Finding paying customers for carbon pollution



For two years before he resigned as the top government official in charge of fossil fuels, Chuck McConnell found himself between a rock and a hard place. The rock was coal. The hard place was the Obama administration and Congress, which holds the purse strings for research into the promise of clean coal.

Many in the administration and some Democrats in the legislature wanted federal energy dollars steered toward renewables like solar and wind, he said. Many Republicans, living in “climate change denial,” saw clean-coal research as a concession that a problem exists.

It didn’t help that Mr. McConnell’s chief mission at the U.S. Department of Energy was to promote the use of carbon dioxide sucked from coal-fired power plants as a fracking enhancer to force more oil out of shale wells. 

“The Democrats were arguing with me that I was trying to subsidize the oil business,” Mr. McConnell, who now leads the Energy and Environment Initiative at R‎ice University, recalled.

What he was trying to do, Mr. McConnell said, was shift the economics of dealing with carbon pollution away from the utilities and toward potential customers for carbon dioxide.

“This really changes the paradigm,” he said. “It says, look, if I’m an oil company and I can get hold of inexpensive CO2, now I want to partner with utilities.”

New uses for carbon dioxide 

Carbon dioxide utilization is a small but growing field of research at the National Energy Technology Laboratory in Pittsburgh and Morgantown, W.Va.

There are a few projects looking at using CO2 to grow algae, which could then be used to make biofuel, pharmaceuticals or vitamins. Alcoa, in Pennsylvania, and a California company have proposed turning carbon dioxide into a building material.

“Re-use is a great idea,” said Lynn Brickett, NETL’s carbon capture technology manager, “but as long as people understand that it’s going to be a niche market only.

“When you’re talking about these large concentrations (of CO2), the re-use market isn’t going to take it.”

For that, you need to pump it into geological storage or send it into the oilfields, she said.

Before he was tapped as assistant secretary for fossil fuels in Washington, Mr. McConnell oversaw the carbon management business at Battelle Memorial Institute, a research and development nonprofit which was helping Ohio-based utility AEP Corp. build the first ever integrated carbon capture and sequestration plant.

Hundreds of millions of dollars were committed to the project, which would have trapped more than 90 percent of carbon dioxide from burning coal and pumped it into a reservoir a mile and a half underground.

In 2009, when it looked like Congress would pass legislation that would limit carbon emissions and set up a cap-and-trade system, eyes were on AEP’s project and several others like it across the country. The same year, carbon capture and sequestration research got a $3.4 billion jolt from the federal stimulus package.

But the effects of the recession, which stifled energy demand, the rise of cheap natural gas, and the dead-in-the-water carbon cap effort overwhelmed coal companies and utilities. They were forced to rein in their budgets. 

In 2011, having spent $114 million on a pilot project, AEP cancelled its program. 

Last week, the Department of Energy said it would return an unspent $1.27 billion, or 37 percent of the funds slated for carbon capture and sequestration projects to the U.S. treasury. The companies that stood to get that money didn’t meet program milestones, the agency said.

“When cap and trade was being discussed, we had all kinds of interest. We were being called, interviewed,” said Ms. Brikett at NETL. “When it stopped, a lot of the host sites dropped off. Now, since the regulations were finalized this summer, we’re back to the interest (being) high again.”

Under recently released EPA carbon standards, no new coal plants can be built without carbon capture and sequestration.

Oil to the rescue?

His experience with AEP’s aborted effort convinced Mr. McConnell that there needs to be a stable and lucrative market for carbon dioxide, and that carbon capture plants should be located near oilfields to capitalize on their demand.

NRG Energy Inc., a New Jersey energy company that owns power plants across the U.S., seized the opportunity. It announced three carbon capture and utilization projects that would pipe the pollutant to oil and gas producers nearby. To manage them, it started a subsidiary called Carbon360.

Then, the price of oil collapsed.

Last month, NRG’s CEO David Whipple Crane told investors “the concept of carbon capture to enhance oil recovery as a distinct business opportunity, which made both strategic and economic sense to NRG at $75 to $100 a barrel (oil), obviously does not currently make economic sense at $30 to $40 a barrel.”

Carbon360 is “being wound down” he said. Beyond completing the already-in-progress Texas project that will send captured carbon dioxide from a small coal plant to the Permian oil fields nearby, NRG won’t be pursuing any other “megaprojects.”

Instead, NRG partnered with Canada’s Oil Sands Innovation Alliance in a splashy new innovation contest through the XPRIZE Foundation, which claims credit for having founded a “new private space travel industry” ten years ago. XPRIZE Carbon is a $40 million competition for ways to turn carbon dioxide into a salable product, launching new markets for the pollutant.

Anya Litvak: alitvak@post-gazette.com or 412-263-1455.

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