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Capturing carbon dioxide emissions for enhanced oil recovery could significantly increase if Congress passes tax incentives and other policy changes similar to those that fueled the growth of renewable energy, according to a new report by the Great Plains Institute.
The Minneapolis-based energy policy group worked with representatives of 14 states to arrive at policy proposals now before Congress, which will likely be voted on this week. The proposals would increase federal payments for companies that capture carbon, stabilize its price and offer financing options commonly available to renewable energy companies.
Those participating in the Midwest Work Group included representatives from Indiana and Ohio, as well as nearby Kentucky and Pennsylvania. Two governors — Democrat Steve Bullock of Montana and Republican Matt Mead of Wyoming — have endorsed the report.
“We have the resources in this country to become truly energy independent,” Mead said in a statement. “I have advocated for an all-inclusive energy mix and believe that the responsible development of hydrocarbons is critically important. This report makes recommendations that will enhance our nation’s energy and economic security.”
Brad Crabtree, vice president for fossil energy at the Great Plains Institute, spoke to Midwest Energy News about the carbon-capture technology, challenges in the field, the policy needed to jumpstart it growth and what support looks like in Congress.
Midwest Energy News: How do you explain carbon capture and how it works to non-geologists?
Crabtree: Carbon capture can come from various sources, both coal plants and industrial and fertilizer companies. It’s been going on for half a century, starting in 1972 in Texas. The original purpose was not climate change, but to extract oil that stayed in reservoirs. Injecting carbon back into reservoirs released more of the remaining oil trapped in geologic formations.
What happens when you use carbon dioxide (CO2) for removing oil from wells?
CO2 works as a solvent by causing oil to swell and start flowing again. I tell people it’s like changing the oil of a car and the oil sticks to your hands. Oil sticks to the surface in these geologic formations. The CO2 makes oil expand and that makes it flow again.
Aren’t we just encouraging more greenhouse gas emissions by reusing it to harvest even more oil?
People have asked what good does it do to capture all this CO2 and turn around and produce more oil. What’s interesting is that the International Energy Agency has done a very authoritative lifecycle analysis of the process and what it found was even after accounting for the CO2 included in the oil produced, there’s one-third carbon reduction by using carbon capture. And the fact is we’re still producing and importing millions of barrels of oil a day. We’re still in an oil economy.
So it’s a good thing?
This is a way to produce additional oil with a very large-scale CO2 reduction and to produce that oil here at home, which is an economic benefit as well.
Are oil companies and power plant owners the only ones who would benefit from the tax credits?
Carbon is fundamental to the global economy. We’re not going to stop using concrete, we’re not going to stop using steel, and both emit CO2. To produce one ton of Portland cement you chemically generate one and a quarter tons of CO2, and that doesn’t even include the energy that goes into the process — that’s just the chemical reaction. That’s why cement production is one of the largest sources of greenhouse gas emissions in the world today. There is a whole suite of industrial processes that will need CO2 management if we are to meet mid-century climate goals.
What is the 45Q tax credit and how does it work?
The 45Q tax credit pays companies that re-use carbon. In a general sort of way that’s like a wind tax credit. It’s performance based — it’s based on production, which is important. There are those who say we shouldn’t be using tax payer dollars to support technology and projects that don’t work. But you don’t get to claim the tax credit unless your project works and you inject CO2 in a geologic formation and have it safely stored.
How much is the credit?
Right now it’s $10 a ton if you’re doing enhanced oil recovery, and it’s $20 a ton if you’re storing CO2 in a saline formation. That’s too little. The legislation that’s pending on the Senate side would provide $35 a ton for enhance oil recovery and $50 a ton for storage in a saline formation.
Why is there so much more of a tax credit for placing it in a saline formation?
It’s possible to store enormous volumes of CO2 in saline formations — enough to store centuries’ worth of CO2 emissions. That’s because they are so large and numerous. The problem in the near term is no one will pay you for that CO2, so there’s no business model. When you put it in a saline formation no one is paying you to do it.
What are your other legislative efforts?
The current [law] limits the government’s program to 75 million tons of CO2 in total and unfortunately it’s on a first-come first-served basis. The fund is expected to run out in just a few years. If you’re starting the development of a project now that could take several years to develop, you will be faced with the tax credit running out before your project enters commercial operation.
You mentioned some restrictions on the size of CO2 operations. Can you explain that issue?
The current law restricts the tax credit to facilities capturing 500,000 tons of CO2 each year. The idea is we should be supporting significant demonstrations of carbon capture technology. But the problem is what’s significant varies by industry. In some industries there are no facilities that emit half a million tons of CO2 every year. The Senate bill would reduce the amount to 100,000 tons annually, which would make nearly all ethanol plants eligible to participate in carbon capture and storage.
Does any of the legislation have any chance of passing?
We have many Republican governors onboard and for the 45Q legislation we have 20 senators on board, including eight Republicans. The House legislation has 50 sponsors, with two Republicans for every one Democrat. Both Minnesota senators support it, as do several House members.