Climate Bill Could Dramatically Increase US Energy Security
Posted September 18, 2009 in Solving Global Warming, The Media and the Environment, U.S. Law and Policy
One of the key findings from a new NRDC climate policy study is that policies to support CO2 capture and sequestration at power plants and industrial facilities could also help recover almost 37 billion barrels of stranded domestic oil by 2050. This increase in annual oil production using the CO2 from power and industrial facilities could cut crude oil imports by over 55%, create tens of thousands of new jobs, and generate up to $800bln in royalties for states and the federal government. In addition, this increase in domestic oil production could also prevent or delay dirtier fuels from coming to market and help to lower global oil prices as well.
The underlying reason for this potential is that over 60 percent of the oil discovered in the United States, according to Department of Energy (DOE) estimates, is considered "stranded" in the ground and uneconomical to recover using conventional methods. Using a common oil recovery technique known as CO2-enhanced oil recovery (CO2-EOR) however, it is estimated that up to 20 percent more of the original oil in place can be dry cleaned out of existing fields, extending the productive life of these fields by 20 to 30 years. This technique has been used by oil field operators in western Texas, Mississippi, Wyoming and elsewhere for more than 35 years and even though CO2-EOR is constrained by the limited CO2 supply, it is currently responsible for 5% of our domestic oil production. My colleague John Steelman describes this in more detail in his post.
Yet this is just a fraction of the potential of oil that could be recovered with CO2; the DOE estimates that with ample supplies of CO2, there could be as much as 64 billion barrels of domestic oil that could be economically recoverable using this CO2-EOR technique at a price of $70/barrel. Indeed, as Wayne Leonard, CEO of New Orleans-based utility, Entergy, said in a recent BusinessWeek article, demand is so high for CO2 for enhanced oil recovery that "we have people knocking on our doors" looking for more sources of carbon dioxide.
Anyone know where to find some CO2?
Using two well-established national energy models (MARKAL and NEMS) and working with Advanced Resources International, a specialist in enhanced oil recovery (CO2-EOR), NRDC forecasts that there would be enough additional carbon dioxide available from power plants alone under the Waxman-Markey climate bill to increase CO2 EOR production to 2.6 mpbd in the year 2030.
The primary reason for this dramatic rise in domestic CO2 EOR production over the next several decades comes from the impact the climate bill is expected to have on the availability of captured CO2 for sequestration in deep geologic formations, such as depleted oil and gas fields.
In NRDC’s analysis, as well as those by EIA and EPA, much more CO2 will be captured under climate policy than would be needed to develop the full economic potential for CO2-enhanced oil recovery in the U.S. NRDC integrated this CO2-EOR potential into its MARKAL model, which forecasts more than 37 billion barrels of oil to be produced with the CO2 captured as a result of the incentives in Waxman-Markey bill. Without climate policy that drives carbon capture and storage at power plants and industrial facilities this potential could be delayed by as much as 20 years and keep America heavily reliant on imported oil well into the future.
Instead, this double benefit of capturing CO2 at power plants and using it help recover stranded oil under climate policy could provide an important national security benefit as NRDC projects that CO2 EOR would help domestic oil supplies displace imports as our largest source of oil as early as 2023 (see graph below):
Assuming an average price of $70/barrel for the oil recovered, this $2.6trln of additional oil production is expected not only to provide a significant boost to US GDP and provide tens of thousands of new jobs for the oil industry, it would also generate up to $800bln (30% of wellhead value) in oil royalties desperately needed by states and the federal government. In total, CO2 EOR is expected to create a multi-trillion dollar benefit to the American economy over the life of the cap and trade program.
From an environmental standpoint, this additional oil production from existing fields should also be welcome as it will effectively keep dirtier fuels like tar sands, oil shale, and liquid coal from coming to market sooner if at all. For example, industry executives estimate that CO2 EOR is six times cheaper at producing fuel than liquid coal at even current CO2 prices for EOR, which are about $20/ton. This gives oil produced with CO2 from power plants a significant economic advantage over liquid coal and could potentially keep liquid coal technology on the shelf indefinitely.
