and $69,387,656 appropriated for such purpose each fiscal year from 2022 through 2026.

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