In Trump tax bill, using carbon to recover oil now as attractive as storing it

By Allison Prang  •  September 17, 2025

(Allison Prang is a freelance climate journalist based in Washington, D.C. Her work has appeared in The New York Times, The Wall Street Journal, POLITICO and Canary Media.)

WASHINGTON, D.C. (Callaway Climate Insights) — The “Big Beautiful Bill” took many hits at programs and incentives to fight climate change. One that flew under the radar makes using harmful carbon (CO₂) to push more oil out of the ground as financially attractive as storing it.

Companies through the federal 45Q tax credit now get the same amount of money for every ton of CO₂ they capture and use to recover more oil as they can if they trap the greenhouse gas and permanently store it. That could make companies less inclined to keep the CO₂ they trap from entering or re-entering the atmosphere — and by extension, help fight global warming — by permanently storing all of it and instead compel them to use it to produce more oil in a process known as enhanced oil recovery.

There’s “now going to be a lot more EOR than [there] would’ve been otherwise,” said Marcus Lima, cofounder and CEO of Heimdal, a Colorado-based carbon removal company that has a five-acre direct air capture plant in Oklahoma and says it will be able to capture as much as 7,000 tons of COâ‚‚ a year. That COâ‚‚ gets transported 200 feet from the plant to an oil well where it’s used for enhanced oil recovery.

Lima said had the tax credit stayed the same — where companies netted $180 per ton for permanently storing CO₂ from a DAC project and $130 a ton for using that CO₂ in some way — he would’ve expected there to be an even split in the near term of using captured CO₂ for enhanced oil recovery or taking it and permanently storing it. Instead, he expects the majority of captured CO₂ to be used for EOR in the 2030s before shifting to see the majority of it stored by the 2040s.

“It’s just a project-by-project basis which makes the most sense,” Lima said.

Enhanced oil recovery is predictably a fraught concept in the climate space depending on who you ask. Using CO₂ to procure more oil out of the ground — a process that ends up storing some of the CO₂ but not all of it — is greener than producing oil without storing greenhouse gases at all. At the same time, using captured CO₂ to prolong the life of fossil fuels, to some, goes against the very nature of efforts to fight climate change, the phenomenon that made people want to capture carbon emissions in the first place.

From Lima’s point of view, it’s better to produce a less emissions-intensive barrel of oil in a world where the barrel of oil is going to be burned regardless, he said. Occidental Petroleum OXY 0.79%↑, a major fossil-fuel producer and big supporter of carbon capture, also is excited about enhanced oil recovery’s prospects. CEO and President Vicki Hollub told analysts last month that enhanced oil recovery could recover between 50 and 70 billion barrels of oil in the U.S. and “extend our energy independence by 10 years.”

“The new law levels the playing field between carbon storage and utilization pathways like DAC to EOR,” Hollub said on the company’s recent earnings call. “Both can, and likely will, play an important role in global energy supply chains and carbon management.”

Other carbon removal advocates don’t want to touch fossil fuels. Carbon180, a carbon removal advocacy organization, has pushed back against tying the industry to enhanced oil recovery, saying it “undermines” what carbon removal should be used for.

Lawmakers on both sides of the aisle in recent years have supported efforts to make the tax credit the same regardless of whether the COâ‚‚ is stored or used. Senators Bill Cassidy (R-La.) and Sheldon Whitehouse (D-R.I.) sponsored legislation in 2023 to bring the credit amounts in line with each other, as did several House members from both parties.

There’s also a mindset among some in the carbon removal industry that the focus needs to be on getting direct air capture technology up and running to help it scale and that the industry can worry about specifics later, such as what happens to the CO₂ that’s captured or how direct air capture plants are powered.

“At this stage, the most important thing is getting projects deployed and understanding how the technology will work in the field,” said Jason Hochman, cofounder and former executive director of the Direct Air Capture Coalition, a group of more than 60 firms working in the industry in some fashion.

Plus, drawing in more interest from oil and gas companies could be beneficial, Hochman added.

“If this makes it more economic[al] for them to be interested in leveraging DAC technology, then that is a positive thing for the sector and in the long run, ideally the climate, because they will have then actually enabled the buildout and scaling of this really important carbon removal technology,” he said.

Industry also has the ever-changing price of oil to contend with, however. As that price fluctuates, how much a company makes from the 45Q tax credit if they’re using the COâ‚‚ for enhanced oil recovery could vary, said Jack Andreasen Cavanaugh, a global fellow at Columbia University’s Carbon Management Research Initiative.

The U.S. Energy Information Administration is expecting global oil prices to fall in the coming months.

“That just may be a risk that’s too high for folks,” Andreasen Cavanaugh said.

On top of that, the network of pipelines in the U.S. that can actually support CO₂ is minimal at more than 5,000 miles. That’s also a hurdle, he added.

By comparison, there are more than 2.6 million miles of pipelines in the country that can transport liquid petroleum and natural gas, according to the U.S. Department of Transportation.

Where enhanced oil recovery comes out on top also is in the number of wells that have already been approved for extracting fossil fuels compared to the number of wells that have been approved for storing CO₂ underground. In the U.S., roughly 180,000 Class II wells — the kind that are used for oil and gas activities — are up and running, and most of those are used for enhanced recovery of fossil fuels, according to the U.S. Environmental Protection Agency. The number of Class VI wells that have been approved — or the kind used for storing CO₂ — is only in the double digits, with some approvals having been announced in recent months.

Companies also might have to consider other potential buyers if they’re trying to sell carbon credits tied to their carbon capture, which firms sometimes buy to offset their own carbon footprints or hit climate goals. If the projects benefiting from those investments are associated with fossil fuels, buyers could develop a bad taste in their mouth, some say.

“Buyers of carbon removal credits are not going to be enthusiastic about linking projects to EOR for the most part,” said Rory Jacobson, head of policy for Carbon Direct, which helps clients factor carbon management into their climate plans.

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