September Surprise: Clean Energy Bill could be (very) good for U.S. oil production

It really should come as no surprise that clean energy legislation (America's Clean Energy and Security Act, or ACES), which was passed by the House and now is being considered in the Senate, will be good for our economy.  The bill is specifically designed to ramp up investment in energy efficiency and clean energy technology, which will save consumers and businesses money, create clean energy jobs, and ramp down global warming pollution in the process.  That's what comprehensive assessments of the bill by EIA and EPA have shown.

What may come as a big surprise to many, though, is that ACES could also dramatically reduce America's reliance on imported oil.  Not so much through reduced fuel consumption and increased biofuel production (though ACES certainly helps both), but by significantly increasing domestic oil production, according NRDC's analysis, by more than two million barrels per day by 2030 and a total of 37 billion barrels by 2050.  At today's oil prices, that's more than $2.5 trillion dollars of oil that the U.S. can collect royalties on, and which we won't have to pay to import. My colleague Andy Stevenson goes into further detail on the economic and energy security benefits of CO2-EOR.

What's more, this increased oil production — every barrel of it — would come from fields that have already been drilled, and not by hit-or-miss drilling for new oil fields, especially in sensitive and protected areas.  The key is reliable supplies of carbon dioxide that are used in a process called CO2-enhanced oil recovery (CO2-EOR), which ACES could facilitate on a large scale. ACES includes very robust financial incentives for capturing CO2 from power plants and industrial sources for disposal in deep geologic formations, such as those where oil and gas are found.  The bill also requires new emission performance standards for all coal plants permitted after 2009 that will further drive carbon capture. 

Using CO2 to boost oil production is nothing new.  Oil field operators in Texas, Wyoming, Colorado and Mississippi have been doing it for more than 30 years.  Today, more than 35 million tons of CO2 are pumped into depleted oil fields each year, boosting oil production by more than 270,000 barrels a day.  The CO2 mixes with oil that otherwise would remain stranded, making it more mobile so it can be pumped out. The CO2 that comes up with the oil is easily removed and re-injected into the oil field, where it is trapped in the pore space of what is typically sandstone as well as the surrounding geology that has trapped the originally oil and gas for millions of years. 

While some of the CO2 used for enhanced oil recovery today comes from industrial sources, such as natural gas processing plants, most of it comes from natural domes of CO2 found in Colorado, New Mexico and Mississippi.  But those natural supplies are very limited, and that is precisely what has limited the growth of CO2-EOR in the country. The future of the practice lies with capturing CO2 from industrial sources.

For several years, the Department of Energy has been assessing the potential for using CO2 to boost production in the major oil basins in the U.S. and the results are quite significant, largely because more than 60% of the oil that has been discovered in the U.S. is considered stranded and uneconomical to recover.  The agency has published an series of analyses by Advanced Resources International covering more than 2000 oil fields, half of which showed potential for CO2-EOR, totaling between 35 and 55 billion barrels of economically recoverable oil in the lower-48 states.  By comparison, the current proven oil reserves in the U.S. are around 22 billion barrels.  Producing this additional oil would require about 10 billion tons of CO2 over a thirty to forty year period.  

While that may sound like a lot of CO2 — and it is — more than twice as much CO2 is likely to be captured as a result of ACES' incentives and limits on carbon pollution, more than enough to supply all the CO2 needed to fully develop this domestic oil potential.  Of course, when this captured CO2 is used for oil recovery, field operations will need to carefully monitor and account for the injected and produced CO2, to ensure that it will remain permanently sequestered underground.  And because the sources of the CO2 will not always be in areas with potential for enhanced oil recovery, it is likely that captured CO2, particularly from the Midwest and Southeast, will be piped to large markets for CO2 -EOR in the Gulf Coast, Texas and Oklahoma. The U.S. already has around 3,500 miles of CO2 pipelines with a very good safety record. Although care will need to be taken in siting additional pipelines, this would be another source of jobs created by the bill.

For those concerned about America's energy security and dependence on imported oil, CO2-enhanced oil recovery is the most certain and fastest way to boost U.S. oil production without resorting to drilling in sensitive and protected areas, even as we become more efficient in using oil and transition to cleaner alternatives.  So when it comes to domestic oil, it's time for the "drill, baby, drill" crowd to sing a new tune!