Tax credit, environmental concerns may spur next generation of carbon capture projects

Oil, power and other heavy industries are proposing to build nearly three dozen carbon capture projects across the country over the next several years as advancing climate change and a generous tax credit provide incentives for companies to lower greenhouse gas emissions.

The burst of proposals is a sign that carbon capture technology might yet fulfill its promise of keeping fossil fuels viable in the low-carbon world needed to slow the pace of global warming. At least seven projects are planned in Texas, including a plant designed to pull carbon directly out of the air above the Permian Basin.

Several others are proposed for power plants, chemical plants and oil fields in 11 other states including Colorado, New Mexico, Louisiana and California.

“Carbon capture is back,” said Rich Powell, executive director of ClearPath, a Washington organization that promotes clean energy solutions for businesses.

Carbon capture and storage separates and captures carbon dioxide from emissions, or in some cases pulls the gas directly from the atmosphere, and stores it in geological formations deep underground. In some cases, the carbon dioxide has commercial uses, such as pumping it underground to increase oil production, a process known as enhanced oil recovery.

The Intergovernmental Panel on Climate Change, the U.N. body considered the leading voice on climate change, has identified the widespread deployment of carbon capture technologies as critical to limiting the rise in global temperatures to 1.5 degrees Celsius by 2050 as outlined in the Paris climate accord.

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Although the technology to capture carbon released from industrial processes has been around for several decades, it has met with limited commercial success. Carbon capture and storage projects are not economical to build without substantial governmental incentives such as tax credits or other subsidies.

Projects that have been built have contended with scarce and inconsistent commercial markets for captured carbon dioxide. In August, for example, the merchant power company NRG said it shut its Petra Nova carbon capture project at the W.A. Parish Generating Station in Fort Bend County because the crash in oil prices dried up demand for carbon dioxide used for enhanced oil recovery.

The company said it would consider reopening Petra Nova if and when oil prices turned more favorable.

Tax credit might help

Adding a carbon capture plant to an existing coal-burning power plant can be pricey; the Petra Nova plant cost about $1 billion, according to the Energy Department. But interest in carbon capture technology has increased as industrial companies, particularly in oil and gas, have grappled with the question of how to reduce carbon footprints in an economical way

New technological developments, such as an advanced chemical process being studied by University of Texas scientists, may offer companies more efficient and cost-effective solutions. An enhanced federal tax credit for carbon capture and storage projects is also helping the numbers add up by more than doubling the value of tax breaks to as much as $50 per metric ton up, from $20.

The increase could make carbon capture profitable and attractive to investors needed to finance the projects. The Clean Air Task Force, a coalition of groups that advocates for economical solutions to air pollution, estimates that 32 potential U.S. carbon capture projects are likely to be built as a direct result of the enhanced federal tax credit.

Seven of those proposed projects are in Texas. In two of them, the Houston oil company Occidental Petroleum is partnering with ethanol producer White Energy to build carbon capture equipment capable of capturing 350,000 tons per year from ethanol plants in Hereford and Plainview.

In another project, Bechtel National, a unit of the global engineering and construction company Bechtel, will conduct an engineering design study to retrofit a carbon capture system onto an existing natural gas-fired power plant owned by Panda Energy Fund in Texas. The site of the project has not been announced, but Panda owns three power plants in the state — two in Temple and one in Sherman.

All three plants are close to oil fields where carbon dioxide is used to aid production.

The Highlands company Systems International plans to build two power plants fueled by biomass, which ranges from cardboard to tree waste to livestock manure. The plants will generate 240 megawatts of power — enough to power some 50,000 Texas homes on a hot summer day — and capture 1.5 million tons of carbon dioxide a year, making the plants emission-free, company spokesman John Kreig said in an interview.

Systems International has not announced the exact sites of the plants but plans to construct one in Chambers County and the other in Jefferson County.

UT study

In September 2019, the Energy Department announced that it would finance preliminary engineering and design studies for nine carbon capture and storage projects, including the Panda Energy project and an advanced carbon capture facility at Mustang Station, a natural gas-fired power plant in Denver City in West Texas. The plant is owned by Golden Spread Electric Cooperative, a utility in Amarillo and Lubbock.

The plant, which is being designed to remove about 90 percent of carbon dioxide emissions, could capture about 1 million metric tons per year. That is the equivalent of taking 216,000 passenger vehicles off the road for one year, according to the Environmental Protection Agency.

Gary Rochelle, the UT chemical engineering professor conducting the study under an Energy Department grant, said he expects to complete his work by the fall of 2021.

Rochelle said he selected the Mustang Station power plant because it was important for the study to demonstrate that the technology could work on a gas-fired plant. Natural has has become the fuel of choice for electric power generation.

“If we’re going to address global warming and get really low COâ‚‚ emissions, then we have to be able to use natural gas-fired (power plants) with capture to address that,” he said. “Natural gas is going to continue to be inexpensive for the immediate future.”

Oxy Permian project

Occidental Petroleum plans to build the largest carbon capture project of its kind in the Permian Basin oil field in West Texas, a massive plant that would pull carbon dioxide directly out of the air. Oxy would then pump the captured gas underground to increase oil production.

In August, the company’s subsidiary Oxy Low Carbon Ventures announced it had partnered with private equity firm Rusheen Capital Management to finance and deploy large-scale, direct air capture technology, developed by the Canadian company Carbon Engineering.

Carbon Engineering CEO Steve Oldham said the project, which would occupy about 100 acres, would be the largest direct air capture plant in the world, capable of capturing up to 1 million tons of carbon dioxide directly from the atmosphere every year. Oldham said the cost of the project is likely to be in the hundreds of millions of dollar.

Construction could start late next year, and operations could begin as soon as the end of 2024, Oldham said.

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