Podcast

Can Carbon-Negative Oil Be Climate Positive?

The fossil fuel industry is investing billions of dollars into projects that will use carbon dioxide captured from the air to produce more oil. What will be the climate impact?

In April the Intergovernmental Panel on Climate Change identified carbon dioxide removal as an essential tool in the global effort to achieve net zero carbon emissions. One technology-based type of carbon dioxide removal known as direct air capture (DAC) has the potential to reduce net carbon dioxide emission by billions of tons per year.  Yet DAC’s high cost raises concern around if and when the technology might be scaled to meaningfully address climate change. 

Recently, the fossil fuel industry has committed more than $1 billion to support controversial projects that will use captured CO2 to increase production from oil wells, through a process known as enhanced oil recovery (EOR).  Pete Psarras, a research assistant professor of Chemical Engineering at the University of Pennsylvania, dives into the controversy over the use of captured CO2 as a tool for low-carbon oil production. He discusses research that examines whether the combination of DAC + EOR might lead to net climate benefits or damages, and explores frameworks for effective governance of the technology.

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.

Earlier this year, the Intergovernmental Panel on Climate Change identified carbon dioxide removal as an essential tool in the global effort to achieve net zero carbon emissions. One type of carbon dioxide removal known as direct air capture, relies on machines to literally suck carbon dioxide from the air. The technology has so far struggled to gain a foothold due to its high cost, and doubts exist over if and when it might reach the scale needed to meaningfully address the climate threat. Yet a wave of recent investment commitments have generated hope that commercialization of direct air capture will accelerate. The commitments include $3.5 billion in the Infrastructure Investment and Jobs Act. In addition, the fossil fuel industry has committed over $1 billion to support direct air capture projects that will use captured carbon dioxide to increase production from oil wells through a process known as enhanced oil recovery. On today’s podcast, we’re going to dive into the controversy over the use of captured CO2 as a tool for oil production. And we’ll look at whether the process might lead to net climate benefits or damages. The answer to this question, as we’ll discuss today, may lie in how the process is ultimately regulated and governed. My guest is a researcher whose recent work has sought to quantify the climate impact of direct air capture paired with enhanced oil recovery. Pete Psarras is a Research Assistant Professor of Chemical Engineering here at the University of Pennsylvania. His work focuses on carbon dioxide removal and carbon capture. Pete, welcome to the podcast.

Psarras: Thanks, Andy. Good to be here.

Stone: To get us started, I wonder if you could, for those who may not be familiar, tell us what are direct air capture and Enhanced Oil Recovery?

Psarras: Yeah. Sure thing. direct air capture is an engineered carbon dioxide removal solution. So carbon dioxide removal, we call it CDR, this is a solution that can bring CO2 and capture it directly out of the atmosphere. This is not what you’ve heard of probably in the last decade, which is known as CCS, Carbon Capture and Storage. There’s a really key difference there. CCS is aimed at point sources, like power facilities and industry, like steel and cement that are notoriously carbon intensive that would admit that CO2 out of a stack per say. You would put a scrubber or a solution there to capture that CO2 before it ever hits the atmosphere. And we need to do lots of that– let’s get that out of the way. And before that, we need to reduce. So kind of order of operations here. CDR is your clean up in case of emergency. Once you’ve released all that CO2 to the atmosphere, either because you’ve done nothing or you’ve done not enough of the former, reducing and capturing, it’s a way to save us. Almost like a time machine to take that CO2 back out. So we do this with these large engineered machines, chemicals, bind the CO2 and then release it in a controlled way so that it doesn’t re-emit to the atmosphere. So that’s direct air capture. You’ll be hearing about it a lot over the next decade.

