Read the article below, following my commentary
My response to the google group discussion where the article was posted:
Polluters Pay for “Final Expenses” and Carbon Dioxide Removal Using Enhanced Oil Recovery CO2 Injection
I have a contrarian view that requires only two indisputable numbers to fulfill economic fairness for oil companies and the general public. “What you see is what you get”, “no blame, no shame” and “social responsibility” are three simple bases underlying the free enterprise concept to let oil companies utilize EOR (Enhanced Oil Recovery) to sequester carbon while producing as much oil & gas as is needed as Global Society winds down fossil fuels in a “smooth landing” to zero fossil fuel production—near- zero dependence.
The oil & gas industry have joined civil society and environmental & lobbying organizations in support for “a carbon tax” or “a fee and dividend” scheme focused at the wellhead—or at the point of entry in the case of international imports. Give them their “cake and eat it too.”
We the people—individual consumers, business and the economy—will benefit from more efficiency and social justice than is offered by the alternatives.
The mechanism that I have been advocating (so far to a deaf audience) is simple: No complex set of assumptions, no slight-of-hand calculations, no differential equations, no questionable economics, no vilification or jail time for CEOs, Officers, Board members and Executives, and lower economic fall-out to the consumer than from a speculative contrived government program involving tax incentives.
But … CEOs, Officers, Board members and Executives would no longer enjoy bonuses, stock options, stock buy-backs, deferred compensation or inflated salaries; annual dividends to shareholders would end; tax credits and other subsidies would no longer be handed out; shirking financial responsibility through bankruptcy or by selling marginal leases and assets to less stable or insoluble companies would be prohibited; corporations would be required to fund the shutting-in, dismantling, toxic clean-up and landscape restoration of retired refineries, abandoned derelict pipelines and all production facilities.
Those costs have heretofore been ignored. Now is the time to “bite the bullet” and recognize that there is no getting around paying to clean up the fossil fuel mess! From oil wells to refineries and every piece of infrastructure in between, the “final expenses” to lay them to rest and wipe them off the face of the globe, will have a cost all consumers will have to bear in the “price at the pump.” There is no getting around our system’s demand that We the People will “pay the piper.” The system demands that a viable enterprise make a profit or go out of business. Oil & gas must stay in business until the very last refinery is shuttered. Hence, the price at the pump will necessarily be set to give marginally break-even Profit and Loss—no more and no less.
The concept I have in mind is one that would add 50¢ to $1.00 per gallon of gasoline or other liquid fuels to cover the actual expenses to capture and sequester double the amount of CO2 and CH4 associated with wellhead oil and methane extraction plus the actual volume of recycled CO2 associated with EOR production. The cost would be determined by actual expenses of industrial operations to capture and dispose the GHGs—not an arbitrary negotiated “rising fee” embedded in comprised legislation.
In this way, the oil & gas industry would “pay to pollute” by removing all current, future and post legacy emissions over the declining economic life of reserves.
Experience, high tech systems and human skills will be continuously needed to determine optimally which wells, which fields, which pipelines, and which of the 750 refineries worldwide will be shut down in the most effective order, and the logistics of reallocating of crude oil sources to appropriate refineries that are designed to process the range of oil quality (API gravity, viscosity and sulfur content).
Such logistics will require the best and brightest engineers, corporate planners, mathematicians and research staff. Those folks will be assured continued employment, winding down rather than expanding the industry. The present Upper Management will lose their lucrative positions to folks who have demonstrated, proven excellence in project management, reporting to an international council to facilitate coordinated logistical controls.
Don’t Rule out Enhanced Oil Recovery in Carbon Dioxide Policymaking
By Wil Burns | Mar 20 2023 | Removal Policymaking
The Intergovernmental Panel on Climate Change (IPCC) has emphasized that meeting the Paris Agreement’s temperature objectives will require both highly aggressive measures to decarbonize the global economy as well as large-scale initiatives to remove carbon dioxide from the atmosphere. In 2018, the IPCC concluded that “all pathways that limit global warming to 1.5°C with limited or no overshoot project the use of carbon dioxide removal (CDR) on the order of 100–1000 GtCO2 over the 21st century.” In some scenarios that limit global warming to 1.5°C, half of current carbon emissions have to be removed annually in the second half of the 21st century. Moreover, in its Sixth Assessment Report, the IPCC declared that deployment of carbon dioxide removal approaches is “unavoidable” if the net-zero objectives of the Paris Agreement are to be realized.
In the 2021 Infrastructure Investment and Jobs Act, the U.S. Congress allocated $3.5 billion for the development of four “regional direct air capture hubs.” Direct air capture facilities can extract carbon dioxide from ambient air, with the CO2 subsequently stored in deep geological formations, or converted for use.
Currently, there are only 18 direct air facilities operating globally, sequestering approximately 10,000 tons of CO2. However, the International Energy Agency has projected that we may need almost a billion tons of carbon removal from such facilities by 2050 to keep us on track to meet the objectives of the Paris Agreement. Many believe that U.S. investments in direct air capture hubs can help scale up the industry by helping to bring down the currently imposing costs of such facilities by fostering economies of scale and learning by doing, much as policy measures helped to drive down the cost of solar energy. Government support of this nature can also drive the infusion of capital into the construction of critical transport infrastructure for both carbon capture projects.
