How a Pricey Taxpayer Gamble on Carbon Capture Helps Big Oil

October 13, 2022

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by Evan Halper (Washington Post) ... Carbon capture generally involves chemical processes that separate out carbon dioxide from industrial gases. Newer, more costly, variations of the technology work like giant vacuums, sucking the carbon dioxide directly from the air. The carbon dioxide is usually then compressed into a liquid and routed to storage, or repurposed for industrial uses.

The irony of carbon capture is that the place it has proven most successful is getting more oil out of the ground. All but one major project built in the United States to date is geared toward fossil fuel companies taking the trapped carbon and injecting it into underground wells to extract crude. A Wyoming project from Exxon was designed for oil extraction but has since been rebranded as a key component of the company’s decarbonization strategy, with Exxon boasting it has captured more CO2 than any facility in the world.

Occidental Petroleum would be able to use tens — and possibly hundreds — of millions of dollars of the subsidies in Texas for its plan to trap carbon that will then be injected into wells to extract what it calls “net-zero oil,” branding critics call brazenly misleading.

In the United States, there are at least 29 oil, gas and petrochemical facilities that are currently proposing new carbon capture projects potentially eligible for large tax credits baked into the Inflation Reduction Act, according to Oil and Gas Watch, a nonprofit that tracks permit applications.

In Louisiana and Texas, this includes seven proposed liquefied natural gas facilities, each of which is a potential hot spot for greenhouse gas emissions. There are also oil-drilling operations, ammonia plants and hydrogen production facilities.

Such carbon capture operations have a questionable track record. During the Obama era, the Department of Energy spent $1.1 billion to help launch 11 demonstration projects. Only two of them are operational today. An Institute for Energy Economics and Financial Analysis study of 13 of the world’s biggest projects, accounting for more than half the global carbon capture capacity, found that 10 of them are either underperforming by large margins — trapping as little as half the CO2 promised — or have shut down.

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The Biden administration takes exception, arguing the technology has evolved since earlier failures and will be a crucial decarbonization tool.

“Some of the same critiques we are now hearing about carbon capture were made about wind and solar power in the early 2000s,” said Brad Crabtree, who leads the Department of Energy’s Office of Fossil Energy and Carbon Management. Those heavily subsidized technologies overcame early, well-publicized troubles to become efficient drivers of climate action.

“We can and will do the same thing with carbon management technology,” Crabtree said.

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The thinking is shared by some prominent climate scientists who say success of the technology is crucial to decarbonizing challenging industries such as cement and steel.

“There haven’t been sufficient resources invested in this until now,” said Kurt Waltzer, CEO of the Clean Air Task Force, a nonprofit focused on confronting warming that has long championed carbon capture. “We are finally seeing the resources needed to drive this technology forward.”

The Task Force points to developments like Project Bison in Wyoming, where giant air capture machines aim to vacuum from the atmosphere and then permanently store the equivalent annual emissions of 1 million gas-powered cars. Such projects are now eligible for a tax credit of as much as $180 per metric ton, positioning Project Bison for an annual subsidy in the hundreds of millions of dollars at build out.

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The Inflation Reduction Act also boosts by 70 percent the tax credit for the troubled legacy carbon capture technologies oil and gas companies have traditionally used to get more oil out of the ground, increasing it to $60 per ton.

As these billions of dollars in expanded subsidies are set to flow in large part to oil, gas, biofuel and petrochemical companies, some of their signature projects are posting lackluster results.

The most notable is the Gorgon Project in northwest Australia, which Chevron is leading with Shell and Exxon. It is one of the largest natural gas extraction facilities in the world. The companies promised to divert 40 percent of the gas extraction operation’s CO2 emissions into a reservoir more than a mile deep.

But it is not working right. Only about half the promised greenhouse gases have been captured and stored from the $3 billion project that went online in 2019, forcing the oil companies to purchase large volumes of carbon offsets from elsewhere.

Company executives say the project is merely experiencing growing pains getting to scale, and that they expect to ultimately meet their targets.

“Innovation on this scale is not without its challenges, but the technology works,” said Bill Turenne, a spokesman for Chevron.

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The company (ExxonMobil) is spearheading a plan for a $100 billion carbon capture “hub” in the Houston Ship Channel that has attracted 10 partners, all of them oil, gas or petrochemical giants. Depending on the technologies used, the effort now has the potential to generate several billion dollars in subsidies.

There is no cap on the number of tax credits such projects can be awarded. The Exxon project is only one of more than two dozen in development, suggesting the cost to taxpayers will dwarf the congressional estimate of just $3.2 billion over a decade. READ MORE

‘Put up or shut up’: can Big Oil prove the case for carbon capture? (Financial Times)

Oil Companies Had a Problem With ExxonMobil’s Industry-Wide Carbon Capture Proposal: Exxon’s Bad Reputation -- Documents show Shell initially resisted working with Exxon on the Houston project and believed Chevron had doubts, too. Both companies eventually signed on. (Inside Climate News)

America needs a new environmentalism -- Preventing clean-energy infrastructure from being built is no way to save the planet (The Economist)