CRA confirms that an underground mineral formation used for carbon capture can qualify for refundable tax credit purposes

A refundable tax credit under s. 127.44(2) may be available for a carbon capture, utilization and storage project when 10% or more of the captured carbon is used for an “eligible use,” whose definition refers inter alia to the storage of captured carbon in a “dedicated geological storage.”

In confirming that a “geological formation” referred to in the definition of “dedicated geological storage” does not refer only to an underground reservoir, and can include an underground mineral formation used for carbon storage, for example, an underground serpentinite deposit, CRA first stated:

[A] “geological formation” will be an identifiable rock body with stable lithic characteristics that distinguish it from adjacent rock bodies and that occupies a particular position in the rock layers (the stratigraphic column). A formation may be mapped on the Earth’s surface or traceable underground. In general terms, a formation can be distinguished on the basis of the identification of a rock unit that has specific internal characteristics that make it different from neighbouring units.

CRA concluded:

[A] geological formation is not limited to underground reservoirs but could instead include rock bodies with the characteristics described above.

Neal Armstrong. Summary of 31 October 2024 External T.I. 2024-1038061E5 F under s. 127.44(1) - dedicated geological storage.