This article was originally published in Ethanol Producer Magazine on February 23, 2026.
By Roxby Hartley, Ph.D. and Chelsa Oren
For ethanol producers investing in carbon capture and storage, Section 45Q, the U.S. tax credit for carbon dioxide (CO2) sequestration, remains a cornerstone incentive. At the same time, recent regulatory developments have introduced uncertainty around how producers will document compliance for calendar year 2025.
The issue is not whether the credit is available; it is how eligibility will be demonstrated.
It is also important to note that Section 45Q is not limited to geologic storage. CO2 used for enhanced oil recovery (EOR) or other utilization pathways may also qualify as eligible carbon capture under 45Q, provided the CO2 is securely stored or its lifecycle emissions are appropriately quantified and verified in accordance with U.S. Internal Revenue Service and U.S. Environmental Protection Agency requirements.
Historically, 45Q compliance for geologic storage has been closely tied to the EPA’s Greenhouse Gas Reporting Program (GHGRP), specifically Subpart RR. Facilities captured CO2, injected it under approved permits, monitored storage performance and reported results annually through EPA’s electronic reporting system. Those reports formed the basis for certifying eligible CO2 volumes on IRS Form 8933.
In September 2025, the EPA proposed removing most GHGRP reporting requirements, including Subpart RR, after 2024. As of early 2026, the agency has not yet decided whether to discontinue reporting or to launch a revised electronic Greenhouse Gas Reporting Tool (e-GGRT) for 2025 data. Because existing U.S. Treasury regulations still reference EPA reporting as the mechanism for demonstrating secure geological storage, this lack of clarity has real implications for ethanol producers planning to claim the credit.
To address this gap, the IRS issued interim guidance in December 2025 (Notice 2026-1). The guidance outlines two compliance paths for calendar year 2025, depending on whether the EPA launches its reporting system by June 10, 2026. Producers should now prepare for both outcomes.
Why EPA Reporting Still Matters
Under current rules, CO2 qualifies as securely stored for 45Q purposes only if injection and monitoring meet EPA standards. Subpart RR defines those standards. It requires mass-balance accounting of injected CO2, monitoring to confirm containment and annual reporting of results.
The IRS safe harbor does not change these technical expectations. What changes is the verification pathway if EPA reporting is unavailable. Instead of submitting data directly to the EPA, producers may rely on third-party technical certification. The underlying monitoring, documentation and engineering rigor remain the same. This distinction is important. The safe harbor is not a simplified option. It is an alternative method for demonstrating compliance when the EPA’s reporting system is not accessible.
Two Compliance Paths for 2025
If EPA Launches e-GGRT:
If the EPA launches the reporting system for reporting year 2025 by June 10, 2026, the safe harbor does not apply. In that case, ethanol producers must submit a complete Subpart RR Annual Report through the EPA system, consistent with prior practice.
All monitoring data, mass-balance calculations and supporting documentation must be reported electronically. Successful submission satisfies the regulatory requirement for secure geological storage and allows the taxpayer to certify eligible CO2 volumes on its federal tax return. Producers should assume this remains the default scenario until EPA confirms otherwise. Reporting accounts, credentials and internal workflows should remain active.
If EPA Does Not Launch e-GGRT:
If the EPA does not launch the reporting system by June 10, 2026, Notice 2026-1 allows taxpayers to rely on a safe harbor for calendar year 2025. Under the safe harbor, the producer must still prepare a full Subpart RR–compliant Annual Report.
Content requirements are unchanged. What changes is who reviews and certifies the report. Instead of submitting the report to the EPA, the taxpayer must provide it to a qualified independent engineer or geologist. The certifier must be licensed in at least one U.S. state and independent of the taxpayer and any credit claimant.
The certifier must attest, under penalties of perjury, that the project complies with Subpart RR as in effect on December 31, 2025, and that the report is accurate and complete. All documentation and certification must be finalized by the time the taxpayer files its federal income tax return. The materials are retained in the taxpayer’s records and must be available upon request.
For producers accustomed to EPA-centered compliance, this represents a shift. Responsibility for demonstrating compliance moves more directly to the project team and its technical advisors.
What Ethanol Producers Should Be Doing Now
The most significant risk in the current environment is delay. Producers should continue operating as though Subpart RR reporting will be required. Monitoring systems, data collection protocols and internal quality controls should remain fully aligned with EPA requirements. The safe harbor does not excuse gaps in data or incomplete monitoring, and any deficiencies will surface during third-party certification.
Producers should also begin engaging qualified professional engineers or geologists now. Under the safe harbor, independent technical certification is mandatory. There is a limited pool of professionals with appropriate licensure and carbon storage experience, and demand is likely to increase as the June deadline approaches.
Early engagement allows time to review monitoring plans, validate data workflows and identify issues while corrective action is still possible. It also reduces the risk of certification delays that could interfere with tax filing deadlines.
In parallel, producers should begin assembling the structure of their 2025 annual report. Facility descriptions, permitting information, injection well details and monitoring methodologies can be drafted in advance. Treating the report as a working document reduces schedule pressure and improves defensibility.
Finally, producers should plan for dual compliance until the EPA provides clarity. Preparing both an EPA-ready submission and a safe harbor certification package may involve some duplication, but the cost is modest relative to the value of the credit and the risk of noncompliance.
Supporting Compliance Through the Transition
Work with a third-party verification body on 45Q compliance, monitoring and verification program development, and third-party certification readiness. Whether EPA reporting proceeds or the safe harbor applies, the technical standard remains Subpart RR. Early involvement of qualified engineers helps ensure that monitoring programs are aligned with those standards and that documentation withstands review.
Looking Ahead
June 10, 2026, is the key date. Producers should closely monitor EPA announcements, Federal Register notices and updates to the GHGRP program. Confirmation that e-GGRT is operational—or that Subpart RR reporting will not proceed—will determine which compliance path applies.
Additional IRS guidance is also possible. Notice 2026-1 is interim and limited to calendar year 2025. Revised regulations are expected for future years.
For now, the prudent approach is to:
• Prepare and maintain technical discipline
• Engage qualified professionals
• Build documentation early
Producers that do so will be positioned to claim the 45Q credit with confidence, regardless of how EPA ultimately resolves its reporting program.
Authors: Roxby Hartley, Climate Risk Director EcoEngineers, an LRQA company
rhartley@ecoengineers.us
Chelsa Oren, Ethanol and Biodiesel Service Director EcoEngineers, an LRQA company
coren@ecoengineers.us
