Department of Energy Announces Significant Investment in Direct Air Capture
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Department of Energy Announces Significant Investment in Direct Air Capture

Brownstein Client Alert, May 24, 2022

Last week, the U.S. Department of Energy (“DOE”) released a notice of intent to fund the 2021 Infrastructure Investment and Jobs Act’s program for direct air capture (“DAC”) of carbon dioxide at four regional hubs. The infrastructure bill appropriates $3.5 billion for the project during the next five years (fiscal years 2022–2026). DAC uses technology to capture carbon dioxide from the ambient air. Once captured, the carbon dioxide can be permanently sequestered in geologic formations or used (e.g., for enhanced oil recovery, to strengthen concrete or as a feedstock for synthetic fuels).

Carbon dioxide removal (“CDR”) strategies, including DAC technology, are becoming increasingly central to the administration’s energy transition efforts. The Intergovernmental Panel on Climate Change’s 2022 report on climate change mitigation concluded “the deployment of CDR to counterbalance hard-to-abate residual emissions is unavoidable if net zero CO2 or GHG emissions are to be achieved.” DOE is leading the U.S. CDR effort with Carbon Negative Shot—a decade-long initiative to fund and scale CDR technology to reduce the cost of capture and sequestration to under $100 per metric ton of carbon dioxide equivalent. DOE recognizes DAC’s short-term role to offset emissions from sectors that are difficult and expensive to decarbonize like heavy industry and aviation, and its long-term role to remove legacy greenhouse gas emissions. Despite its critical emissions reduction role, DAC technology has been slow to scale. According to the International Energy Agency, as of November 2021, there were nineteen DAC plants operating worldwide. Occidental Petroleum Corp. is building the United States’ first large-scale DAC plant in the Permian Basin and plans to bring it online in 2024.

DOE’s $3.5 billion fund will play an important initial role in scaling DAC projects. The Infrastructure Bill requires DOE to provide funding to eligible projects that contribute to the development of four regional DAC hubs. Each DAC hub must: facilitate the development of DAC projects; have the capacity to capture and sequester or use at least 1 million metric tons of carbon dioxide from the atmosphere each year; demonstrate its capture, delivery and sequestration or use technology; and have the potential to be developed into a regional or interregional carbon network to facilitate carbon sequestration or use.

In addition to announcing the availability of funding, the DOE notice of intent describes its DAC hub implementation strategy. DOE defines a DAC hub as a “network of projects, potential CO2 utilization off-takers, connective carbon dioxide transport infrastructure, subsurface resources, and sequestration infrastructure located within a region.” DOE plans to use the fund to nurture both near-term and long-term technically and economically viable DAC technologies. While the infrastructure bill provides for sequestration or utilization as the carbon dioxide end use, the DOE notice of intent limits the funding opportunity to permanent sequestration projects, including storage via durable conversion pathways or dedicated geologic storage. Eligible projects include: chemical DAC technologies, biomass carbon removal and storage, ocean-based carbon removal (aka direct ocean capture) and enhanced mineralization.

DOE’s DAC funding opportunity signals a continued and sustained effort by the administration to establish and fund regional “hubs” focused on various energy transition projects, including hydrogen and more broadly, carbon capture, use and sequestration. As with other efforts, the success and scalability of DAC projects will depend on location (e.g., geology, geography) technological feasibility, existing and yet-to-be developed regulatory frameworks, economic incentives, and available markets. Our attorneys and policy advisors work with clients across the spectrum on a variety of energy transition issues and would be happy to discuss how your company can take advantage of DOE’s most recent funding announcement.

This document is intended to provide you with general information regarding the Department of Energy funding direct air capture. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.

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