CLIMATE:

Pipeline would carry Midwest CO2 to Gulf Coast's oil fields

Midwestern states are working with energy companies to overcome one of the biggest obstacles to carbon capture and storage: finding ways to transport the gas from its industrial source to its final resting place.

The Midwestern Governors Association last week announced a goal to site and permit by 2012 at least one interstate pipeline to ferry global warming pollution from the region's power plants to suitable underground storage sites.

The goal was among several laid out in the Midwestern Energy Infrastructure Accord aiming to transform the region's coal-rich states into hubs for CCS technology (Greenwire, Oct. 7).

An early step in the accord involves the development of a pipeline that would move carbon dioxide from capture-ready coal plants in Indiana, Illinois and Kentucky to the Gulf Coast for use in enhanced oil recovery (EOR).

Denbury Resources Inc., a Texas-based oil and gas company, announced in July that it was conducting a feasibility study into a 500-mile Midwest pipeline that would link the proposed plants to the company's production fields in Mississippi. The company said it could build the estimated $1 billion pipeline at a profit -- and without government subsidies -- if at least three commercial-scale coal gasification plants in the region supplied CO2.

Four proposed gasification facilities have signed conditional agreements to supply CO2 to the pipeline, Denbury said, including ones near Rockport, Ind., and Owensboro, Ky., and one each in Jefferson and Christian counties in Illinois. Each would capture between 50 percent and 90 percent of emissions.

While none of the plants has entered construction, the Indiana project and one of the Illinois projects are in negotiations for Department of Energy loan guarantees, Denbury said.

"We offer these industrial users the most practical and economical way to sequester CO2," Denbury CEO Phil Rykhoek said in a statement. "And we benefit as we will use their CO2 to further increase our domestic oil production."

Enhanced oil recovery pumps CO2 into underground oil reservoirs to push previously unrecoverable oil to the surface. It can increase productivity in some wells by up to 60 percent of the original amount of recoverable oil, according to Energy Department estimates.

An optimistic DOE assessment pegged recoverable EOR reserves in the United States at 88 billion barrels out of the 330 billion barrels of oil remaining. Enhanced oil recovery production from CO2 was 75 million barrels per year in 2004.

Denbury, which owns the largest carbon dioxide reserves east of the Mississippi River used for EOR, is already working on the 24-inch-diameter, 300-mile Green Pipeline to move CO2 from Texas plants to increase oil production in the state.

If built, the Midwest pipeline would become the first of its kind in the eastern United States to transport large quantities of CO2 from power plants and would represent a major step in an effort to decarbonize the area's coal.

It would also signal a head start for coal-reliant states looking for a way to keep the fossil fuel affordable if Congress passes legislation to cap greenhouse gas emissions.

"Our neighbors are doing the same thing in planning this new generation of coal," said Brandon Seitz, director of Indiana's Office of Energy Development.

The 12-state Midwest region generates 71 percent of its electricity from coal-fired power plants, according to MGA. In contrast, the national average is 49 percent. The stakes for CCS are even higher in Indiana, which gets 95 percent of its electricity from coal and holds about 400 years' worth of reserves at today's production, Seitz said.

"The bottom line is, we can't just shut down our economy," Seitz said. "The pipeline idea holds a lot of promise, and I think there's a lot of private-sector interest."

Companies looking to develop capture-ready coal plants need guarantees that there will be an affordable way to get emissions to storage sites, said John Thompson, director of the Coal Transition Project at the Clean Air Task Force. But firms like Denbury also need assurance that plants will be able to supply enough CO2 to make pipeline projects worth their investment.

"There's a certain chicken-or-egg dilemma," Thompson said. "In order for companies to build new gasification plants, you have to have a CO2 solution. But no one plant is big enough to justify building a pipeline of this size."

Early bird gets the EOR cash

What stands out in the Midwest, Thompson said, is the number of gasification plants under development with plans to capture significant portions of CO2. There are at least five gasification plants under development in Indiana, Illinois and Kentucky alone, each pledging to capture more than 50 percent of CO2 emissions, according to CATF.

A fifth, Duke Energy Corp.'s 630-megawatt gasification plant under construction in Edwardsport, Ind., is conducting a feasibility study into capturing 18 percent of the plant's emissions and could possibly supply the Denbury pipeline.

The trend toward gasification technology has taken hold in the region partly because it can burn high-sulfur, Illinois Basin coal more cleanly and at a lower cost than conventional pulverized coal-fired power plants. That eliminates the need to import coal from mines in Wyoming or Appalachia and keeps more of the region's energy dollars close to home.

But instead of paying to sequester the carbon in deep underground saline formations -- a process that is both unproven at commercial scale and at least several years down the road -- early CCS movers would be first in line to sell CO2 to oil producers.

The opportunities for using CO2 in enhanced oil recovery "will not last forever and could be overwhelmed if even a few large power plants capture their CO2 and lock in contracts with EOR fields," according to the Indiana Office of Energy Development.

For Bart Ford, project manager of the proposed $3.5 billion Taylorville Energy Center in central Illinois, the "most economic path" is to work with a pipeline company to use CO2 for enhanced recovery.

The 525-megawatt hybrid integrated gasification combined cycle plant would capture at least 50 percent of CO2 emissions, or about 3 million to 3.5 million tons per year, according to developer Tenaska Inc. Because there is a limited potential for carbon storage in EOR, early CCS adopters may have a lot to gain, Ford said.

"The oil field operators in need of CO2 are interested in locking in long-term supply," Ford said. "But once they do that, the opportunities for suppliers are not that great."

In the near term, there is not enough carbon dioxide to meet the demand from oil companies, said Denbury's Tracy Evans, senior vice president for reservoir engineering. But do not expect it to last long as more power companies install carbon capture technology at their plants, he said.

"The main advantage is that there's a limited amount of CO2 that can be stored in oil fields," Evans said. "We can use about six or seven hundred million cubic feet from the Midwest, and then other competitors will maybe build a separate pipeline."

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