But we need something to do with that CO2. And so storage underground is an option. EOR, Enhanced Oil Recovery or CO2-EOR. And when I talk about EOR today, I’m going to talk about CO2-EOR though there are many different forms of enhanced oil recovery. CO2-EOR uses carbon dioxide to extract the remaining oil in a field that has gone through kind of conventional recovery. So your squeezing the last bits of oil out of that field that could not be recovered under conventional means, water injection etc. CO2 is a working fluid, is injected, makes that oil a bit more miscible. And so it’s an economic opportunity for the oil and gas industry to extract more oil without having to move their operations to a new field, a new endeavor. And it’s really the largest use of, or user of carbon dioxide, at least in this country, by leaps and bounds. About between 60 and 70 million tons of carbon dioxide per year in the U.S. are used for this purpose. It’s the second largest user of carbon dioxide globally outside of fertilizer and urea production.

Stone: So a lot of that carbon dioxide that you’re talking about that’s used in enhanced oil recovery is what’s called natural carbon dioxide, that’s brought up from underground and then it’s re-injected. But we’re talking here today about combining direct air capture and enhanced oil recovery. There’s been a lot of announcements in this. One of the most notable is one from earlier this year where Occidental Petroleum, a major oil producer in the Permian Basin, is investing up to $1 Billion in a project using technology licensed from a Canadian company called Carbon Engineering to create the largest direct air capture plus enhanced oil recovery project to date. But, again, so why specifically use the carbon dioxide from direct air capture for this process? What are the goals of that?

Psarras: Well, the reason you would want to pair these is really, again, an economic driver for the viability of really direct air capture or, even historically, carbon capture and storage. We’ve seen a lot of projects tied to EOR because you have a stable source of revenue. And that has been shown through analysis to be one of the predictors of success in these projects. And I think it’s no secret then that when you look at the players in CCS globally, 22 of 27 projects right now are tied to enhanced oil recovery. So it’s an indicator of where that success lies. And it’s an indicator of the economics. CCS is an expensive endeavor. Direct air capture since you’re targeting dilute CO2 in the atmosphere is even more expensive. So getting that stable source of revenue to underwrite the project from a viability standpoint makes the pairing make sense from that perspective. You did mention natural CO2. So the way it’s done today largely is mining CO2 from underground and then using that as an injected fluid for CO2-EOR. That’s unfortunate. It’s obviously economic because it’s very cheap to do that. You’re talking about dollars on the ton compared to hundreds of dollars on the ton for what you would have from an industrial or direct air capture source. So you could certainly see the economics work there, but you really have absolutely no climate benefit here because that CO2 is going to end up hitting the atmosphere through the combustion of the oil. And it’s all new to the atmosphere. So we’re looking at direct air capture to make that more cyclic or industrial CO2 for the same reason.

Stone: Now, the IPCC, the Intergovernmental Panel on Climate Change, has really pointed out that direct air capture is going to be essential to achieving net zero carbon and addressing the climate threat. How much direct air capture will we need and by when? And to put that into context, how much do we actually have today?

Psarras: The amount of director capture we need is certainly contested. There are some people who will say we need none. Carbon dioxide removal is what we need and we’re going to do that through nature based solutions. Afforestation, reforestation, improved forest management, perhaps soil sequestration, regenerative agriculture, etc.. There is a lot of scrutiny. There’s a lot of benefits as well to these types of solutions, particularly ecosystems, biodiversity. But in terms of permanence and durability of that stored CO2– and you have to keep your eye on the prize here, we are trying to lower and limit atmospheric CO2 accumulation and concentration. These engineered solutions really offer, I think, the security of long term storage that is much more challenging to achieve in the nature based alternatives. So I say that direct air capture needs to take on some portion of that maybe10 gigaton total, say just perhaps 10 percent of that. That would still place us at the billion ton mark. So we’ll say a gigaton of CO2 is needed. Where are we at today? The largest plant is 4000 tons. So we’re looking at an enormous growth. Decade on decade to reach that gigaton level in a matter of the next couple of decades.

Stone: So we’re looking at gigaton target by, say, 2050 or so?

Psarras: Yeah, by mid-century.

Stone: So there’s been a lot of controversy about the combination of direct air capture and enhanced oil recovery. Can you introduce us to some of those controversies?