In January, the U.S. Department of Energy issued a Funding Opportunity Announcement for the hubs. The Announcement detailed that direct air capture hubs could be developed for both geological storage of carbon dioxide, as well as “utilization,” which could include “storage in conjunction with hydrocarbon extraction,” a form of an operation known as “enhanced oil recovery (EOR).” CO2 EOR entails the injection of carbon dioxide into an oil reservoir that is 80-90% depleted to displace the oil with a density of less than 900 kg/m3 from the rock pores, pushing it toward production wells. It can increase the production from oil reservoirs by 5-20% over and above primary production (driven by the natural pressure of a reservoir) and tertiary recovery (water injection) methods. Approximately a third of injected CO2 in the EOR process is geologically stored, with the remainder produced with oil, recaptured, and reinjected until all of the CO2 is ultimately sequestered.
CO-based EOR operations began in West Texas in the early 70s and now account for approximately four percent of U.S. oil production. While North American operations predominated historically, 60% of such operations are now based in other countries.
85% of the CO2 used in EOR operations is derived from natural sources, primarily a few large terrestrial reservoirs. However, the consensus is that such operations can only scale up further if supplemented by anthropogenic sources, most notably from carbon capture with storage or carbon dioxide removal options. In turn, many proponents of EOR argue that it can play a critical role in scaling up both carbon capture with storage (CCS) and carbon dioxide removal operations by providing a critical source of revenue to incentivize such operations, driving down costs by economies of scale, and helping to foster development critical infrastructure, such as pipelines to help effectuate sequestration at the gigaton level. Historically, CO2-EOR has, by far, used more captured CO2 than any other industrial process, and is the only commercially established carbon utilization option that provides large-scale permanent storage for captured CO2.
However, a number of commentators have expressed consternation about the prospects of a role for enhanced oil recovery in the nascent carbon dioxide removal industry. For example, the non-governmental organization, Carbon180, has argued that EOR could “prolong … a reliance on fossil fuels,” while the Energy Justice Network has contended that the process can increase carbon dioxide emissions by combustion of “oil that would otherwise be left in the ground.”
However, I think these positions are misguided and potentially unfortunate in terms of global climate goals. Carbon180’s argument is premised on assumption that without EOR, fossil fuel use would be phased out more quickly. Yet the reality is that IPCC modeling projects that the globe will still be using substantial amounts of fossil fuels in the middle of this century, even under 1.5°C scenarios due to constraints in decarbonizing many sectors dependent on such resources. Moreover, meeting this demand will not be contingent on EOR, as there are currently 50 years’ worth of proven petroleum reserves at current levels of consumption.
Also, while perhaps counterintuitive, EOR is likely to actually result in a net decrease in carbon dioxide emissions under most circumstances. Each ton of carbon dioxide injected into a well in the EOR process can yield 2-3 barrels of oil production, and 1.2 tons of carbon dioxide when this oil is burned. However, the International Energy Agency (IEA) has estimated that 80% of each barrel that is produced through the EOR process displaces other oil production.
After taking into account all emissions associated with the process, including energy use in the EOR process and emissions associated with combusting the oil, the IEA estimates that each ton of CO2 injected in the EOR process results in CO2 abatement of 0.63-0.79 tons. Drawing upon the IEA’s lifecycle analysis, the Clean Air Task Force concluded that “a barrel of EOR oil represents 37 percent less CO2 than conventional oil.” Another recent study concluded that EOR could ultimately achieve somewhere between 4.5-8% of the reduction in carbon dioxide emissions necessary to meet the Paris Agreement’s objectives. However, these numbers must be qualified by the carbon intensity of oil supplies that EOR operations displace. For example, oil production in Venezuela has approximately twice the carbon emissions on average than U.S. operations, while emissions are about 50% higher in Iranian production. Overall, CO2 EOR generates an emissions reduction benefit even when displacing low-intensity oil. Moreover, the benefits of EOR operations can be even higher in cases where it results in the displacement of unconventional sources of oil, which can have a carbon dioxide intensity of 108-173% of conventional oil.
Additionally, because EOR operations increase the quantity of carbon dioxide that dissolves in aquifer stores, it would facilitate more secure storage than standard geological storage with top seal mudrocks.
Of course, the recent increase of federal tax credits for sequestration of carbon dioxide via direct air capture to $180/ton from its previous level of $50/ton may privilege storage of carbon dioxide overuse in many projects, including those that might contemplate selling carbon dioxide for EOR purposes. However, since tax credits for the use of carbon dioxide were also recently ratcheted up from $30 to $130/ton, there may still be developers that deem this the more financially propitious course from a financial perspective. For example, revenue associated with EOR appears to be part of the business model for the companies currently developing what is slated to be the world’s largest DAC facility, DAC-1 in Texas’s Permian basin. Thus, we should not be discouraging this path given both the potential climatic benefits of EOR, as well as the need to drive down direct air capture’s costs if it’s to play a substantial role in combating climate change.
However, at the same time, we should seek to ensure that EOR operations are conducted with integrity, and in a manner that maximizes the achievement of climate policy goals. Oil companies have sought to game the system and avoid strict verification of the amount of carbon dioxide they claim to be storing through EOR operations. In the context of federal support for direct air capture hubs, reporting requirements for any project that includes EOR should be extremely stringent. Moreover, government incentives and regulatory mechanisms should be designed to encourage those engaged in EOR operations to utilize and bury as much CO2 as possible.Finally, all EOR projects reach a point where operating costs are greater than waning revenue streams from fossil fuel sales. At that juncture, there is no economic motivation for operators to continue to pursue oil production. However, it would be salutary to provide incentives to maintain the viability of such sites as CO2-only storage facilities given lower unit costs compared to constructing CO2 storage facilities from scratch. Government incentives in the form of tax credits might help to drive down storage costs for the nascent carbon removal industry, accelerating its development.
EOR is assuredly a counterintuitive strategy for combating climate change. However, the optics of this approach should not keep society from considering the potentially salutary role that it can play, including in helping to scale up the carbon removal industry.
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Cover photo by Zbynek Burival on Unsplash