[p7wang]

And... also from Grok.

### Tax Credits for the Oil and Gas Industry Under U.S. IRS Rules

The U.S. tax code provides several tax credits relevant to the oil and gas industry, aimed at incentivizing specific activities like domestic production, enhanced recovery, or environmental compliance. Below is a concise overview of key credits available as of October 12, 2025, based on current IRS rules and guidance from sources like the IRS Oil & Gas Audit Technique Guide and recent tax legislation. Note that tax credits are subject to change, phase-outs, or renewal, so always verify with a tax professional or IRS resources.

#### 1. Enhanced Oil Recovery (EOR) Credit (IRC § 43)
- Purpose: Encourages advanced techniques to extract oil that would otherwise be unrecoverable (e.g., CO2 injection, thermal recovery).
- Amount: 15% of qualified costs (e.g., equipment, chemicals, and labor for EOR methods).
- Eligibility:
- Applies to tertiary recovery methods approved by the IRS (see Treas. Reg. § 1.43-2).
- Project must be certified by a petroleum engineer and approved by the IRS.
- Only for domestic projects.
- Limitations:
- Phased out when oil prices exceed a reference price (adjusted annually; historically ~$28/barrel in 1990s dollars).
- For 2025, high oil prices may reduce or eliminate this credit’s availability (check IRS Notice for current phase-out status).
- Form: Claimed on Form 8830 (Enhanced Oil Recovery Credit).

#### 2. Marginal Well Production Credit (IRC § 45I)
- Purpose: Supports small or low-production wells to prevent abandonment.
- Amount: Up to $3 per barrel of oil or $0.50 per 1,000 cubic feet of natural gas (adjusted for inflation) for qualified marginal wells.
- Eligibility:
- Wells producing ≤ 15 barrels/day of oil or ≤ 90 Mcf/day of gas, or heavy oil wells with low gravity.
- Domestic production only; applies to independent producers (not integrated oil companies).
- Limitations:
- Phased out when oil prices exceed a threshold (~$15/barrel in 1990s dollars; check IRS for 2025 threshold).
- Subject to the general business credit limit (see IRC § 38).
- Form: Claimed as part of Form 3800 (General Business Credit).

#### 3. Carbon Capture and Sequestration Credit (IRC § 45Q)
- Purpose: Incentivizes capturing and storing CO2, often relevant for oil and gas companies using CO2 for EOR or permanent storage.
- Amount (2025 rates, inflation-adjusted):
- $85/metric ton for CO2 stored in secure geological storage (e.g., saline formations).
- $60/metric ton for CO2 used in EOR or other utilization with secure storage.
- Rates increase for projects starting construction after 2022 under the Inflation Reduction Act (IRA).
- Eligibility:
- Facilities capturing CO2 from industrial sources (e.g., refineries, gas processing plants).
- Must meet minimum capture thresholds (e.g., 100,000 tons/year for industrial facilities).
- 12-year credit period begins when equipment is placed in service.
- Additional Benefits:
- Direct pay option for non-profits or certain entities (IRA provision).
- Transferable to other taxpayers for cash (post-2022 projects).
- Form: Claimed on Form 8933 (Carbon Oxide Sequestration Credit).

#### 4. Clean Fuel Production Credit (IRC § 45Z)
- Purpose: Supports production of low-emission fuels, including some oil and gas-derived fuels with reduced carbon intensity (introduced by the IRA, effective 2025–2027).
- Amount: Varies based on the fuel’s lifecycle greenhouse gas emissions compared to a baseline (e.g., up to $1/gallon for transportation fuels with zero emissions).
- Eligibility:
- Fuels produced at qualified facilities (e.g., refineries producing sustainable aviation fuel or low-carbon diesel).
- Must be sold or used by December 31, 2027.
- Oil and gas companies transitioning to cleaner fuels may qualify.
- Limitations: Replaces earlier biodiesel and renewable diesel credits (IRC § 40A, 6426); subject to registration and certification.
- Form: Claimed on Form 720 (Quarterly Federal Excise Tax Return) or Form 3800.

#### 5. Alternative Fuel Refueling Property Credit (IRC § 30C)
- Purpose: Supports infrastructure for alternative fuels, including natural gas or hydrogen refueling stations.
- Amount: Up to 30% of the cost of qualified property (e.g., CNG/LNG pumps), capped at $100,000 per location (increased by IRA for 2023–2032).
- Eligibility:
- Property must be placed in service in low-income or rural census tracts (post-2022).
- Must be used for business purposes (e.g., retail CNG stations).
- Limitations: Subject to general business credit rules; reduced for non-business use.
- Form: Claimed on Form 8911 (Alternative Fuel Vehicle Refueling Property Credit).

#### 6. General Business Credit (IRC § 38)
- Many oil and gas credits (e.g., EOR, marginal well) fall under the general business credit, which aggregates multiple credits.
- Limitation: Capped at net income tax minus the greater of 25% of taxable income over $25,000 or tentative minimum tax.
- Carryover: Unused credits can be carried back 1 year or forward 20 years.
- Form: File Form 3800 to aggregate credits.

#### 7. Other Potential Credits
- Work Opportunity Tax Credit (WOTC, IRC § 51): For hiring certain employees (e.g., veterans) in oil and gas operations. Up to $9,600 per employee.
- Energy Investment Credit (ITC, IRC § 48): For renewable energy components (e.g., solar or geothermal) used in oil and gas facilities, though less common.
- Research and Development (R&D) Credit (IRC § 41): For developing new extraction or refining technologies. Up to 20% of qualified research expenses.