Psarras: Well, first of all, let me step back and say that direct air capture in and of itself is controversial.

Stone: Why is that?

Psarras: Well, because it’s part of the carbon dioxide removal. And carbon dioxide removal is controversial in and of itself, specifically because (and here’s the argument), that it is a safety net that could limit action today. I talked about the order of operations. We need to be reducing our emissions. I should state that clearly. We need to be reducing emissions as aggressively as possible. Where you can’t reduce, we should perhaps capture from hard-to-abate industries, perhaps things like transportation sector, aviation, some of those things are a little bit more challenging as those technologies develop. Then once that is all said and done, you’ve gone through that diligence, we reserve carbon dioxide removal which can be an expensive and resource intensive option to clean up the absolute rest. People who look at this understand that that is how we should proceed. The problem is that because we need so much CDR (which I just talked about that gigaton level) by mid-century, we have to talk about carbon dioxide removal today. We need to talk about direct air capture today. And because it’s almost become the technology or the flavor of the day, people are worried that we’re putting political capital and other resources into direct air capture when we ought to be devoting it to those other mechanisms, those reduction mechanisms. So fuel switching, renewable energy buildout. Right. So do we have our priorities straight?

So we need to figure out how to have that discussion simultaneously. So that’s where the attack on direct air capture occurs that it gets our priorities out of line. Now CO2-EOR, well, I don’t have to say fossil for you to know where the controversy lies. It is a mechanism to produce more fossil. Aren’t we as a society sprinting in the absolute opposite direction? And I would say, yes. Same idea. We do need to reduce fossil as fast as absolutely necessary to meet our climate goals. So how does CO2-EOR fit into that? How does dark CO2-EOR fit into that? I think there’s really two camps to that. There’s the people who feel like those answers are cut and dry. Don’t do carbon dioxide removal and absolute under no circumstance should we be producing any more fossil or being engaging in activities that would lead to fossil production. Then there’s a camp that recognizes that there is a little bit of nuance there. There’s a little bit of nuance in that discussion. I like to step into that nuance a little bit, that those answers aren’t quite as cut and dry or black and white. Just give you a quick example, I think one of the criticisms against CO2-EOR paired with that is this storage versus use argument. This is an old argument in that it has persisted for the last at least decade that says, why would you ever use carbon dioxide for a purpose when the best thing for climate is to put it underground and store it securely so it never hits the atmosphere again?

I totally get that argument, and I think the listeners can understand that that is the ultimate goal. I believe that’s the ultimate goal. But it places a false decision and a false picture that you’ve captured that carbon dioxide, and all we have to do now is decide door A or door B. Door A is storage. Door B is use and produce fossil. Well, if you present that, then of course Door A is the door of choice. But we recognize that in reality, use like CO2-EOR plays heavily into the viability of the project in the first place. So you can’t assume that if you were going storage so that project would have ever occurred. That’s what we see and that’s where the nuance lies. Well, then you have to step back and ask, well, what really are our goals? Can we wait for storage? And that’s, again, what we’re looking at. There is a little bit of a delay there and I can talk about a little bit of why that is. Or do we go right now and we use CO2-EOR as a mechanism like it has in the past to enable the stand up of these technologies, the deployment, and get them down the learning curves? So it’s a very near-term goal to push these things down those learning curves, get those cost reductions, get that build out and that scale up that we desperately need that will save us in the future.

Stone: The point here, just to sum up, is that the combination of direct air capture plus EOR it improves the economics of direct air capture. It creates a revenue stream around the captured carbon dioxide. It’s a product rather than something that’s just going to be buried and that’s the end of the story. And the idea there is by improving the economics you can accelerate adoption, get us sooner closer to the day when this stuff will all be scaled and really useful to address climate change. So one of the things that you have been researching for quite a long time now and you’ve got some interesting findings around, I think this is a key near-term question, is what is the actual climate impact when you combine these two technologies together? Tell us about that research that you’ve done and what have you found? What is the net climate impact of DAC plus EOR?

