Pressurizing existing oil wells with carbon dioxide pushes out what oil remains, but paying for the infrastructure necessary to get the CO2 to the oil wells remains a financial challenge for operators in Wyoming.
On Wednesday, the Joint Minerals, Business and Economic Development Committee of the Wyoming Legislature heard testimony about opportunities to pipe CO2 into existing oil wells and possible avenues for incentivizing future operations.
The Greencore CO2 pipeline is a 232-mile line built by Denbury Resources to transport carbon dioxide from the Lost Cabin gas plant in central Wyoming to the Bell Creek oil field in southeastern Montana. The pipeline route travels through northeastern Wyoming, passing through the Powder River Basin.
Committee members heard Wednesday there’s an opportunity to build a spur pipeline off of Greencore and supply enhanced oil recovery projects with CO2. There’s also potential for developing a new CO2 pipeline into the Bighorn Basin, according to testimony heard Wednesday.
But the experts testifying and the legislators listening were all left to wrestle with the same question — how will private industry finance the construction of new pipelines and pay for the CO2 used to recover oil?
Lon Whitman, director of the Enhanced Oil Recovery Institute (EORI) — a state-backed institution chartered in 2004 to advance EOR — offered a financial breakdown for a project that could kick off in June southeast of Gillette.
TR Operating, the oil producer looking at using EOR in the Halverson, Dillinger Ranch and Raven Creek oil fields, hopes to recover 35 million barrels of oil from the Raven Creek field, Whitman told the committee.
For that to happen, the proposed 12” Belle Aire Pipeline needs to be constructed for more than 40 miles at a cost of more than $1 million a mile. Then in order to feed the pipeline with CO2, the costs run around $63,000 a day, adding up to around $23 million a year.
At Beaver Creek oil field, 12 miles south of Riverton, it took four years of repressurizing the oil field with CO2 — at a cost of over $64 million — before the well started producing oil.
“These are long-term,” said Whitman, offering another example in the Big Muddy Field outside Glenrock.
Rep. Kevin Campbell, R-Glenrock, asked if captured CO2 from the nearby Dave Johnston Power Plant, might help lower costs.
“If you’re capturing CO2 off Dave Johnston, I would not see that you would necessarily have a price drop of the CO2,” said Whitman.
But there could be lower overall costs if EOR projects near existing coal fired plants like Dave Johnston could be developed because it would require a shorter, cheaper pipeline, according to the committee’s discussion.
Tax Incentives
As federal tax and budget legislation continues to churn through Congress, Wyoming leaders attending Wednesday’s hearing were left wondering how a federal tax incentive known as the 45Q will fare.
The 45Q tax incentive is a U.S. federal tax credit designed to encourage the capture, utilization and storage of CO2.
“If you want to incentivize, there has to be an incentive,” said Whitman, who said the Trump administration is generally supportive of EOR but it remains unclear if the 45Q tax incentive will offer a major incentive for private industry looking to move forward with projects in Wyoming.
“We'll see how that plays out,” Pete Obermueller, president of the Petroleum Association of Wyoming, told the committee, referring to the current debate in Congress over 45Q.
Obermueller suggested Wyoming could do more to incentivize EOR using CO2 by embracing policies like those passed in North Dakota.
“The state (North Dakota) incentivizes infrastructure by offering sales and use tax exemptions for materials involved in CO2 transport, storage or injection,” said Obermueller. “For enhanced oil recovery, CO2 pipeline products are exempt from property taxes during construction. And for the first 10 years of operation, sales of CO2 used for geological storage are exempt from sales tax.”
“There is a way to invest in these super expensive projects. And is modeled by another state. Would it be easy? No way. And what I’m suggesting,” concluded Obermeuller, “is that we're not going to get there unless we take some pretty bold action.”
Response to Hearing
“Wyoming and North Dakota have been the two most progressive policy states in the space” offered Matt Fry, director of the University of Wyoming’s Center for Energy Regulation and Policy Analysis.
Fry attended the committee hearing in Casper and spoke to Cowboy State Daily during a break on Wednesday.
As for North Dakota, said Fry, “They're doing some things that they have the ability to do that we don't, but we're also doing a lot of things to incentivize in Wyoming as well. It's just as Pete (Obermeuller) mentioned, a big, bold move would be beneficial.”
What that means in terms of future legislative action remains to be seen as the Minerals Committee continues to mull over the issues raised Wednesday.
“Wyoming, we're an energy state, right? Energy dynamics across the country and the globe change substantially,” said Fry. “And what Wyoming needs to continuously work to figure out is how we maintain our competitiveness in the energy space. So the committee is looking at one factor with CO2 and opportunities.”
At the close of the morning hearing on Wednesday, one person stepped up to offer public comment.
Rosemary Saban, who identified herself as a Natrona County resident who has worked in the oil and gas industry, said there are complications that come with pumping CO2 underground.
“I'd like it on record that there are some concerns with these CO2 pipelines,” said Saban. “So when CO2 mixes with water, it produces carbonic acid. In certain formations, it can break down and cause swelling, and it can be detrimental to aquifers. So if we're pumping all of this in the ground, there's concerns that need to be mitigated so that we're not doing damage.”
Saban went on to question the general acceptance of energy development in Wyoming, wondering if more is always better. She also took a swipe at the notion of tax breaks for the oil and gas industry, while everyday Wyoming residents struggle with rising property taxes.
“This constant need to grow more and more, at any cost, at any burden, what’s the end goal?” asked Saban. “Who wins this game? Because right now, I think there’s a lot of people around the state that feel our boots are filled with empty political promises.”
“And we can talk about property tax relief. And I’m sure we’re going to spin this that we can have all these wonderful things — CO2, nuclear, any of the above — that we’re going to get property tax relief,” added Saban. “We need to hold you guys accountable that we get taken care of before whatever the game is.”
David Madison can be reached at david@cowboystatedaily.com.
