To amend the Internal Revenue Code of 1986 to allow a credit for carbon dioxide captured from anthropogenic industrial sources and used as a tertiary injectant in enhanced oil and natural gas recovery.

Summary: Amends the Internal Revenue Code to allow a business tax credit for amounts of qualified carbon dioxide captured in the United States from anthropogenic industrial sources (e.g., an ethanol plant, fertilizer plant, or chemical plant) and used as a tertiary injectant in enhanced oil and natural gas recovery. Sets the credit amount at 75 cents (adjusted for inflation) per 1,000 standard cubic feet of the carbon dioxide captured.

Defines "qualified carbon dioxide" as carbon dioxide captured from an anthropogenic source that: (1) would otherwise be released into the atmosphere as industrial emission of greenhouse gas; (2) is measurable at the source of capture; (3) is compressed, treated, and transported by pipeline; (4) is sold as a tertiary injectant in qualified enhanced oil and natural gas recovery; and (5) is permanently sequestered in geological formations as a result of the oil and natural gas recovery process.

SECTION 1. TAX CREDIT FOR CARBON DIOXIDE CAPTURED FROM INDUSTRIAL 
              SOURCES AND USED IN ENHANCED OIL AND NATURAL GAS 
              RECOVERY.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business credits) is 
amended by adding at the end the following new section:

``SEC. 45J. CREDIT FOR CARBON DIOXIDE CAPTURED FROM INDUSTRIAL SOURCES 
              AND USED AS A TERTIARY INJECTANT IN ENHANCED OIL AND 
              NATURAL GAS RECOVERY.

    ``(a) General Rule.--For purposes of section 38, the captured 
carbon dioxide tertiary injectant credit for any taxable year is an 
amount equal to the product of--
            ``(1) the credit amount, and
            ``(2) the qualified carbon dioxide captured from industrial 
        sources and used as a tertiary injectant in qualified enhanced 
        oil and natural gas recovery which is attributable to the 
        taxpayer.
    ``(b) Credit Amount.--For purposes of this section--
            ``(1) In general.--The credit amount is $0.75 per 1,000 
        standard cubic feet.
            ``(2) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2004, there shall be 
        substituted for the $0.75 amount under paragraph (1) an amount 
        equal to the product of--
                    ``(A) $0.75, multiplied by
                    ``(B) the inflation adjustment factor for such 
                calendar year determined under section 43(b)(3)(B) for 
                such calendar year, determined by substituting `2003' 
                for `1990'.
    ``(c) Qualified Carbon Dioxide.--For purposes of this section--
            ``(1) In general.--The term `qualified carbon dioxide' 
        means carbon dioxide captured from an anthropogenic source 
        that--
                    ``(A) would otherwise be released into the 
                atmosphere as industrial emission of greenhouse gas,
                    ``(B) is measurable at the source of capture,
                    ``(C) is compressed, treated, and transported via 
                pipeline,
                    ``(D) is sold as a tertiary injectant in qualified 
                enhanced oil and natural gas recovery, and
                    ``(E) is permanently sequestered in geological 
                formations as a result of the enhanced oil and natural 
                gas recovery process.
            ``(2) Anthropogenic source.--An anthropogenic source of 
        carbon dioxide is an industrial source, including any of the 
        following types of plants, and facilities related to such 
        plant--
                    ``(A) a coal and natural gas fired electrical 
                generating power station,
                    ``(B) a natural gas processing and treating plant,
                    ``(C) an ethanol plant,
                    ``(D) a fertilizer plant, and
                    ``(E) a chemical plant.
            ``(3) Definitions.--
                    ``(A) Qualified enhanced oil and natural gas 
                recovery.--The term `qualified enhanced oil and natural 
                gas recovery' has the meaning given such term by 
                section 43(c)(2).
                    ``(B) Tertiary injectant.--The term `tertiary 
                injectant' has the same meaning as when used within 
                section 193(b)(1).
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Only carbon dioxide captured within the united states 
        taken into account.--Sales shall be taken into account under 
        this section only with respect to qualified carbon dioxide of 
        which is within--
                    ``(A) the United States (within the meaning of 
                section 638(1)), or
                    ``(B) a possession of the United States (within the 
                meaning of section 638(2)).
            ``(2) Recycled carbon dioxide.--The term `qualified carbon 
        dioxide' includes the initial deposit of captured carbon 
        dioxide used as a tertiary injectant. Such term does not 
        include carbon dioxide that is re-captured, recycled, and re-
        injected as part of the enhanced oil and natural gas recovery 
        process.
            ``(3) Credit attributable to taxpayer.--Any credit under 
        this section shall be attributable to the person that captures, 
        treats, compresses, transports and sells the carbon dioxide for 
        use as a tertiary injectant in enhanced oil and natural gas 
        recovery, except to the extent provided in regulations 
        prescribed by the Secretary.''.
    (b) Conforming Amendment.--Section 38(b) of the Internal Revenue 
Code of 1986 (relating to general business credit) is amended by 
striking ``plus'' at the end of paragraph (18), by striking the period 
at the end of paragraph (19) and inserting ``, plus'', and by adding at 
the end of following new paragraph:
            ``(20) the captured carbon dioxide tertiary injectant 
        credit determined under section 45J(a).''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code (relating to other 
credits) is amended by adding at the end the following new section:

``Sec. 45J. Credit for carbon dioxide captured from industrial sources 
                            and used as a tertiary injectant in 
                            enhanced oil and natural gas recovery.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.