S. 1188: Facilitating Lower Atmospheric Released Emissions Act

The bill titled the "Facilitating Lower Atmospheric Released Emissions Act" (FLARE Act) proposes changes to the U.S. Internal Revenue Code concerning the treatment of expenses related to gas flaring and venting mitigation systems. Here are the key components of the bill:

Permanent Full Expensing

The bill aims to allow companies to fully expense costs related to systems designed to mitigate gas flaring and venting. This means:

• When companies invest in equipment or technologies that capture gas that would otherwise be flared (burned off) or vented (released into the atmosphere), they can immediately deduct 100% of the costs from their taxable income.
• This change applies specifically to what is defined as "applicable energy property," which includes systems that collect and utilize or combust natural gas and hydrocarbons for various purposes.

Definition of Flaring and Venting Mitigation System

A "flaring and venting mitigation system" is defined in the bill as any system that:

• Intakes natural gas.
• Separates, collects, and uses or burns methane and heavier hydrocarbons through methods such as:
• Compressing or liquefying gas for fuel or transport.
• Producing petrochemicals or fertilizers.
• Converting gas into liquid fuels.
• Generating electricity.
• Using gas for computational power or digital asset mining.
• Powering oilfield equipment.

Exemption for Foreign Entities

The tax benefits provided by this bill will not apply to any systems placed in service by foreign entities identified as concerning under specific definitions provided by the law. This aims to focus support on domestic operators and developers of these technologies.

Effective Date

The changes introduced in the bill are set to take effect for any applicable property placed in service after December 31, 2025.

Relevant Companies

• XOM (Exxon Mobil Corporation): A major player in oil and gas, Exxon could benefit significantly from tax incentives related to flaring mitigation technologies.
• CVX (Chevron Corporation): Another leading oil and gas company, Chevron may also leverage the proposed deductions to invest more in flaring reduction technologies.
• SLB (SLB Ltd.): As a provider of technologies for oil and gas production, SLB may see increased demand for its services related to the mitigation systems defined in the bill.