Less is more: new recommendations for advancing enhanced oil recovery and geologic sequestration of CO2
Posted February 28, 2012
Today, the National Enhanced Oil Recovery Initiative (NEORI) released its recommendations for advancing CO2-enhanced oil recovery. The Initiative comprises stakeholders from many different walks of life: environmental groups, technology vendors, public and investor-owned utilities, labor, ethanol, fuel producers and project developers. The Initiative has its own website, where the report and other materials can be found.
NRDC has been highlighting the potential value of CO2-enhanced oil recovery for some time now. We called it a win-win-win: for the environment, for energy security and for jobs and the economy. By injecting carbon dioxide from industrial facilities in oilfields that have already been developed we can significantly reduce carbon pollution from these facilities, access domestic oil that would otherwise remain stranded underground, avoid the need to drill in offshore or protected areas, and stimulate job growth and economic development in the U.S. CO2-enhanced oil recovery is not just about producing oil. It’s about reducing imports, tapping into a resource that would otherwise be inaccessible, and doing so in a way that benefits the environment or relieves pressure from further development. Today, this potential has been publicly recognized by a very broad array of stakeholders and interests, which is testament to the validity of the concept.
NRDC believes that the geologic sequestration of carbon dioxide (GS) from large pollution sources is one of the needed technologies to combat climate change. CO2-enhanced oil recovery provides a pathway to sequester CO2 in oilfields. If operated and regulated appropriately, the injection of CO2 in those fields can result in the permament sequestration of large volumes of industrial emissions. EOR-GS will not happen automatically. Although several regulatory pieces are in place, there is still no guarantee that existing EOR operations will also result in GS in a credible way. To ensure EOR-GS, EPA needs to address some remaining regulatory gaps. NEORI did not tackle this issue, but NRDC will continue to work on this issue.
For EOR-GS to become commercial reality, government will need to get involved and incentivize the capture of CO2 from power plants and industrial sources. However, despite the needed expenditure in the early years, analysis done by NRDC and NEORI shows clearly that the program as a whole will be revenue-neutral. The reason is that additional oil production stimulates added economic activity that results in additional revenues to the Treasury. These revenues soon exceed the size of the tax credits needed to encourage the capture the CO2 in the first place. Thus, taxpayers end up benefiting from a revenue stream that would have otherwise been unavailable. This is the basis upon which NEORI issued its recommendations. Policy makers should see that, even at very modest and conservative oil prices, the public will benefit from this program.
As can be expected, there wasn’t full agreement within the group on all aspects of the recommendations. NRDC does not support inclusion of plants that convert coal to liquid fuels or to methane in the program. The products from these plants contain significant quantities of carbon which are released to the atmosphere when they are burned. For EOR-GS to make environmental sense, the source of the CO2 matters. Nonetheless, the recommendations for an incentive program and for administrative modification to the existing 45Q tax credit for carbon dioxide capture and sequestration by the group make good starting points for future legislative action. In an often contentious political environment, we hope that the diversity of signatories in NEORI will be a precursor to bipartisan cooperation to advance the recommendations.