The Energy Infrastructure Reinvestment (EIR) program of the Loan Program Office (LPO), coupled with Inflation Reduction Act (IRA) tax incentives, provides a unique and time-sensitive opportunity for the US oil and gas sector to accelerate its transition toward cleaner sources of energy and away from oil and gas.

Through the EIR, the LPO can provide financing for projects that retool, repower, repurpose or replace energy infrastructure that has ceased operations or projects that reduce operational emissions of existing energy infrastructure (for a detailed description see Appendix A), providing the opportunity not only for emissions reductions but also for reinvestment in energy communities. By lowering the cost of financing, the EIR creates more opportunities for oil and gas companies to reduce their operational emissions in the near term and more importantly, to transform their business models and advance the transition by pursuing eligible clean energy projects. This insight brief highlights examples of such opportunities.

The ongoing high-interest rate environment makes investment in capital-intensive renewable energy projects more expensive. However, after a year of record oil and gas sector profits in 2022 and a resulting increase in cash availability and widespread deleveraging, coupled with substantial profits in 2023, oil and gas companies have more room on their balance sheets to invest in projects and take on more debt.

Through the Title XVII program (see Appendix A), the LPO offers loan guarantees and access to low-cost, long-tenor debt financing at or below commercial debt market rates. The loans provided through the program have a maximum tenor of 30 years, are priced at 37.5 basis points above Treasuries of the corresponding tenor, and can cover up to 80 percent of eligible project costs, with no ceiling on the project size and costs other than the program’s designated loan authority. Through the IRA, the EIR program was allocated $5 billion to cover the cost to government to provide up to $250 billion in lending for eligible projects, making it possible to finance large-scale energy infrastructure projects with meaningful emissions reductions impact.

Access to EIR financing combined with applicable IRA tax incentives make eligible projects more financially attractive while also providing economic and environmental benefit to local communities through the program’s focus on community benefit and mitigation of pollutants and emissions. More broadly, these IRA programs can help make a more robust internal business case for significant strategic investment of oil and gas company capital in pursuing emissions-reducing or clean energy projects. The EIR’s loan authority currently goes through September 2026 with loan disbursement possible through to 2031, making this a time-constrained opportunity and underscoring the need for companies to act quickly.

Potential oil and gas transition activities eligible for EIR financing cover upstream, midstream, and downstream activities, and could be broadly grouped into activities that accelerate the transition away from oil and gas and those that reduce the sector’s operational emissions in the near term.

Upstream:

Upstream oil and gas activities deal with petroleum exploration and production. The bulk of oil and gas value-chain methane emissions are from their upstream activities, making this a key segment to focus on for decarbonization.

Midstream:

The midstream sector is engaged primarily in the processing, transportation, storage, and trading of oil and natural gas.

Downstream:

The downstream oil and gas sector is responsible for crude oil refining, natural gas processing, petrochemical production, and the distribution and marketing of petroleum products. Downstream and end-use activities are significant contributors to the sector’s CO₂

1. Activities that Accelerate the Transition Away from Oil and Gas

The transition activities discussed in this section would qualify for funding through EIR by being projects that would “retool, repower, repurpose, or replace energy infrastructure that has ceased operations.”

Upstream:

Lithium extraction from oilfield brine:

Lithium may be found in oilfield brine typically considered a liquid by-product of oil and gas drilling. Now, it yields the potential to be its own primary product. However, not all oil fields hold economical quantities. The amount and concentrations of lithium in brine vary by location and rock formation. If lithium extraction from oil field brine is successful at economical quantities, it would be a faster and cheaper production method than the more conventional hard rock mining and extraction from evaporation ponds. Some oil and gas companies have been involved in exploring the potential for oil field brine extraction as it relies on their core capability of drilling and because the market for lithium is significant and growing with the increase in demand for batteries for EVs, grid-scale batteries, and other applications.

The technology to extract lithium from brine—direct lithium extraction or DLE—is in its early stages and has not been applied on a commercial scale. However, pilot projects have been underway both within and outside the United States. Given the nascent stage of the extraction technology, other Title XVII funding geared toward innovative energy projects (section 1703) may be better suited. In instances where economical lithium concentrations have been identified and enabling infrastructure exists, such as in the Arkansas region of the Smackover rock formation, EIR funding may be applicable to repurposing pre-existing infrastructure. Additionally, the 45X Advanced Manufacturing Production tax credit would be applicable given lithium’s nature as a critical mineral. The environmental impact of DLE use on brine depends on a number of factors that would need to be assessed depending on the specific technology selected and the nature of its application.

