SECTION 5. SECURE GEOLOGICAL

STORAGE

.01 In General . In order to qualify for the § 45Q credit, a taxpayer must either physically or contractually dispose of captured CO 2 in secure geological storage using adequate security measures as provided by the Secretary in regulations. The term “secure geological storage” includes storage at deep saline formations, oil and gas reservoirs, and unminable coal seams under such conditions as the Secretary may determine under regulations. There are not yet regulations setting forth the requirements for secure geological storage. This section of the notice provides interim procedures for a taxpayer to determine adequate security measures for the secure geological storage of CO until such reg2 ulations are promulgated. In the event that a taxpayer disposes of the qualified CO contractually, the taxpayer must en2 sure that the contracting party complies with the requirements of this section of the notice at all times, and the taxpayer must be able to provide documentation of such compliance as required under section 7 of this notice. In order to demonstrate secure geological storage for purposes of the § 45Q credit, a taxpayer must meet the requirements of section 5.02 of this notice.

.02 Requirements of Secure Geological Storage .

(a) Measurement of CO the Source 2 at of Capture: Final Mandatory GHG Re- porting Rule . On September 22, 2009, EPA issued the Final Mandatory GHG Reporting Rule (Reporting Rule) (to be codified at 40 C.F.R pt. 98), to require reporting of greenhouse gas emissions from all sectors of the economy. The Reporting Rule applies to fossil fuel suppliers and industrial gas suppliers, including CO 2 suppliers, as well as to direct greenhouse gas emitters. The Reporting Rule does not require control of greenhouse gases: rather, it requires only that certain sources monitor and report emissions. A taxpayer claiming the § 45Q credit must use the methodology, inputs, and equations in the Reporting Rule (or any successor rule) to calculate the amount of CO measured at 2 the source of capture. The amount reported under the Reporting Rule (or any successor rule) must be consistent with the amount of qualified CO taken into ac2 count for purposes of the § 45Q credit.

(b) Sequestration Site Rules . (i) IPCC Guidelines . In order for geological storage to be considered adequately secure for purposes of the § 45Q credit such that the injected CO does not es2 cape into the atmosphere, a taxpayer must conduct at the frequency appropriate for the site conditions, except as otherwise provided under paragraph (c), the following procedures outlined in the 2006 Intergovernmental Panel on Climate Change Guidelines for National Greenhouse Gas Inventories (IPCC Guidelines):

(A) Conduct a site characterization by evaluating the geology of the storage site and surrounding strata and identifying the local and regional hydrogeology and leakage pathways such as deep wells, faults, and fractures.

(B) Conduct an assessment of the risks of CO leakage, or escape of CO from 2 2 the subsurface to the atmosphere, by evaluating the potential for leakage through a combination of site characterization and realistic models that predict movement of CO over time and locations where emis2 sions might occur. A range of modeling tools is available, including reservoir simulators that are widely used in the oil and gas industry and have proved effective in predicting movement of gases and liquids, including CO, through geological forma2 tions. Reservoir simulation can be used to predict the likely location, timing, and

2009–44 I.R.B. 590 November 2, 2009