Carbon capture: Are oil firms using it for cover?
Critics say betting Houston’s energy future on one technology is short-sighted
Oil industry executives, political leaders and civic officials have for years heard the warnings of a coming energy transition and considered how Houston, which has long depended on oil and gas, would position itself in a world in which fossil fuels play a diminishing role.
The strategy has focused on leveraging the oil industry’s money, research and expertise to move in new technologies, such as offshore wind, hydrogen, biofuels. But industry and local leaders are increasingly betting the future of the energy sector and the Houston economy lies with one expensive, controversial and largely untried technology.
Carbon capture and storage, which extracts greenhouse gasses from industrial emissions — or even from the atmosphere — and pumps them into geological formations such as depleted oil reservoirs, holds the promise of keeping large parts of the region’s petroleum industries viable in a low-carbon environment. It also may enable another industry expected to play a large role in Houston’s energy future — hydrogen.
Carbon capture and storage, however, has never been tried on the scale proposed by oil companies, and certainly not on the scale needed to reach netzero greenhouse gas emissions by 2050 — considered by scientists a point of no return for the rapidly warming planet. Much smaller scale projects, notably Petra Nova at NRG’s coal-fired plant in Fort Bend County, have largely failed, beset by technical problems and exorbitant costs.
Still, carbon capture is becoming the centerpiece of the Houston region’s energy transition strategy, with Exxon Mobil and 13 other companies saying they will try to raise $100 billion to make the Houston Ship Channel and the sea beds around it a carbon capture and storage hub.
The efforts figure into Big Oil’s plans to reshape itself as well. Occidental Petroleum CEO Vicki Hollub said in Au
gust the company would nearly double its carbon capture and sequestration projects to 135 sites from 72. Civic officials, including Mayor Sylvester Turner and Bobby Tudor, the former CEO of Tudor, Pickering, Holt & Co. who now chairs the Houston Energy Transition Initiative, said carbon capture will play an important role in the region’s energy mix heading forward by allowing existing companies to grow into the nascent industry.
Energy experts at the University of Houston tout it as one of the clearest paths to decarbonizing the local economy.
“We’re all looking at CCS as a potential solution,” Ramanan Krishnamoorti, chief energy officer at the University of Houston and co-director of the Center for Carbon Management in Energy, said of carbon capture and storage efforts. “In our state we’ve been doing carbon capture and storage for over five decades (for enhanced oil recovery). We’re not doing it as a toy experiment in someone’s lab – these have been done at scale in real reservoirs. We’ve got demonstrated capabilities to show how this can be done.”
Critics, however, say betting Houston’s energy future on this one technology is short-sighted. They have challenged the idea that carbon capture will deliver meaningful results toward achieving climate goals and question whether the technology – or at least its promise – is little more than cover for energy companies to keep pumping oil and gas and protect their profits, even as the world demands cleaner energy.
By continuing to burn oil and gas for fuel and throwing away its greenhouse gas byproduct companies are ignoring the potential to keep pumping fossil products out of the ground but using them instead to create cleaner alternatives to steel or copper, or using byproducts as feedstock to improve agriculture.
“They’ve got nothing else. It’s the only way they can preserve their big money making,” said Matteo Pasquali, director of Rice University’s Carbon Hub, which studies the use of oil and gas for sustainable products. “Their way of making money is getting hydrocarbons out of the ground, and now they say
‘We’ll clean up the trash so we can continue to make money by extracting hydrocarbons and processing them, but we’ll clean up on the back end.’ It preserves their supply chain.”
Economic challenges
In 2008, one of Charles Harvey’s postdoctoral fellows at the Massachusetts Institute of Technology came to him with an idea and a group of younger folks eager to work on it.
The goal was to capture carbon dioxide emitted by power plants, and rather than using it for enhanced oil recovery, store it permanently underground to help curb climate change. It made sense at the time – solar and wind energy were prohibitively expensive, and politicians from both parties were discussing the idea of “cap and trade,” which would provide incentives for companies to
reduce emissions.
Oil and gas companies, meanwhile, were constantly knocking on MIT’s door asking fellows and professors to conduct feasibility studies for enhanced oil recovery projects that could take advantage of those government proposals.
Harvey and his students launched a company, raised $200 million from Silicon Valley and elsewhere to get off the ground. But soon, the cost of renewable energy took a nosedive. The cost of solar alone fell to less than $1 per watt in 2012 from as much as $4.40 in 2008, eventually dropping to 20 cents per watt in 2020, according to the International Energy Agency.
Carbon capture and sequestration lost its steam. All of the company’s founders and first employees left, and Harvey saw fewer requests from oil and gas companies to do feasibility studies – until the past year or
two.
“The business landscape is different now, more favorable for it, and that means one thing and one thing only,” he said. “And that is massive government subsidies for carbon capture and sequestration that cannot be applied to any of the alternatives or any of the other ways of reducing emissions.”
Money, projects
The Inflation Reduction Act, signed into law by President Joe Biden in August 2022, authorized $369 billion for efforts to lower greenhouse gas emissions and help slow global warming.
Among the most eye-catching inclusions for energy companies was a huge increase in the tax incentive for capturing and sequestering carbon dioxide.
The IRA upped the amount companies could collect to $85 per ton of carbon dioxide captured and stored from $50.
A tax credit that big would mean JX Nippon and NRG’s Petra Nova plant, had it functioned at 100 percent of its capacity, would have allowed
NRG to write off $119 million annually. That, theoretically, would allow the project to recoup its operating expenses and a little more, but it’s unclear if or how long it would take to offset the cost of building the facility.
After the bill was signed, oil-and-gas companies announced they would start doubling down on the practice, giving Harvey some heartburn. He said it’s encouraging greater consumption of fossil fuels while not doing much to diminish their ecological impact.
“It incentivized the production of CO2 because it pays for injecting it underground. So you have to have it to begin with, and you get CO2 by burning fossil fuels,” Harvey said.
Even direct air capture projects that aim to separate and sequester carbon dioxide from ambient air, like the $1 billion Occidental project in the Permian Basin that broke ground last year, could do more harm than good, said Matteo Pasquali, director of Rice University’s Carbon Institute.
Those types of facilities require massive amounts of power, and unless it draws its electricity only from renewable sources, they too will rely on fossil fuels to function. Companies would not do that on their own dime, Pasquali said.
“There is no economic value to do it,” he said. “They’re asking to be paid to clean up the trash they generate.”