Pipeline Operators Say They’ll Make Clean Energy Investments if the Government Continues Offering Tax Credits

Nothing sparks action like a bit of skin in the game. ‘Show me the money’ is a phrase that pays, and in the ESG world, tax credits are a great way to generate clean energy investments. 2022’s Inflation Reduction Act (IRA) expands tax credits for industrial projects that capture, reuse or permanently store carbon dioxide. Federal funding is, of course, attractive support to major players in the energy industry whose business models are built on fossil fuel energy exporting. Legislation like the IRA is sure to bolster clean energy investments, which were already on a record pace in 2022 when decarbonizing energy investments topped $1.1 trillion.

Energy pipeline operator Kinder Morgan didn’t need an invitation to the dance to recognize the upside of the IRA’s expanded tax credits. The company recently made public calls acknowledging the importance of federal funding, and specifically tax credits, as a “key policy tool for promoting investment in clean energy projects.” In addition, Kinder Morgan executives urge more municipalities and states to adopt tax credits to encourage citizens to invest in clean energy projects.

The IRA is doing just that. Under the Act, credits for carbon sequestration projects increased from $50 per ton to $85 per ton, which will help speed the development targets for CCS projects tied to these credits. The law also provides $60 per ton for carbon used for enhanced oil recovery, used in Kinder Morgan’s oil business.

Michael Davies, an energy industry analyst and economist with Green Econometrics, believes the timing couldn’t be more spot-on for policy that encourages (and funds) clean energy investments.

Michael’s Thoughts

“We have an issue in this country with rising energy prices, scarcity of resources, and continued interest in carbon reduction.

The ESG focused on the environmental and social governance led by investors to provide a roadmap to net zero carbon has particular interest in the environmental side. We have three key pillars here, people, the planet, and profits, that we have to have in unison. With tax credits going into investments in clean and renewable energy, money helps facilitate this type of an action. And you know, Kinder Morgan coming out, one of the largest infrastructure players in energy, helping to call out the need for more of this investment is crucial because it shows that the fossil fuel side of the business, which is going to be here for a continuous period as we transition to cleaner and acceptable fuels, it does not need to be disrupted. We need that to keep energy prices at least stable.

Energy prices are exacerbated by the war in Ukraine and reduced production from OPEC-led nations. And this term is causing us to feel some pain at the pump when it comes to any disruption in supply. Therefore, we need to balance investment into clean energy while providing resilience in the use of fossil fuels in the current time being. That is to help, you know, keep our lights on. Electric energy, predominantly produced by fossil fuels, will be required, particularly as we transition to electric vehicles.

We have increasing demand from data centers and cloud computing for the use of electricity, and therefore it’s imperative to keep the supply channels open. And this is all predicated on the ability for a stable, healthy environment, so using tax credits to help investment into clean and renewable energies is probably the way to go.”