While the spotlight on carbon management often falls on new capture technologies and storage facilities, a robust carbon dioxide (CO2) transport infrastructure is critical to achieving midcentury climate goals. An established CO2 transport infrastructure can help lower the financial risk of capture and storage projects and expand the number of opportunities for carbon management.
The Carbon Dioxide Transportation Infrastructure Finance and Innovation (CIFIA) Program was established in the Bipartisan Infrastructure Law and expanded in the recent Inflation Reduction Act. Administered by the US Department of Energy (DOE) Loan Programs Office (LPO), CIFIA is a financing mechanism (a main component of the bipartisan SCALE Act) that will provide flexible, low-interest grants and loans to cover a portion of the cost of common carrier CO2 transport infrastructure development, lowering the risk of private sector investment.
CIFIA has a total of $2.1 billion available for CO2 transport infrastructure financing in the form of loans or grants. LPO estimates that the funding available through the CIFIA Program could support up to $40 billion in CO2 transport infrastructure investments across the country.
We had a conversation with Matt Kittell, a senior investment officer with LPO’s carbon management team, who conducts due diligence and underwriting on loans for LPO and is overseeing the rollout of CIFIA.
How does CIFIA advance DOE’s broader carbon management goals?
One of the ways the DOE aims to facilitate a just and environmentally sustainable transition toward a net-zero carbon economy is by focusing on carbon dioxide—specifically, its storage, containment, and capture.
Carbon capture and storage (CCS) seeks to permanently store and/or convert CO2 to reduce negative climate impacts. This process can be divided into three distinct parts: (1) capturing carbon (upstream), (2) transporting carbon (midstream), and (3) storing or utilizing carbon (downstream).
The CIFIA Program provides an attractive form of financing for the midstream portion of a CCS project—carbon transport—to benefit from economies of scale. This financing will take financial pressure off the upstream and downstream parts of the CCS chain, which will also increase the economic viability of those projects. Without a way to transport captured CO2, facilities would have to significantly increase their capital investment for CCS.
Offering financing for large-scale, common carrier CO2 transport mechanisms will allow capture and storage facilities to be connected in a cost-effective manner, leading to significant implementation of CCS technologies.
Who is eligible to apply for CIFIA?
We welcome applicants from the private sector, state or local governments, or any combination of the above.
What types of projects are eligible for CIFIA?
To be eligible for CIFIA funding, projects must be large—adding up to $100M or more in total investment. CO2 infrastructure projects must also be common carrier, meaning an eligible project, such as a CO2 pipeline, must offer transportation services to any third party under a standard set of terms.
It is anticipated that most applications will be for CO2 pipelines, though CIFIA funding is available to other modes of CO2 transport as well, including rail, maritime, truck, or other methods. CIFIA legislation is also agnostic to the capture and storage technologies used in the CCS chain, though priority will be given to infrastructure connecting to permanent storage, such as geologic storage.
Are there any additional criteria for CIFIA eligibility?
There are a few additional considerations that should be taken into account when determining eligibility for CIFIA funding. A project application must show:
- The potential to raise enough financing to build the project.
- Advanced stages of development in order for the LPO to underwrite the loan. This may include demonstration of construction contracts in place, initial orders of materials, or other financial commitments.
- The ability to begin construction within three months of receiving CIFIA funding.
- A reasonable prospect to repay the CIFIA loan to be awarded.
Awarded projects must also include a publicly available tariff for using the project’s CO2 transport infrastructure.
Does the project require active capture facilities to be eligible?
No, CIFIA does not require prospective capture facilities to be active. CIFIA will consider the viability of targeted CO2 sources, including the status of development for capture technologies, the negotiations between target facilities and the applicant, and the likelihood target facilities will capture CO2 and use the project’s transportation infrastructure. Priority will be given to projects that are further along.
Are there restrictions or preferences for project locations?
There are no restrictions on project locations, though geographic diversity will be taken into account. Congress has expressed its desire for CIFIA resources to be spread out among a broad geographic area.
Is funding only available for new CO2 infrastructure, or are infrastructure replacement and repurposing projects eligible?
Priority will be given to projects that have an existing and established right-of-way. Replacement or repurposing projects may also be considered.
Will there be a preference in application type between loan or grant funding?
CIFIA does not have a preference between loan and grant funding, but the program will consider the overall financial impact of the funding method.
CIFIA has $2.1 billion authorized in credit subsidy. This authorization may translate into $20-40 billion in loan authority, depending on the risk of the project. However, CIFIA grants are a dollar-for-dollar subsidy and would offer a maximum financial impact of $2.1 billion.
If a project is funded as a grant, is there a cost-share requirement?
CIFIA grants are “Future Growth Grants,” meaning they will cover up to 80 percent of the additional cost to expand or add more capacity to an existing project. Eighty percent is the maximum, though, and grants of this nature may be covered closer to 50 percent depending on the specific terms of the project.
What kind of financial terms can CIFIA provide?
CIFIA financial terms include but are not limited to the following:
- Eligible costs: Development and construction; transaction costs and capitalized interest; refinance of other project financial obligations.
- Tenor: Earlier of 35 years after substantial completion and the useful life of project.
- Debt to equity ratio: Max of 80/20 relative to eligible project costs, but subject to due diligence and negotiations.
- Interest rate: Not less than US Treasury securities rate for similar maturity to secured loan.
- General requirements: Standard covenants, reps, and warranties; US government is senior secured lender; Davis-Bacon wages paid for covered trades.
Once granted, are there any reporting requirements attached to the loan?
The loan will be administered by LPO’s Portfolio Management Division (PMD). Industry standard reporting requirements for debt-funded infrastructure projects will be required.
How many projects are expected to be funded?
This will depend on the size of awarded projects, the credit subsidy score for awarded projects, and the total share of the $2.1 billion that is used for loans versus grants. The more loans compared to grants that are awarded, the more projects CIFIA can support.
Is this a reoccurring program or a one-time funding opportunity?
CIFIA is a one-time program, and loan repayments will return to the Treasury.
What is the anticipated application window?
The application window is set to open on October 3rd, corresponding with the start of the federal government’s fiscal year. Additional guidance and a program website are targeted for public release in mid-September, which will include a link to request a pre-application. The LPO is currently engaging in pre-application consultations, and interested parties are encouraged to reach out.
CIFIA loans need to be closed by the end of 2026, with construction beginning within 90 days after financial close.
How do I apply?
An application guidance document is targeted for mid-September and will not go through a public comment period.
The CIFIA Program provides a tremendous opportunity to support project developers in deploying carbon dioxide infrastructure at scale. Similar to building other forms of infrastructure to support deployment of low- and zero-carbon technologies, such as transmission lines for solar and wind projects, scaling a national CO2 capture, transport, and storage system is a necessary component to meeting midcentury climate goals.
In tandem, the Bipartisan Infrastructure Law and the enhancements to the 45Q tax credit passed in the Inflation Reduction Act represent a complementary suite of policies, which would result in an estimated 13-fold increase in carbon management capacity and annual CO2 emissions reductions of 210-250 million metric tons by 2035. These complementary policies provide a substantial down payment on scaling deployment to meet midcentury climate obligations, while retaining and creating family-sustaining jobs and safeguarding America’s domestic energy production
If you have any questions regarding CIFIA applications or are interested in a pre-application consultation, please reach out to Matt Kittell at [email protected].
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