Developing enhanced geothermal systems:

Enhanced geothermal systems (EGS) involve extracting geothermal resources in areas where stimulation (e.g., hydraulic fracturing) is required to develop the resource. Oil and gas companies have significant subsurface exploration and drilling expertise relevant to geothermal heat and power resource development.

In November 2023, Project Red, a 3.5 MW EGS pilot project plant developed by Fervo Energy and backed by Google, came online, demonstrating the technical feasibility of EGS. However, a number of challenges exist in deploying EGS, one of which is the economics. Right now, it is prohibitively expensive to generate electricity using the technology. So much so that the US Department of Energy, through its Enhanced Geothermal Shot initiative, has a goal of reducing the cost of EGS by 90% to $45/MWh by 2035. As more corporate buyers express demand for clean, firm power to meet renewable energy goals, a market for EGS-supplied clean firm power likely exists even at current prices.

Different financing options may be available depending on the nature of the project. Given the relative recency and innovativeness of EGS technology, section 1703 Innovative Energy Project financing could be applicable to a greenfield project. Where existing oil and gas fields and their associated equipment can be repurposed for EGS, EIR financing could be applicable. Additionally, the 48E or 45Y Clean Electricity tax credits would apply due to the clean electricity generation of the project.

Repurposing offshore oil and gas infrastructure for offshore wind:

Some of the infrastructure required in offshore drilling and offshore wind (ports, ships, platforms, etc.) overlap, creating an opportunity for a new business model for oil and gas companies. This model could take the form of setting up offshore wind turbines and selling power to electric utilities through long-term PPA contracts. The Gulf of Mexico is a hotbed for offshore oil and gas activity with the potential for harnessing offshore wind power (more than 100 GW of offshore wind by 2050) while also having the logisitical, manufacturing, transport, and skilled labor capabilities that could be translated to offshore wind. This makes it a potential region for this use case. To be eligible for EIR financing, these offshore projects could repurpose pre-existing oil and gas infrastructure that has ceased operations or through the use or upgrade of exisiting interconnections. Tax credits 48E or 45Y could be used to further enhance wind power project economics along with an additional energy community bonus credit for projects investing in port communities via port repurposing.

Additionally, other entities in the oil and gas sector that currently own ports and shipping infrastructure for oil and gas applications could be eligible for EIR funding through supporting the deployment of offshore wind, but also as part of the supply chain for domestic clean energy components. This expands the repurposing opportunity from the coasts further inland to infrastructure on inland waterways.

Remediating and repurposing abandoned onshore oil and gas fields and infrastructure for renewable energy and/or energy storage projects:

Abandoned oil and gas well brownfield sites could be remediated and repurposed with renewable energy projects. An example is the RenuWell project in Alberta, Canada, which seeks to remediate and repurpose with renewable energy-generating projects implemented by fossil fuel industry and Indigenous workers trained in an associated workforce training program. Abandoned oil wells may also be repurposed for energy storage, as demonstrated by Renewell — a US-based company using idle oil and gas wells for gravity energy storage.

Similar remediation and repurposing solutions would be a good use case for EIR financing because they combine repurposing, improving air quality through remediation of the site, and avoiding CO₂ emissions by generating clean electricity. Renewable energy generating projects would also benefit from 45Y or 48E clean electricity tax credits, which could have an additional energy community bonus credit applied due to the use of a brownfield site.

Downstream

Repurposing gas stations to build electric vehicle (EV) charging stations:

As the share of electric cars sold increases, the need for more widely distributed charging infrastructure grows. In its 2024 energy transition strategy, Shell cited plans to build out its EV public charging infrastructure globally, noting its existing network of service stations as a competitive advantage. This highlights a potential kind of EIR-supported transition case applicable to downstream sector companies in the United States.

With the 30C tax credit and access to low-cost EIR debt financing, companies can more cost-effectively convert existing gas stations to commercial EV fast charging stations.

In addition to providing more quick and accessible electric vehicle charging, repurposed charging stations can serve as part of a virtual power plant network, providing additional economic benefit to project owners and helping to support grid reliability.

The environmental and surrounding community benefits are enhanced when the station to be repurposed is an abandoned one considered to be a petroleum brownfield. This creates an opportunity for site remediation where needed, as well as revenue-generating reuse of these abandoned sites.