Psarras: Well, it’s a loaded question and I’m happy to take it on and that’s why I jumped into this research question. It really asks that question if you were to use CO2-EOR in the near term to enable specifically direct air capture capacity build out over, say, the next decade, would you be in a better place at that mid-century mark or worse? And there are a number of metrics that you could use there. You could look at how much additional oil have we produced. You could step back and say what really what the atmosphere would care about, at least from a carbon perspective, as where are the additional emissions in pursuing CO2-EOR at least in the near term, versus not doing so? Then you could look at what is the actual DAC capacity if you were to use CO2-EOR to get that growth curve jumpstarted. Where would that place you versus a counterfactual if not taking that pathway. I’ll just say that it’s CO2-EOR with DAC, but more specifically, just the parameter space around CO2-EOR can be very complicated because I consider a number of variables. You consider use rate or utilization rate, that’s a function of how much CO2 you’re using to produce a barrel of oil and obviously you want to maximize that. Oil and gas companies have wanted to minimize that. Economically it makes sense. From a climate perspective, we want to maximize that.

The more CO2 you put underground to lift that oil out, the more storage you have. That’s important from a use perspective, but it’s also important from carbon intensity of the produced oil. Because I am a lifecycle analysis practitioner, so my curiosity really is tied to the carbon balance of this whole thing. You’ve got carbon coming in, but you’re producing fossil, which is carbon going out. Where does that balance lie? So in short, the more CO2 you put in, the lower the carbon of the produced oil. And you have things like displacement rate. These are just economic arguments and how the markets work. The idea that we here and the opponents to CO2-EOR say no more additional oil. Well, there’s really two things that would make that oil additional. One is looking at the displacement rate. Displacement rates says how much– if you’re producing a CO2-EOR barrel, how much would that actually displace on the open market? If you displace none, displacement rate of zero, then one barrel of CO2-EOR crude is an initial barrel of oil. If you have a displacement rate of 100 percent though, then you actually don’t produce any additional oil. You just replace a barrel on the market with a much lower carbon intensity barrel.

What we find is that that displacement rate can be manipulated basically how you want to based on how you observe the arguments. So we see a lot of opponents that own a much lower displacement rate. We think it will rise closer to around 80 percent. So we look at that space. But it’s important to run a number of scenarios there because we don’t know and there actually isn’t a large body of research on that. But if you step back and take a look at all of those, that scenario space, what I found is that using CO2-EOR for DAC in a limited capacity– and when I say limited capacity, I’m not talking about for decades and decades. I’m talking about for a strict period of time. So over the next decade, for a strict number of facilities, say 2 to 5, very large structure capture plants. So you’re talking about 2 to 5 million tons of CO2 DAC capacity additional build out. We have lower carbon futures in 2050 versus not doing that. So versus not taking a CO2-EOR pathway.

Stone: Is that because of the acceleration of the technology?

Psarras: It’s really tied strongly to two things. One is you are jumpstarting the growth. And people who want to play a little bit loose with that growth, you have to understand we are already on the clock and the growth demand, that rate that we’re looking at, is very aggressive. We’re talking about 25 percent decade on decade. That’s a extremely aggressive growth rate.

Stone: That’s for the DAC itself?

Psarras: That’s for direct air capture. Again, to hit that gigaton mark at mid-century. So if you start now and you get that jump started today, then we do have more DAC capacity in 2050 because of that jump start, and because you are producing lower carbon fossil. So lower carbon transportation fuels, you also get emission reductions versus business as usual oil production. And I think that’s one of the missing arguments in CO2-EOR. People just do want to do it. But you have to recognize that if you don’t do that, that fossil is going to get produced by far more carbon intensive mechanisms. So when you take that into account, it is a lower carbon pathway to use CO2-EOR in the near term to boost DAC capacity. But there are very strict assumptions and guidance that we need to make sure that results holds.

