2025, the One Big Beautiful Bill Act (“OBBBA”) modified the structure of Section 45Q tax credits to increase their value for carbon capture developers. Under OBBBA, there is one credit value for projects capturing carbon dioxide from industrial and power facilities ($85 per metric ton) and one value for direct air capture projects ($180 per metric ton), representing the maximum value of carbon credits under previous iterations of Section 45Q. [43] Previously, the value of Section 45Q tax credits depended on the end-use of the captured carbon, so tax credits for capturing carbon from industrial and power facilities varied from $60 to $85 per metric ton; and tax credits for direct air capture projects varied from $130 to $180 per metric ton. [44] Further under OBBBA, Section 45Q tax credits are available as a direct payment or transferable to a third party, allowing developers to receive either a direct refund or to monetize their credits via sale. [45] Finally, unlike previous iterations of Section 45Q, OBBBA adjusts Section 45Q tax credits for inflation beginning in 2027 so that the credits do not lose value over time. [46] Overall, OBBBA makes Section 45Q tax credits for CCS projects more valuable than ever before.
carbon sequestration in the state, possibly as soon as December 2025. [51] Texas primacy is a major development in CCS because captured carbon now can be sequestered in Texas, rather than having to be transported long distances to another state that has primacy. [52] For natural gas-powered plants, the ability to sequester carbon much closer to the location of the plant itself would drastically decrease transportation costs. [53] As result, Exxon, Oxy, and other supermajors in the oil and gas industry recently have announced construction projects for natural gas-powered plants in Texas, citing proximity to natural gas sources as a key factor; but now, the ability also to sequester carbon in Texas provides another advantage for siting natural gas-powered plants in Texas. [54]
Impact on AI Data Centers
The OBBBA’s sweeping reforms to the Section 45Q tax credits establish a uniform and substantially more valuable incentive framework for carbon capture, making gas-powered plants an attractive option to provide electricity to AI data centers. By integrating carbon capture and sequestration technologies into data center infrastructure, operators and investors can maximize available federal carbon capture incentives, while simultaneously managing exposure to long-term cost and policy uncertainties. As AI data center decarbonization becomes a strategic and regulatory imperative, pairing natural gas power with advanced carbon capture and sequestration technologies offers robust, near- term solutions for emissions reduction, operational reliability, and flexible output capacity. The expansion of tax credits and regulatory incentives has tilted the financial equation toward aggressive adoption of natural gas-powered electricity generation, and carbon capture and sequestration makes gas-powered plants environmentally sustainable for the future.
State Primacy
Currently, the most stringent regulatory hurdle for CCS – Class VI well permits – is at an all-time low. Carbon, including CO 2 emissions from gas-fired power plants, must be stored in a Class VI well, which is the most regulated classification of disposal well by the U.S. Environmental Protection Agency (“EPA”). [47] The EPA must grant a state primacy over Class VI wells, meaning that the state has authority to regulate and permit Class VI wells under the EPA’s requirements. [48] To date, only Louisiana, North Dakota, West Virginia, and Wyoming have been granted primacy by the EPA, meaning these are the only states that can permit Class VI wells for carbon sequestration. [49] As part of the EPA’s initiative surrounding CCS, the federal government has expedited the primacy application process. [50] In July 2025, the EPA approved Texas’s application for primacy, meaning that the Texas Railroad Commission will be able to regulate and permit Class VI wells for
Opportunities for Oil and Gas Professionals
While most people associate the proliferation of AI data centers with major tech companies such
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