End Polluter Welfare for Enhanced Oil Recovery Act of 2026

S.4222, titled the "End Polluter Welfare for Enhanced Oil Recovery Act of 2026," was introduced in the Senate on March 26, 2026, and subsequently referred to the Committee on Finance. The bill, sponsored by Senator Merkley (D-OR) and five co-sponsors, is in its early legislative stage. Its primary objective is to amend the Internal Revenue Code of 1986 by adding an end date for the credit for certain qualified carbon oxide and eliminating the use of carbon oxide as a tertiary injectant for facilities constructed after the bill's enactment date. Furthermore, it seeks to strike Section 43 of the Internal Revenue Code, which pertains to the enhanced oil recovery credit, effectively repealing this tax incentive. This bill does not authorize or appropriate any direct funding. Instead, its financial impact stems from the removal of existing tax credits. The elimination of the Section 45Q credit for carbon oxide used as a tertiary injectant and the repeal of the Section 43 enhanced oil recovery credit would directly increase the operational costs for companies engaged in enhanced oil recovery (EOR) projects that rely on these incentives. This change would reduce the profitability of such projects, making them less attractive for future investment. The bill's effective date for these changes is for taxable years beginning after its enactment. The structural losers from this legislation would be companies heavily invested in or planning to invest in enhanced oil recovery projects, particularly those utilizing carbon capture and utilization for EOR. These include major integrated oil and gas companies like $XOM and $CVX, as well as midstream and energy infrastructure companies such as $KMI, $ET, $EQT, $WMB, $LNG, $TRGP, $ENB, and $EPD, which may be involved in the transportation and storage of CO2 for EOR. Oilfield services companies like $SLB and $HAL, which provide technology and services for EOR, could also see reduced demand for these specific services. The recent Presidential Memoranda on April 20, 2026, aimed at stimulating domestic petroleum production and natural gas infrastructure, conflict with the intent of S.4222. While the memoranda encourage investment in the broader energy sector, S.4222 specifically targets and removes incentives for a particular method of oil recovery, potentially counteracting some of the positive impacts of the executive actions on EOR-focused companies. As of April 27, 2026, the bill is in the early stages of the legislative process, having only been introduced and referred to committee. Its companion bill, HR8108, is also in the early stages in the House. For S.4222 to advance, it must be considered and approved by the Senate Committee on Finance, then pass a full Senate vote, and subsequently pass the House of Representatives, before being sent to the President for signature. Given the early stage and the nature of repealing tax credits, the timeline for potential enactment is uncertain and likely extended, requiring significant legislative effort.