Stone: So it sounds like at the core, this oil that’s produced through the injection of carbon dioxide from direct air capture, that oil needs to displace oil we might otherwise get from under the ground. It should not be additional barrels of oil that are produced. And as you said, we want to use as much CO2 as possible to produce each of those barrels of oil. And my understanding is that this is already going to be used to produce some of the hardest to get at barrels of oil anyways. So I think that implies that there’s going to be a maximal use of CO2. Is that right?

Psarras: Well, we certainly want to replace natural CO2. And if you can do that with direct air capture source CO2, you’re not actually increasing the amount of oil you’re producing, you’re changing the carbon intensity of the oil that was being produced. So there’s nothing currently that says that an oil and gas operation has to replace or has to have a certain profile of the amount of natural CO2 that they mined from the ground versus the amount of CO2 they take from an industrial capture partner or from a direct air capture partner. But the more of that that you can use more, the latter, the better from a carbon perspective. From that carbon perspective, we’re really looking at if you look at the lifecycle intensity of a barrel of oil from EOR, you need about point six tonnes of CO2 injected underground to come out neutral. That includes the downstream combustion at the tailpipe, it includes refining, it includes all other processes. Venting, methane leakage in the supply chain. It all adds up to about point six. So if you can push the amount of CO2 you’re injecting underground to a point six and above, then you actually have a net carbon benefit in this. And you have to consider that over the long run.

Stone: So that’s what we’re looking at. I’ve heard this concept of zero carbon oil or net zero oil. Is that what we’re talking about here, essentially?

Psarras: That’s exactly right. It again sounds like an oxymoron, but it is if you look at the life cycle. Carbon in, carbon out. We know a number that you need to hit to make that math work. And you have to hit about point sixish tons of CO2. And we know that there are operations that exceed this. We also know there are operations that are well short of that. Again, and it is very nuanced and complicated industry so you have to be careful. You also have to be careful where you’re sourcing it from. Natural CO2 does not count. So you’ll hear about that being stored. That was mined from underground and stored back underground. There’s still climate benefit there. None at all.

Stone: It’s a wash.

Psarras: It’s a complete wash. Right. We want to take CO2 that would have hit the atmosphere. So avoided CO2 from power plants or industry. We want to store that underground. We want to remove it from the atmosphere store it underground. And I should say when I say stored underground, this is something people should also realize. CO2-EOR does store that CO2 underground. So the CO2 that you inject into an oil field, about 99 percent of that remains secured in that system. And they’ve been doing that for 40 years. So there’s a very well known number. It is a storage mechanism. Of course, you create more fossil, you may create more carbon in the downstream [Inaudible]. So I think people recognize that. So that’s where that trade off comes. But again, lifecycle, when you draw that box, we know exactly what you need to hit to make that carbon neutral or negative operation.

Stone: Alright. So, Pete, I want to go back to something really important you said a few minutes ago. You mentioned that for this to be climate positive, DAC plus EOR, the combination has to be time limited. And you talked about it being a bridge to get us to more economic direct air capture. And that bridge should last about a decade after which point I assume this is going to be no more or ideally no more production of oil with this captured carbon dioxide. Instead, that carbon dioxide is going to be buried under the ground in reservoirs and there’s going to be no fossil fuel produced as a result of that barrel. But those reservoirs that would be dedicated just for the barrel of carbon dioxide are not easy to come by. There are some permitting requirements that are quite onerous, I understand, and other barriers that are going to get in the way potentially of this or complicate the idea of this being a limited ten-year bridge. Tell us about some of those barriers to geologic storage.

Psarras: Yeah, it’s an excellent question and I absolutely agree. Ten years. While DAC is expensive, if we can get some of these stood up, a couple doublings in capacity is typically how we discuss the economics starting to fall. We learn by doing and that could all start to take over. You get that a little bit more economic. You don’t necessarily need that revenue source or we don’t need to lean as heavily on to that revenue source from EOR anymore.

Stone: One stack becomes cheap.

