Senate bill introduced to aid CO2 use for enhanced oil recovery

Basin Electric Power Cooperative, which for years has sold CO2 captured from its lignite-fed Dakota Gasification plant into the Canadian enhanced oil recovery (EOR) market, said Sept. 28 that a bill recently introduced in Congress is a good start toward kick-starting a U.S. EOR market for CO2.

Sen. Kent Conrad, D-N.D., introduced legislation Sept. 20 that could help put billions of additional barrels of oil on the market, help reduce greenhouse gas emissions, and potentially give North Dakota’s energy industry a backyard market for its CO2, Basin noted. The bill — which Conrad co-authored with Sen. Mike Enzi, R-Wyo., and Sen. Jay Rockefeller, D-W.Va. — would modify the existing carbon capture and storage incentive in tax code Section 45Q to make it more accessible to U.S. companies.

Currently, Section 45Q provides a credit of $10 per metric ton of industrial CO2 used in EOR projects and $20 per metric ton for CO2 placed directly in secure geological storage for up to 75 million metric tons of CO2.The proposed legislation states that credits are allowed to either the taxpayer who captures the CO2 or the taxpayer who sequesters the CO2, if a different party, and establishes a credit allocation process.

Dakota Gasification, a subsidiary of Basin Electric, owns and operates the Great Plains Synfuels Plant located near Beulah, N.D. The plant captures and pipes about 152 million cubic feet per day of CO2 north into nearby Canada to be used for EOR. That amount is about two-thirds of readily available CO2 when the plant is running at full rates. For Basin Electric to be eligible for the tax credit, the CO2 produced at the plant would need to be sequestered in the United States instead of being piped to Canada, said Mike Eggl, Basin Electric’s senior vice president of Communications & Administration.

Other avenues for eligibility would be development of a cost-effective technology for capturing CO2 from power plants for both lignite and subbituminous coals, or Dakota Gasification would need to capture the remaining one-third of CO2 produced at the Synfuels Plant, said Rod Kuhn, Basin Electric’s manager of tax and insurance. To date, only a number of pilot plants have tested CO2-capture technologies.

Kuhn said there could be improvements made to the legislation that include more CO2 sequestration specifics. “It’s open to interpretation yet, and that’s the problem. But it’s a start,” he said.

The U.S. Department of Energy estimates that standard oil production methods leave as much as 80% of the original oil in place. Employing CO2 in EOR could lead to a potential 67 billion barrels of economically recoverable oil — an increase of 45 billion barrels from the 22 billion barrels of current U.S. proven oil reserves, according to DOE. The use of CO2 for EOR accounts for about 6% of U.S. crude oil production, according to the National Enhanced Oil Recovery Initiative, Basin Electric noted.

Conrad, Rockefeller say this will add to utility confidence in CCS

Said Conrad in a Sept. 20 statement: “I am confident many of my colleagues will recognize the incredible potential of taking carbon dioxide that would otherwise be released into the atmosphere and sending it underground to produce far more oil than we otherwise could. This credit will help give electric utilities the certainty they need to invest in carbon capture technology, reducing the amount of carbon emitted into our atmosphere while helping electric utilities  continue using coal to provide affordable electricity to consumers.”

Conrad said this bill reflects the recommendations of the National Enhanced Oil Recovery Initiative (NEORI) for spurring new EOR projects. NEORI is a working group of almost 30 energy industry members, state regulators, and environmental group members and was co-founded by the Great Plains Institute and the Center for Climate and Energy Solutions. Conrad was a lead sponsor of the NEORI when it was launched last year.

“This legislation will help innovative companies attract the private investment they need to get key carbon capture technology projects across the finish line and increase American oil production, create jobs, and address important environmental concerns, all at the same time,” said Brad Crabtree, Policy Director of the Great Plains Institute and co-director of NEORI. “NEORI members appreciate the leadership of Senator Conrad and his colleagues Senator Enzi and Senator Rockefeller, and they welcome the Senators’ bipartisan efforts to advance legislation in Congress to support further deployment of CO2-EOR in the U.S.”

Rockefeller said Sept. 20 that this legislation would be a big boost for the development and deployment of Carbon Capture Utilization and Sequestration (CCS). Rockefeller said that while these tax credits are one important part of CCS viability, he is working on comprehensive legislation that will help secure the future of CCS in West Virginia and around the country. The Conrad-Enzi bill amends current law to provide assurances to companies who were previously concerned that the tax credit would no longer be available to them once construction of CCS projects began.

“We’ll have to bring many components to bear in bringing Carbon Capture Utilization and Sequestration to full deployment. This is one piece of that puzzle,” Rockefeller said. “I’m thankful that Senators Conrad and Enzi are shining a spotlight on an issue that’s vitally important to West Virginia.”

He added: “My focus remains on large-scale CCS deployment through comprehensive clean coal technology legislation, and I’m looking forward to working with all of my colleagues in moving clean coal forward. In addition to reforming these tax credits, which I believe we can do in the near term, I also sent letters last month to coal operators, industry groups, labor organizations and environmental advocates asking for their ideas about how to drive deployment of clean coal technology in the state [of West Virginia].”

In 2010, Rockefeller co-authored the first comprehensive legislation designed to realize widespread CCS technologies. The Carbon Capture and Storage Deployment Act of 2010 would create funding for research; financial incentives for large-scale deployment; and technology standards for new power plants, among other provisions. In addition, Rockefeller said he fought for and secured funding for CCS as part of $3.4bn for advanced coal in the American Recovery and Reinvestment Act of 2009.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.