Mystery solved about that little tweak of the tax code regarding special treatment of CO2, thanks to some insight passed my way via Capitol Hill: this was not a drafting error poorly identifying CO2 credits but indeed, the Senate has just voted to elevate carbon dioxide to a distinct status. Not as a “pollutant,” but as a natural resource worthy of encouragement and preservation. Huzzah!

Here’s what we know, thanks to THOMAS. The House didn’t pass this loophole, it was slipped in by the Senate. There is no discussion of it in the House report or bill summary (obviously), and the Senate didn’t bother with either one of those things.

However, one problem of slipping things in like this, particularly when you try to keep the tweak as short as possible so as to be as unobtrusive as possible, is that the result can be some potentially suspect language. And, lacking any legislative history, such as an explanation of the purpose of the language, look what the courts will have to take on its face (emphasis mine):

"(E) income and gains derived from the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil, or products thereof), or the marketing of any mineral or natural resource (including fertilizer, geothermal energy, industrial source carbon dioxide and timber),"

Who knows if there’s sufficient potential in the new construct such that utilities find it worthwhile to create partnerships for the purpose of, er, producing CO2. But what fun if they do. It’s about time we subsidized the stuff . . . particularly as the next president is preparing to tax it. It really is the new tobacco, isn’t it?

The one thing we can safely say is that Congress has just classified CO2 as a natural resource like oil, gas and timber in order to create a loophole. And in the next provision they call for a study to help them figure out how to tax it or take away the tax benefits of producing it.