#### Key Considerations

• Phase-Outs and Market Conditions: Credits like EOR and marginal well are sensitive to oil/gas prices, often reducing in high-price years (check IRS Notices for 2025 thresholds).
• Inflation Reduction Act (IRA): Expanded credits like § 45Q and § 45Z, with enhanced benefits for prevailing wage and apprenticeship compliance.
• Documentation: Maintain detailed records (e.g., engineer certifications for EOR, CO2 capture data) to withstand IRS audits, which are common in this industry.
• Audit Risks: The IRS Oil & Gas Audit Guide emphasizes scrutiny of credit eligibility, especially for EOR and CO2 sequestration.

#### Recommendations

• Review IRS forms and publications (e.g., Pub. 535 Business Expenses, Pub. 946 How to Depreciate Property) for detailed rules.
• Consult a tax advisor for eligibility, especially for IRA-related credits or complex projects like carbon capture.
• Check x.ai/grok for general guidance or IRS.gov for specific forms and notices.

If you have a specific project (e.g., EOR, carbon capture) or need details on a particular credit, provide more context, and I can refine the response.

 

[Left Coast Geek]

Those projects weren't banned, only the "Inflation Reduction Act" money was withdrawn.
...

refusing to approve the FInal EIR is the same as banning them.

 

[jefro]

The bolt and almost everything in our lives are made from oil. Claiming there's a problem with tax credit gasoline and extracting oil from the ground isn't exactly correct.

 

[Aaron R.]

The kit that p7wang posted Pardon Our Interruption... ... thats 12KW of 240VAC with 20KWH of LFP battery storage, and 7KW of solar to charge it. this is a standalone off grid system, mount the panels in a field or large yard, hook your L2 charger up to it and go to town.

Off grid systems aren't immune to state and local regulations/ordinances, but there are WAY fewer rules and constraints when operating outside of the grid [though one obviously loses the advantage of being able to sell back electricity to the grid--even at a reduced rate].

If batteries become substantially cheaper, living partially or even entirely off grid will be financially viable for a significant number of households.

I've at least toyed with the idea of setting up a solar panel system that would handle a substantial percentage of EV charging for the Bolt [an off grid system]. The idea is that over the long haul, it would mostly or totally pay for itself, and we would have the bonus of significant power in the event of a grid outage [beyond what the Bolt could provide via an EV extend type of setup].

 

[Aaron R.]

I probably should start a driving/charging log but the charging part will be easier once the L2 charger is wired up next week. The charger was $430 + $40 sales tax, and the installation will be $360 or something, lets just call it $800 total, so that's some more sunk cost.




yeah, we got a new roof about 5 years before we got solar, and we got the premium 30 year asphalt shingles

magnetic north is the right side. our local climate, mornings are often overcast, so we concentrated the panels on the west rather than east sides. the roofs pitch is very shallow... 16KW of panels generate 85-90 kWh most days in June & July, tapering off to 50-60 kWH in October and 20-30 kWH per day in December/January...

This was last year, pre-electric car. We weren't home Jan-Apr, so usage was a little lower, but I left my home computer servers running, they average about 500 watts. December was cold, so a lot of electric heat.

View attachment 75638

One should hypothetically factor in the change in appliances one may purchase [as well as potentially vehicles as well] if one installs a solar panel system [depending on anticipated production].

For example, my gas dryer is very old and will likely need to be replaced within five years. If we purchased a [grid tied] solar system, we'd probably replace that dryer with an electric dryer [and run it during peak solar production times, rather than get a reduced rate from the electric utility for excess electricity generation]. If so, our reduction in natural gas bills [due to no longer running a gas dryer] should be factored into ROI on the solar system. And of course, climate change mitigation is furthered by not consuming natural gas for a gas dryer.

 

[SpicyBolt]

One should hypothetically factor in the change in appliances one may purchase [as well as potentially vehicles as well] if one installs a solar panel system [depending on anticipated production].

For example, my gas dryer is very old and will likely need to be replaced within five years. If we purchased a [grid tied] solar system, we'd probably replace that dryer with an electric dryer [and run it during peak solar production times, rather than get a reduced rate from the electric utility for excess electricity generation]. If so, our reduction in natural gas bills [due to no longer running a gas dryer] should be factored into ROI on the solar system. And of course, climate change mitigation is furthered by not consuming natural gas for a gas dryer.

That's a good point. In our house here in Minnesota practically everything that can be natural gas, is natural gas. It's pretty cheap, and is the dominant heating source in our state. The only exception is the oven in our dual fuel range. Ironically, our L2 EVSE utilizes a sub panel that previously was for an electric dryer.

We have an electric bill that tops out at about $200/month at worst including charging two Bolts. My back of the napkin estimate suggests it would be a pretty long time until break even on solar. Plus, we will probably be moving out of this house within 5 years or so anyway. Our roof faces the wrong direction and we also have huge oaks. So, it's not happening.

 

[atc98092]

If we purchased a [grid tied] solar system, we'd probably replace that dryer with an electric dryer

Keep in mind that most homes with gas dryers (and stoves) are not wired for an electric replacement. So don't forget to factor in the cost of adding the wiring, which may or may not be a significant additional expense.

 

[Left Coast Geek]

One should hypothetically factor in the change in appliances one may purchase [as well as potentially vehicles as well] if one installs a solar panel system [depending on anticipated production].
...

We will likely be replacing our gas water heater with a heat pump water heater, when the existing one fails... and we have plans on installing a heatpump HVAC.

 

[Left Coast Geek]

huge difference between 'made with' and 'uses 10 or 20 gallons/week for lifetime'.

 

[GregBrew]

We will likely be replacing our gas water heater with a heat pump water heater, when the existing one fails... and we have plans on installing a heatpump HVAC.

Bonus (in Summer, at least) is that the HP water heater cools the room it's installed in.