Climate bill positions big oil and gas companies to cash in

Source: By Evan Halper, Washington Post • Posted: Sunday, October 9, 2022

The measure includes subsidies for carbon capture projects that often promote more fossil fuel extraction

A “clean coal” project subsidized by the Department of Energy under President Barack Obama, the Petra Nova project in Texas fell short of its environmental targets and then closed after three years of operations in 2020. (Luke Sharrett/Bloomberg)

It is an appealing proposition for a nation urgently trying to confront globalwarming: enlist state-of-the-art machinery to trap and bury harmful greenhouse gas emissions from the most heavily polluting industries, enabling them to otherwise continue business as usual.

Billions of dollars of new subsidies for such carbon capture technology are a signature component of the $370 billion climate package President Biden signed into law last month, with the administration and lawmakers across party lines promising it will help America meet its climate goals.

Yet after years of underwhelming results in carbon capture experimentation, this surge of cash strikes many climate scholars as predominantly a gift to fossil fuel, chemical and industrial agriculture companies seeking a lucrative route to rebrand as “green.” The vastly increased tax credit, which lobbyists of every major oil company pursued, will propel a technology that has failed to deliver in several prominent trials.

The incentives are already driving forward large oil and gas projects that threaten a heavy carbon footprint, with companies including ExxonMobil, Sempra and Occidental Petroleum positioned for big payouts.

“We are spending a vast wad of money on this — huge government subsidies — and it often does not work,” said Bruce Robertson, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, an energy sustainability think tank. “It keeps coming back because the oil and gas industry is powerful politically. It sets the agenda on climate change.”

The boosting of the subsidies by billions of dollars came as lawmakers and the Biden administration confronted a narrow path for meaningful climate action. Energy industry consent was crucial for this summer’s passage of the Inflation Reduction Act, championed by one of the industry’s staunchest allies, Sen. Joe Manchin III (D-W.Va.). Many climate activists overlooked what they saw as throwing good money after bad for carbon capture to win the massive investmentsin renewable energy and electric vehicles in the legislation.

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 fromExxon 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.

The city of New Orleans has seen enough. Unnerved by the technology’s spotty history, safety concerns around the compressed CO2-filled storage wells and pipelines it relies on, and the move by corporations to use it to rebrand heavily polluting projects as green, the City Council voted in June to outright ban carbon capture. The city’s resolution concludes the “technologies often act to enable, not diminish, carbon emissions.”

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.

Manchin’s office said in a statement that there is no “silver bullet” solution to climate change, and the new federal legislation aims to advance a variety of technologies that can curb emissions and enhance energy security.

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.

But owners of such projects can still claim most of that amount even if the CO2 sequestered is ultimately used for oil extraction.

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.

It is not just activists who are skeptical.

The Australian mining giant Fortescue Metals Group is leaving carbon capture out of its pioneering plan to eliminate emissions from its iron ore business by 2030, focusing instead on powering operations entirely on renewable energy.

Company CEO Andrew Forrest calls Gorgon “an abject failure.”

“They promised to get rid of the carbon by shoving it down a hole,” he said in an interview. “So they got their huge project approved. Now that project is happily pumping carbon dioxide out into the atmosphere and the world is worse off because the carbon sequestration didn’t work.”

There is another problem researchers see at Gorgon and other operations like it, including ExxonMobil’s Shute Creek project in Wyoming, the 36-year-old natural gas extraction project the company boasts has captured more C02 than any place else.

The subsidies give companies lucrative incentives to drill for gas in the most climate-unfriendly sites, where the concentration of C02 in the fuel is especially high. The CO2, a potent greenhouse gas, is useless for making fuel, but the tax credits are awarded based on how many tons of it companies trap.

“The perverse effect is to develop fields that are extraordinarily high in CO2,” Robertson said. “The net result is more CO2 gets into the atmosphere, not less.”

Exxon said in a statement it is spending $400 million to expand the facility so it can trap an additional 1.2 million tons of CO2 to be stored on public land, noting the Bureau of Land Management praised the company’s efforts.

“As more projects come online, we expect continued improvements in existing technology and industry’s ability to capture and store more CO2,” the Exxon statement said. The company said incentives like those in the Inflation Reduction Act “are critical to enabling deployment and infrastructure development at the pace and scale needed to help meet the goals of the Paris Agreement which we have supported since its inception.”

The company 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.

They follow a string of carbon capture disappointments in the United States.

The technology spawned the “clean coal” movement, with industry promising it could scrub the greenhouse gases from coal energy production. The Obama administration leaned on it to try to keep coal viable. The Department of Energy invested nearly a half-billion dollars in six “clean coal” projects that ultimately failed, according to a report from the Government Accountability Office.

The one subsidized clean coal endeavor that got off the ground, the Petra Nova project in Texas, fell short of its environmental targets and then closed after three years of operations in 2020, amid challenging economics for coal.

The company Next Decade recently turned to carbon capture after its plans to export natural gas from a proposed huge new terminal in Texas fell into limbo. An earlier iteration of the project, without carbon capture, threatened to be such a climate menace that a major potential buyer in Europe of the project’s natural gas had backed out of a tentative deal with the Next Decade, dimming the outlook for investment and regulatory approval.

The company is now promoting its project as practically emissions free, promising that it will install machinery to trap and store more than 90 percent of the carbon dioxide created on-site. It announced in May that the French energy firm that walked away from the project a couple of years ago now has signed an agreement to purchase 1.75 million tons of natural gas from it annually for 15 years.

Clean Air Task Force, the environmental nonprofit that has endorsed carbon capture technology, calls the evolution of the project a success story. As the European energy crunch fuels an expansion of liquefied natural gas facilities in the United States, they say, the carbon capture technology will mitigate the climate impacts considerably.

The Sierra Club and Public Citizen call the project something else: a scam. The organizations argue the technology is untested and does nothing to curb the emissions created when the gas is fracked, shipped overseas and ultimately burned for energy. Leaders of the Sierra Club chapters in Texas and Louisiana were so troubled by the carbon capture provisions in the Inflation Reduction Act that they sent an email blast to members and allies repudiating their national leaders for praising the act in a news release.

“It’s puzzling how the federal government is justifying all this money for this,” said Beverly Wright, leader of the Deep South Center for Environmental Justice and a guest this month at a decarbonization forum hosted by White House climate adviser Gina McCarthy and Energy Secretary Jennifer Granholm.

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