Psarras: Right. One stack becomes cheap. If you look at the pipeline of CO2 or direct air capture and CCS projects globally, again, the vast majority to date been tied to EOR. The five most recent that are active are all tied to EOR. it is a measure of technical readiness. EOR is ready to go. It is ready to receive that CO2 now. It’s been receiving CO2 for the last 40 years. We know how to do it. There’s minimal risk. Those are all project enablers. If you look at the pipeline, and this is really pleasing to see, of the 100 or so CCS and DAC projects that are in early and late stage development, the vast majority are tied to geological storage. The vast. I’d say only maybe three of 100 or so projects even mention EOR. So that is the shift that we’re talking about. That is where people want to go. But when I look at that list, I say that these projects aren’t active yet for a reason. And the reason is that geological storage just isn’t ready yet. And if you were to tell me tomorrow that we had solved geological storage as an option, I would throw your out with the bathwater. It would be gone. We would be ready to go. Again, that goes back to that two door argument. That door storage. That door EOR. Let’s do it.

Stone: So that’s interesting because everybody talks about it like, let’s just go ahead and bury it. But you’re implying here that it’s not ready to be buried for some reason. So what’s going on here?

Psarras: Again, there’s economics. What is the economics for storage? I think CO2-EOR, you’re producing a fuel. You have a revenue stream that CO2 is coming in as an operational expense. So a capture partner can get some revenue to help subsidize the cost of that operation. We know that says CCS, we know that DAC are expensive. And so that has played into that project viability. So what is the incentive for storage today? Well, the incentive for stores today is 45 Q. And 45 Q will pay you $50 for that that CO2, that storage. You’ll get $35 today for EOR or other beneficial reuse, but you also get the revenue associated with the offtake. And so it looks like the way the credits are written, oh, 50 is larger than 35, we’re definitely giving a nod to storage. It’s almost a laughable nod. It’s not close to making it economic. Everybody recognizes this. This is why reconciliation is aiming to fix this. So we’re boosting that 50 to 85 for industrial resourced. So CCS provided CO2.

We’re boosting it all the way up to one $180 per tonne proposed for direct air capture. So now you’re talking. You flip those economics, you’ll see some attention to storage. That’s just how the world works. But there are also geophysical limitations. So the sailing’s very specific. But we need to make sure that those sites are safe. Safe Drinking Water Act stipulates that if you’re injecting CO2 underground, you have to monitor, you have to characterize that site. We need to make sure that that site has a caprock so that CO2 doesn’t come back to the surface. You need to make sure you have the right well to inject CO2. And this has historically been a thorn in the side. We hope that we see a lot more investment into the development and characterization of the sites and the permitting of these wells.

Stone: Well, that’s interesting. I think there’s something called a Class VI Well Permit, which is needed for these permanent geologic storage sites. And as you said, there are a lot of criteria. You’ve got to have caprock. I mean, I’m not a geologist, but I’m listening to what you’re saying. So, there are a lot of criteria that need to be satisfied so that we know that the permanent storage in these sailing aquifers will truly be permanent. How difficult is it to actually get these Class VI permits? And my understanding is there’s not a whole lot of them, actually, that have been approved to date.

Psarras: Two. Two have been approved.

Stone: It’s great. I mean, it is interesting because, again, I said it 5 minutes ago, everybody’s talking about just burying it. But when we look at the reality, there’s only two of these reservoirs that have ever been approved.

Psarras: This is the crux of the problem. This is why I would advocate for CO2-EOR in the very near-term until we can get this sorted. Get us running all take a loss. I honestly, from the results I showed you, I don’t think it is a loss in the long run. But even if it were a loss, from a near-term climate perspective, I think it would be worth it from a DAC capacity build out standpoint. Class II wells, there are millions of them for CO2-EOR oil and gas. That takes something like 90 days to get permitted for a for a Class II well. That’s nothing. Class VI, we have two. The first one took, I don’t know, five years or greater. I think the second one maybe 18 months. We recognize that this is a bottleneck. It should by no means be a bottleneck. It’s frustrating. We’re ready to store it, but this is a resource issue. We do want to make sure that we’re characterizing these sites properly. We do want to make sure we’ve got monitoring, verification in place. But the amount of permits that have been applied for it’s growing and growing by the day. You’ve got this backlog, we need to file through them. So we need to dedicate resources to getting these permits in that Class VI permit so that we can get storage demonstrated here and so we can play catch up. Once it does that, there is not a strong argument for CO2-EOR maybe outside of the production of low carbon transportation fuels, which we’re going to need as we’re transitioning away from fossil based transportation fuels.