A final economic advantage to passing a climate bill like Waxman-Markey would be how this increase in domestic oil output could potentially lower global oil prices. Using a conservative price elasticity of demand for oil derived by Gately and Huntington, this increase in domestic CO2 EOR production could reduce the global price for oil by up to 6% in the year 2030 (see graph below), enough to save American's over $315bln at the pump over the next two decades alone*.
In sum, NRDC's modeling results conclude that passing climate legislation is not only good economic, energy, and climate policy but it is good oil security policy as well. Domestic oil produced using CO2-EOR techniques could rise ten fold under policies that increase the supply of available CO2 from power plants and industrial sources. If this were to happen, CO2 EOR would ultimately displace imports as our largest source of oil and help domestic production rise to 73% of our total consumption by the year 2050.
Further, the 37 billion barrels of recoverable oil forecast in the model under Waxman-Markey would produce a multiple of the amount of oil that Newt and his buddies expect to be gained from drilling in the Arctic National Wildlife Refuge and other protected offshore sources, and does it in a way that would help us achieve true energy independence.
* Using EIA estimates for oil consumption in the AEO 2009 Stimulus Case forecast
This blog post was co-written with my colleague John Steelman.
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Comments
Dr. James Singmaster — Sep 18 2009 02:58 AM
Do not be deceived by short term benefits in trapping CO2 for some use where it may escape.
And beware that trapping CO2 is not done easily as the present programs for doing it on a large scale involve thousands of tons of quite toxic and very flammable trapping agents just waiting to make mess. Dr, J. Singmaster
Earl Killian — Sep 20 2009 09:17 AM
Not a single mention in this post that CO2 capture will require 25% more mountaintops to be flattened, 25% more streams filled, etc. to create the energy to power the capture process. And 25% more mercury, arsenic, ash dumps, and so on. Wouldn't it be better to get off of oil by 2050 than to produce more domestically?
Ned Ford — Sep 21 2009 12:19 AM
This strategy buys into the fallacious assumption that by eliminating coal CO2 we can neglect petroleum emissions. Just because some famous folks have tied that rock around their necks doesn't make it right. We have huge opportunities to cut petroleum and natural gas use, and we must speak clearly and intelligently about how doing so is better for the economy than doing things the old way.
Electric cars are likely to be slightly better than petroleum for CO2, but they will be far less expensive to fuel - so cheap that they can afford to build into the price of an electric car the cost of fueling it forever with renewable electricity. A 12 cent per gallon gas tax or an 8.7 cent tax on all liquid petroleum fuels would double last year's wind construction. It would anticipate the electric car and cut coal use faster.
We obviously can't think our way through good ideas like this if we are spending our time trying to figure out how to keep the dying fossil fuel industries gasping for a few more decades.
Jean Mcmahon — Sep 21 2009 04:41 AM
I thought NRDC was FOR the environment>I thought we were trying to reduce Greenhouse emmissions...I am not sending any more money to you!! What is wrong w Bobbie Kennedy???Please stop all that mail about innocent Polar Bears !!!
John Blair — Sep 21 2009 11:13 AM
This post and others like it that NRDC has promoted in the past, does make me wonder about the overall mission of the organization.
It almost seems as though the group has completely thrown in the towel when it comes to eliminating as much fossil fuel as possible, from it opposition to Cape Wind, to it wide support for more coal use with their magic elixir of coal gasification.
Of course, they address these issues from an inside the beltway ivory tower in Washington while those of us who must endure the problems with coal every single day through ill health and destroyed ecosystems are left as mere sacrifices to the NRDC energy gods.
Bill Wolfe — Sep 23 2009 11:56 AM
Is this supposed to be some kind of joke?
Are we watching the Colbert Report? Perhaps the Yesmen have taken over the NRDC's blog?
You're kidding, right?
"NRDC forecasts that there would be enough additional carbon dioxide available from power plants alone under the Waxman-Markey climate bill to increase CO2 EOR production to 2.6 mpbd in the year 2030."
Robert Spiegel — Sep 23 2009 01:58 PM
Are you out of your collective minds? This approach will keep us addicted to oil for another few decades and we have no way of knowing what the long term effects will be.
Please change your name to National Richboy developers and consumers. You are insane and by the way stay the hell out of Linden New Jersey you traitors.
