CO2 pipeline revenue dangled at ethanol forum

Source: By Russell Hubbard / World-Herald staff writer • Posted: Monday, April 14, 2014

A Wyoming oil company told Nebraska ethanol producers Friday that a $1 billion carbon dioxide pipeline across the state would mean up to $50 million a year in new revenue for them.

Scott Hornafius, president of Elk Petroleum, said such a pipeline would buy some or all of the CO2 produced by the state’s 24 ethanol plants and ship it to Wyoming, where it is needed for injection into oil wells. The CO2 helps drillers extract almost as much oil as the initial strike, about 17 percent of the well’s total.

For now, the CO2 pipeline is just a dream, without financial backers or cooperating ethanol plants. But Hornafius said the state’s ethanol plants produce about 5 million metric tons of CO2 a year as a natural byproduct of the process. Iowa, with 42 ethanol plants, should also be part of the pipeline, Hornafius said.

“It is an enormously underutilized resource,” said Hornafius, speaking to people gathered for the Nebraska Ethanol Board’s 2014 conference in the Magnolia Hotel in Omaha.

The proposal envisions an underground pipeline stretching more than 1,000 miles through the Iowa/Nebraska ethanol trail. It would start in about the middle of Iowa, near the border with Illinois, moving across central Iowa. It would enter Nebraska at Omaha, then jog south for most of its Cornhusker journey before heading north into Wyoming.

Hornafius said it is not unreasonable for the project to get underway in three years. He said major financing would have to emerge, probably from the large oil producers operating in Wyoming.

Then there is the gaining of rights of way from landowners and the other legal concerns, followed by a one-year construction phase at a cost of $1 million per mile.

The pipeline would be willing to pay about $10 a metric ton for the CO2, Hornafius said.

“It is a phenomenal idea, very creative, just the sort of thing we need,” said conference attendee Brett Frevert, chief financial officer of Council Bluffs ethanol producer Southeast Iowa Renewable Energy. “But it is a long way from feasibility.”

More than a dozen such pipelines are already operating, bypassing Nebraska, but running in a crooked line from Texas to North Dakota, many of them sourcing CO2 from natural deposits. There is also one originating in Mississippi. Some have been around for decades. There has never been a leak, Hornafius said, other than from construction equipment digging where it wasn’t supposed to.

Even if there was, it wouldn’t mean much, he said. While CO2 is considered a harmful greenhouse gas, it is naturally occurring, exhaled by every living organism.

Hornafius said the injection of CO2 into oil wells is an old idea. He said the gas stimulates oil to move around and give itself up for extraction after all other methods have failed. “It is almost as good as a new well,” he said.

Oil producers, he said, will look warmly upon the idea for another reason: California has a low-carbon fuel standard that requires energy companies to reduce the carbon profile of the fuels they sell in the state. Oil produced via CO2 injection counts toward the goal, because more CO2 remains trapped underground than is given off by the fuel produced with it. There are significant financial incentives for oil producers.

“Basically, it is sold in California for a premium price,” Hornafius said. “That premium price in turn pays for the pipeline.”

Todd Sneller, administrator of the Nebraska Ethanol Board, said the CO2 idea is just one of many circulating on how to use corn and its byproducts in novel ways. “The CO2 pipeline is an interesting component,” he said. “The whole idea is to capture additional value.”