With carbon seize and storage infrastructure advancing erratically throughout the Midwest, Iowa lawmakers at the moment are testing whether or not fiscal coverage ought to form the state’s position as a CO2 transport hall.
On February 4, 2026, a Senate subcommittee superior Senate File 2069, laws that might impose a severance-style tax on carbon dioxide transported by way of Iowa pipelines, introducing a brand new price layer for initiatives that aren’t but constructed however already politically contentious.
Beneath the invoice, liquefied CO2 destined for enhanced oil restoration could be taxed at USD 1 per metric ton, whereas all different CO2 transported inside or out of Iowa would face a better USD 2.50 per metric ton price. The construction instantly raised questions amongst lawmakers and stakeholders about each the coverage rationale and market influence, notably because the state debates whether or not carbon sequestration pipelines qualify as a public use eligible for eminent area.
The timing is materials. Summit Carbon Options’ proposed pipeline community, one of many largest CCS initiatives within the area, is designed to move as much as 18 million metric tons of CO2 per 12 months from ethanol crops to underground sequestration websites. On the greater tax price, that quantity would translate into roughly USD 45 million in annual tax publicity, a nontrivial determine in a sector the place margins already rely closely on federal incentives such because the US 45Q tax credit score.
Supporters of the invoice framed the tax as a approach to make sure the state captures some return from infrastructure that depends on Iowa’s geography and regulatory approvals. Senate Methods and Means Chair Dan Dawson pointed to the state’s long-standing monetary assist for the ethanol trade, arguing that new revenue-generating initiatives mustn’t stay exempt indefinitely. From this angle, the tax is much less about carbon coverage and extra about fiscal symmetry, guaranteeing public funding is finally matched by public income.
Critics, nevertheless, see the proposal as disconnected from the core situation dealing with carbon pipeline improvement in Iowa. Landowners and environmental teams, together with the Sierra Membership Iowa Chapter, described the invoice as a distraction from unresolved property rights disputes. Solely every week earlier, senators considerably amended Home-passed laws aimed toward banning the usage of eminent area for carbon sequestration pipelines, underscoring that the authorized basis for such initiatives stays unsettled.
The differential tax charges additionally drew scrutiny. Lawmakers questioned why CO2 used for enhanced oil restoration could be taxed at a decrease price than CO2 transported solely for sequestration. From a local weather coverage standpoint, the excellence is tough to justify, on condition that enhanced oil restoration is related to further fossil gasoline manufacturing, even when paired with carbon injection. Jess Mazour of the Sierra Membership Iowa Chapter argued that the invoice’s construction weakens its environmental credibility whereas additionally misallocating income to the state’s taxpayer reduction fund reasonably than native governments internet hosting the pipelines.
Trade opposition centered squarely on price pass-through. Summit Carbon Options warned that the tax would elevate the price of service for ethanol producers, probably undermining Iowa’s not too long ago enacted sustainable aviation gasoline tax credit score. In line with the corporate, greater transport prices would finally cut back the premium ethanol crops pays to farmers for corn, shifting the financial burden upstream reasonably than attaining a impartial redistribution.
The controversy exposes a broader coverage pressure. Iowa is concurrently positioning itself as a hub for low-carbon fuels and signaling regulatory uncertainty for the infrastructure required to decarbonize ethanol. Senator Tony Bisignano characterised the invoice as untimely, noting that the pipeline itself has but to clear authorized and allowing hurdles. His argument displays a sequencing concern shared by many builders: including fiscal constraints earlier than resolving eminent area and siting guidelines compounds threat reasonably than clarifying funding situations.
Regardless of these considerations, the subcommittee voted to advance the invoice to the total Senate Methods and Means Committee. Senators Jason Schultz and Dan Dawson acknowledged flaws within the price construction however expressed curiosity in persevering with the dialogue, notably round whether or not CCS pipelines ship adequate public profit to justify preferential therapy.