Andy Stevenson — Sep 23 2009 04:26 PM
Obviously the idea of increasing oil production is not popular with a number of Switchboard readers and NRDC is always concerned when we lose supporters. Before the pile on continues let me clarify the context of my post. I was amplifying on one aspect of a comprehensive study that NRDC recently completed on the economic implications of ACES, the clean energy and climate protection bill that the House passed in June and that the Senate will take up (and modify) soon. The overall findings were described by my colleague Dan Lashof in his blog, and they show that the legislation would significantly reduce overall U.S. consumption of fossil fuels. Demand for coal, oil, and gas all go down under the bill because of the combined benefits of increased energy efficiency and greater reliance on renewable energy sources. My focus, however, was a significant new finding of the study. Namely that CO2 captured from power plants, and therefore kept out of the atmosphere, could be used to increase oil production from existing fields. This oil would not increase our overall demand—instead it would reduce our dependence on imports from hostile regimes and reduce the pressure to develop pristine areas, such as the Arctic National Wildlife Refuge.
I’m all for eliminating our use of fossil fuels altogether. But in the meantime, reducing global warming pollution from power plants while reducing demand for imported oil and drilling in frontier areas seems like an environmental and an economic win to me.
Dana Patterson — Sep 23 2009 05:13 PM
I am absolutely shocked that the NRDC, an environmental organization who holds a lot of power in this country, would support an experimental concept without knowing the actual environmental impact. Also, knowing this project still supports the dirty coal industry, (which we should be moving away from in order to reduce emissions) why would NRDC openly support it? Coal mining kills numerous of people each year, creates unsafe communities with toxic slurry byproducts in groundwater, and leaves gaping holes under the earth where whole towns have become a large sinkhole. It's absolutely ludicrous that NRDC would openly support this. Perhaps there is some political corruption behind this very hot topic that needs investigation.
Bob Spiegel — Sep 23 2009 10:36 PM
I just saw the little piece you did on the Tennessee Valley Spill. Maybe you should watch that and get out of DC once in a while to do some actual work on behalf of the environment. Do you have any idea what you are doing? Right now your little group is promoting the joke of clean coal in Linden NJ. You and the others in DC who claim to speak for the environment are a major part of the problem. Someone should start checking where your funding is coming from these days. I bet there would be a few surprises.
Bob Spiegel — Sep 23 2009 10:56 PM
By the way here is the link from your website
http://www.nrdc.org/energy/coalnotclean2.asp
Maybe you should read it?
Andy Bardwell — Sep 25 2009 11:52 PM
What a shame that this article is so one-sided. In the 1960's, my father was asked by a group of geologists to do on study on induced seismic activity -- i.e. earthquakes. From 1962-67, about 165 million gallons of liquid waste from the Rocky Mountain Arsenal was injected under the Denver basin. Geologist David Evans asked my father, who taught math at University of Denver for 40 years, to study whether a correlation between the injection of this waste and the 1,500 seismic events that occurred in the same time frame -- three of the seismic events over Richter magnitude 5.
My father found a correlation, the injection stopped, and and the earthquakes stopped.
Then -- as now -- there is a tendency to paint over the obvious and dangerous flaws in this "solution" called CCS.
Why don't we just start to reduce our coal burn? Is it that difficult? Germany, a cloudy and not-very-sunny country less than one-third the size of the US has FIVE times as much solar PV. Why? Smart policies that promote clean renewable energy.
I'm afraid that what I've seen in the past few years are compromised environmental groups that seem to be willing to be advertising agents for the coal industry.
How disappointing. When money trumps truth and science for so-called environmentalists pushing dangerous, risky, and expensive non-solutions like CCS, we citizens must stand up for ourselves.
Andy Bardwell — Sep 25 2009 11:56 PM
I want NRDC to know that I have been speaking with various friends over the past few years about how disappointed we all are in NRDC.
I am appalled at NRDC's lack of integrity.
Vernon Haltom — Sep 26 2009 01:22 AM
Let's stop using fossil fuels because they're pushing our species to calamity. Okay? Let's stop promoting more coal usage and false solutions. Okay? We're dying, really and truly, from coal extraction and burning, and finding ways to use more fossil fuels to use more fossil fuels seems just nightmarish. Aren't you guys at NRDC supposed to be the good guys? Then why do you sound like coal company executives? I guess that's the nicest I can put it so I'm going to end this now, but please stop promoting things that kill people and planets.