Out of sight, out of mind: Pushing carbon storage offshore
Key Takeaways:
The oil and gas industry plans to invest billions of dollars to build carbon dioxide (CO2) storage projects in the Gulf of Mexico.
The rush to leap from onshore projects averaging a million metric tons of CO2 per well to “hubs” storing more than 100 million metric tons per year is an untested, unproven idea.
The industry’s dependence on the 45Q federal subsidy poses a significant financial risk to industry and taxpayers, who could be on the hook for hundreds of billions of dollars.
Additional risks include the lack of regulations for CCS activities in federal waters and the weak regulatory history of key agencies.
The oil and gas industry is moving forward with a massive experiment in the Gulf of Mexico, with plans to invest billions of dollars into storing carbon dioxide (CO2) in state and federal waters as part of large carbon capture and storage (CCS) projects. But an Institute for Energy Economics and Financial Analysis (IEEFA) briefing note shows that the industry is ignoring or vastly understating the risks, which could ultimately cost investors and taxpayers billions of dollars.
Underground storage of CO2 is still in the early stages of development. While industry claims extensive experience with CO2 management and storage, its experience is mostly with onshore projects that involve enhanced oil recovery (EOR), or injecting CO2 to force more oil out of the ground.
“The industry’s rush to leap from modest storage projects to ' hubs' that collectively promise to store more than 100 million metric tons per year is an untested, unproven idea,” said Anika Juhn, IEEFA energy data analyst and author of the briefing note. “The vast amounts of money available via federal subsidies incentivize the deployment of technology and systems that have not been tested on the scale proposed by supermajors, and taxpayers could end up paying billions.”
Massive offshore CO2 storage hubs, such as one proposed by ExxonMobil, stand to get hundreds of billions of dollars in federal tax credits, as illustrated below:
The industry believes a simplified permitting pathway, high concentrations of industrial and gas processing CO2 emitters, and the long-term security of 45Q federal tax credit will make this infrastructure development profitable. Under current rules, if ExxonMobil meets its storage goals, taxpayers would be on the hook for $133 billion by 2050. The oil and gas industry has been lobbying for an extension of the 45Q credit to 30 years to ensure continued payment for carbon capture. If the credit were extended to 30 years, 45Q costs would balloon to $227 billion cumulatively by 2050 and would keep paying out until 2069, with a total price tag for taxpayers of $416 billion.