Repurposing of refineries for sustainable aviation fuel (SAF) production:

Existing infrastructure in oil refineries can be reused and repurposed to produce sustainable aviation fuel and other biofuels. The requisite technology for SAF production and refinery conversions is proven and production expansion and conversion plans are underway within and outside the United States. Converting an oil refinery to a SAF refinery requires meaningful capital expenditures, which can be made more economical with the support of EIR’s low-cost financing and the 40B sustainable aviation fuel tax credit (before 2025) or the 45Z clean fuel production tax credit (from 2025 onward). A future additional revenue stream is also possible through the sale of sustainable aviation fuel certificates.

SAF production is an even more attractive opportunity for smaller refineries. With the most common biorefinery feedstock (HEFA) in limited supply, the economics are particularly favorable for smaller capacity refineries, which require less feedstock amount for SAF production.

Activities that Lower Existing Operational Emissions

The transition activities discussed in this section, by lowering operational emissions, would qualify for funding through EIR by being projects that would “enable operating energy infrastructure to avoid, reduce, utilize, or sequester air pollutants or anthropogenic emissions of greenhouse gases.” It is important to note that these activities are not aimed at perpetuating the business-as-usual operations of the oil and gas sector, but rather, the rapid near-term reduction of the sector’s emissions carried out in tandem with efforts to reduce oil and gas demand across end-use sectors.

In the current high-interest rate environment, the EIR presents a unique opportunity for oil and gas companies to invest in energy transition projects while reducing the sector’s operational emissions, giving a new life to aging or abandoned infrastructure, or exploring new renewable energy-focused business models. The transition activities mentioned in this brief have the potential to not only help the sector transition away from oil and gas and lower operation emissions but also to bring economic and environmental benefits to the local community.

The EIR program’s loan authority currently goes through September 2026, making this a time-constrained opportunity for companies to apply for financing.

Under Title XVII of the 2005 Energy Policy Act, the DOE Loan Program’s Office (LPO) was granted the authority to provide loan guarantees for clean energy deployment and energy infrastructure reinvestment projects in the United States. Through the program, the LPO can make long-term senior debt more accessible to projects that experience difficulty in obtaining commercial financing on attractive terms. The Title XVII program is applicable to projects at different stages of deployment from first-of-a-kind to established and larger scale.

What are the criteria for project eligibility under Title XVII?

As listed in the Program Guidance for Title XVII Clean Energy Financing Program, all Title XVII projects must meet the criteria of:

• Being an energy-related project located in the United States
• Demonstrating significant and credible greenhouse gas or air pollution avoidance, reduction, utilization, or sequestration that will be achieved through the project activity
• Having a reasonable prospect of loan repayment
• Involving technically viable and commercially ready technology
• Including analysis of the project’s impact on affected communities and a plan for engagement with those communities
• Not benefiting from other federal support that is restricted under the Title XVII program

In 2022, the Inflation Reduction Act (IRA) established the Energy Infrastructure Reinvestment program as an addition to the Department of Energy’s Title XVII loan program authority.

In addition to meeting the Title XVII loan program’s criteria for project eligibility, EIR-eligible projects are required to either:

• Retool, repower, repurpose, or replace American energy infrastructure that has ceased operations.
• Enable energy infrastructure in operation to avoid, reduce, utilize, or sequester air pollutants or anthropogenic greenhouse gas emissions.

How is energy infrastructure defined under EIR?

In the context of EIR, energy infrastructure is defined as “a facility, and associated equipment, used for (1) the generation or transmission of electric energy; or (2) the production, processing, and delivery of fossil fuels, fuels derived from petroleum, or petrochemical feedstocks.”

For projects involving energy infrastructure that has ceased operations, the following additional criteria must be met:

• The replacement needs to be sited at or near the original infrastructure location, and a link needs to be demonstrated between the benefits of the original and those of the replacement infrastructures (e.g., grid capacity and workforce retention).
• Any electricity generation project powered by fossil fuels must include controls or technologies to avoid, reduce, utilize, or sequester pollutants and emissions.

Note, however, that unlike other authorities under Title XVII, these projects are not subject to the requirement that they be “innovative,” opening the door for the program to finance projects that deploy or use commercially available technologies to reinvest in energy communities across the country.

What are some applicable tax credits for transition activities?

Below is a list of tax credits for energy projects that are relevant to the oil and gas transition activities that are covered in this piece. It is important to note that there are rules around how these credits can be stacked. Additionally, certain tax credits are eligible for incremental increases if prevailing wage and apprenticeship requirements or domestic content requirements are met or if the project is sited in an energy community.