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Could oil companies incentivize coal plants to use carbon capture tech?

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Emily Guerin | Nov 12, 2013 05:00 AM

When Gina McCarthy, administrator of the U.S. Environmental Protection Agency, stood before the National Press Club on September 20 and announced draft rules for regulating carbon dioxide from new power plants, she said the proposal, “rather than killing future coal, actually sets out a certain pathway forward for coal.” That way forward is through carbon capture and sequestration, or CCS, a technology McCarthy called “feasible” and “available today.”

McCarthy’s optimistic statement has garnered a lot of attention in the last six weeks, rising to the level of a congressional hearing in the House of Representatives in October, where the lone witness who stood behind McCarthy was Kurt Waltzer of the Clean Air Task Force, an environmental group focused on air pollution. Waltzer said that carbon dioxide captured from coal plants is poised to be a valuable commodity on its own by helping drilling companies get more oil out of the ground more efficiently, a process called “enhanced oil recovery.”

Initially, I was fairly skeptical of EOR. I mean, are we really going to mitigate climate change through a technology that will also enable more oil drilling? But the more I looked into it, the more I agreed with Waltzer’s support of EOR, and his assertion that “If there was ever a chance for a big idea to succeed in our current political climate – EOR is it.”

There is currently a huge unmet demand for carbon dioxide among oil drillers, especially in the Permian Basin on the Texas-New Mexico border. Drillers there use CO2 to bind with oil and push it up toward production wells, allowing them to recover much more oil than with conventional methods (more detail on how it works here).

It’s clear why oil companies like EOR, but it’s popular with enviros like Waltzer because after pushing out the oil, most of the CO2 stays locked underground. Domestic EOR production could also take the place of imported barrels of oil that were produced without any CO2 sequestration. “Think of it as a substitution,” says Vello Kuuskraa at the Advanced Resources Institute, a consulting firm specializing in EOR. “It’s a carbon neutral barrel as opposed to a full carbon barrel.”

One reason that oil companies using EOR may start looking to coal producers for CO2 is that some natural deposits are already running low.  EOR has been around since the 1970s, but the CO2 has always come from natural sources. In the Permian, that meant places like McElmo Dome in southwest Colorado and Bravo Dome in northeastern New Mexico. But as the Global CCS Institute reports, the current lack of cheap, reliable sources of CO2 is “the single largest barrier” to expanding EOR in the Permian Basin.

Permian Basin oil and gas
Oil wells dot the Permian Basin in New Mexico. Courtesy Flickr user Skytruth.

Here’s where coal companies come in. Coal emissions from power plants contain a lot of CO2 that, currently, is released into the atmosphere. But under the proposed EPA rules, new coal plants would have to capture enough of that gas to get their emissions down to 1,100 pounds of CO2 per megawatt hour of electricity produced, down from an average of 1,768 pounds, according to The Washington Post. (Existing plants will also likely have to cut back on emissions, although it’s not clear yet by how much.) A market for CO2, created by EOS drillers, would help encourage coal companies to invest in CCS technology, and thus comply with the new regulations.

“It’s a win win win,” says Patrick Falwell, a fellow at the Virginia-based Center for Climate and Energy Solutions. “You’re expanding domestic energy production, advancing carbon capture and sequestration, contributing to economic growth, and you’re also reducing CO2 emissions.” (Ok, that’s four wins.)

The CCS-EOR partnership already exists in places like North Dakota – where the Great Plains Synfuels Plant, which turns coal into natural gas, captures the CO2 and pipes it to EOR fields in Saskatchewan –  and Mississippi, where the soon-to-be finished Kemper Plant will supply CO2 to oil fields in the Gulf of Mexico. So in some cases, McCarthy was correct when she called CCS “feasible” and “available today.”

But what she didn’t say, and what critics point out, is that CCS is still very expensive. In fact, as Ben Yamagata, executive director of the Coal Utilization Research Council, told E&E TV, “The Kemper project, like all of the other demonstration projects that EPA cited as reasons for saying these technologies are adequately demonstrated… (is) fairly heavily subsidized with federal dollars.”

According to Vello Kuuskraa, the price EOR drillers want to pay for carbon dioxide is a lot less than the amount coal plant operators would need to sell it for to cover the costs of capturing it in the first place. In order to bring the price down, Kuuskraa says, one or all of the following things need to happen: oil prices go up, allowing oil companies to pay more for CO2; carbon capture costs come down, allowing utilities to sell CO2 for less; or the government creates financial incentives to encourage plant operators to capture carbon.

Indeed, there are as many stories of failed CCS-EOR partnerships as there are successes. In June, Tenaska, a Nebraska-based energy company, pulled the plug on its coal-burning Texas Trailblazer Plant, which would have produced electricity and captured and sold 90 percent of its carbon dioxide emissions for EOR. And another new coal gasification plant that had already signed a deal to sell its CO2 for EOR, Wyoming’s Medicine Bow Fuel and Power, still lacks financing. These setbacks show that revenue from selling to the EOR market isn’t enough yet to make private companies want to invest in CCS on their own.

Even if the market for CO2 were strong enough, sequestration isn’t a fully vetted technology yet. Although the Natural Resource Defense Council, a big EOR supporter, says, “to date, no significant documented environmental impacts from CO2 injection, have been reported,” there are still concerns about the long-term viability of storing carbon dioxide in oil wells, including questions about whether the gas will leak out. Just last week, scientists at University of Texas released a study that suggests a link between the injection of CO2 underground and an earthquake in a West Texas oil field.

Falwell counters that CO2 injection comes with understood risks and that current regulation already stops companies from sequestering in places that could trigger seismic events. EOR is critical, he says, because without a market for all that carbon dioxide, it’s going to be really hard to bring the price of CCS technology – and overall CO2 emissions down.

Emily Guerin is a correspondent for High Country News. She Tweets @guerinemily.

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