Stone: Let me jump back to an issue that you also raised briefly earlier, and that’s the issue of the infrastructure that’s going to be involved here. For companies to invest in the infrastructure to capture carbon dioxide from the atmosphere, then build pipelines so that can be buried in the ground. I mean, there’s an investment involved in that. Is there a risk that if we’re looking at a limited timeframe, a ten year bridge for DAC plus EOR that we’re essentially getting into a situation where we’re going to have a lot of assets that are going to end up stranded that were built to serve this purpose? How do we ensure or motivate companies to invest in this with potential for stranded assets coming down the road not too far away?

Psarras: That’s a terrific question. I think the key thing about CO2-EOR is that it is actually using a lot of the infrastructure that we could easily use for geological storage. In pipelines, you don’t need necessarily a new pipeline. If you look at Texas and you look at where these EOR operations are existing or in the Permian, look, there’s plenty of sailing storage sometimes right below. You’re talking about same area. Some people talk about the idea of stack storage where you would actually do CO2-EOR and then recycle that CO2 and then store it permanently in sailing below to really maximize that storage. So there is some repurpose of all infrastructure here. So I don’t think really you hear about the lock in thing like the qwerty keyboard, etc., we can’t get away from it. It’s too late. Really not the same when you think about CO2-EOR just because the transition from CO2-EOR to sailing is a lot closer than people think. It’s a lot more similar. And really the minor difference is that these are really both sailing reservoirs. One just has oil on it and the other doesn’t or one’s producing oil and the other wouldn’t. So there’s a lot that can get repurposed.

But if we’re building new infrastructure, the point is valid. We don’t want to commit too much around CO2-EOR if sailing is the ultimate goal. And I think that’s why we’re seeing like, for example, in the notice of intent from the Department of Energy and Fossil Energy Carbon Management, right? So they put out a notice for the development of these large scale hydrogen and DAC hubs. And actually EOR is cut out of that. EOR is disallowed as an option when considering it. The government of Alberta has done a similar thing, cutting CO2-EOR out of those proposals, and part of that is again to help ensure that we’re not necessarily locking in vast amount of new infrastructure for EOR when sailing is the goal. But I think the other part of it is that I know at least DOE regard CO2-EOR as a very mature technology that it does not need help. So I applaud them for investing a much needed resource, again, going back to where should we be putting this resource into other options for carbon management?

Stone: EOR is just one way to dispose of carbon dioxide from DAC. Obviously, sailing storage is the other way that we’ve just been talking about. But you’ve looked at completely different options. You’ve looked at the economics of carbon to fuels. Tell us what carbon to fuels is and what did you find in your research?

Psarras: So carbon to fuels, CO2 to fuels. A fuel is a hydrocarbon, so you need really two components and you can build it from scratch. You need hydrogen and you need carbon, right? So typically we’ve been getting that from dead dinosaurs. Well, we could get carbon from the air. We can get it from biomass. So there are a lot of different routes to build hydrocarbons from scratch. And they’ve gained a lot of traction because there’s a promising opportunity again with the recognition that we’ll need some this, for example, in aviation and as we transition as fast as necessary away from fossil to bridge that transition period. Let’s use lower carbon options and let’s use these as a replacement. So synthetic fuels. When you step back, again, I run lifecycle analysis and I ask, well also techno economics, what would this cost? So you can get the carbon intensity becomes very promising when you’re using the air or biomass as a source. You can get that carbon intensity. So the carbon intensity, again, you’re burning that fuel or the tailpipe, you’re producing CO2 but on a net basis. The climate and the atmospheric accumulation of CO2 is much lower. So I think it’s a wise option in that sense.

But the economics and the resource intensity are terrible, quite frankly. And a lot of that has to do with the way that we lean so much on the electrolysis and some of the conversion technology. CO2 is a fairly stable molecule, so it’s challenging to convert that into other species. It’s been a historical problem that we’ve tried to use catalysts and improve catalyst and improve operations to lower the energy intensity of the conversion of CO2. But if you’re putting energy into that conversion, you have to be mindful for where that energy’s coming from of course, you’ve got to be mindful of the overall resources. So and it’s really more the hydrogen than anything else. We fix the hydrogen, we can make this a more viable option. And it will. It will become as hydrogen and green hydrogen and those technologies get down their respective learning curves. I think that e-fuels and synthetic fuels will be more competitive, but today they’re not even in the same ballpark in terms of the economics that you could have from a carbon intensive perspective when compared to CO2-EOR.

Stone: Pete, a final question for you. What is your outlook for the timeline for direct air capture implementation? When might you expect the economics of direct air capture to free it from the need to be paired with enhanced oil recovery? When will it economically stand, not on its own two feet, but say with the help of the 45Q tax credit? What’s your outlook?

Psarras: My hope is still where we’re looking at over the next decade that we can cut those debt costs in half. So we’re coming down from very large scale facilities that are projected at $300, $400 per tonne down to close to $200 per tonne. Then in the decade after that, 100. I think if we can shoot for, hey, over this next decade, if we can get some low carbon fuel out of this, if we can get these stood up down there learning curves and we can transition to just all out sailing storage where it matters by 2030 and moving forward, we’ll be in a good places as a society. But I do want to keep an eye on getting that DAC buildout on pace. That is my priority as a researcher to make sure that that’s moving forward, because if we miss on that none of this is going to matter. None of what we’re talking about today and the incremental percentage points of fossil fuels that are created, none of that’s going to matter if we don’t have the engineered direct air capture to meet our climate goals if we find ourselves in an overshoot scenario, to remove us and deliver us from both those harms and potential irreversible harms. That is the eye on the price. So it’s really get this going by any means necessary in the near term. But do it under very strict and strong governance to make sure that we don’t accidentally create a situation where we find ourselves in a path of no return.

I really struggle to see how that can happen. I say that not naive. I say that fully knowing the historical actions of the oil and gas industry. But I’m also encouraged that we do see so much precedent in policy now and policy guardrails that could be developed to make sure we’re doing this responsibly. So things I think that we can do, the reconciliation, improving incentive for sailing storage and make it more an economical option. We we’re seeing that gap split between beneficial reuse and storage. I’d love to see that progressively broadened over time so that you, again, would enable transitioning as an economic argument over time. I’d love to see a longer payoff period for geologic storage. We definitely, definitely, need more investment in to Class VI permitting to get these. Though, if that is the limiting factor, that ought not be, let’s get that invested and moving quickly so that we can get these storage projects up and running. I think investment in a hub structure where we could kind of capture economies of scale and dedicating those to geological storage, also super important in terms of maximal use of infrastructure. As far as CO2-EOR goes, I would love to see those natural domes that are currently producing CO2 right out of the earth. I’d love to flip the switch and make those geological reservoirs. We know that they can accommodate CO2 because they’ve been doing so for years and years and they already have the infrastructure in place. I think there are those types of opportunities and guardrails that we can put in place that will allow us to take certain actions today and not [Inaudible].

Stone: Pete, thanks very much for talking.

Psarra: Of course. Thanks, Andy.

Stone: Today’s guest has been Pete Psarras, a Research Assistant Professor of Chemical Engineering at the University of Pennsylvania. Visit the Kleinman Center’s website for more podcasts, as well as energy policy research and blog posts. To keep up with the latest from the center, subscribe to our monthly newsletter on our website. Our address is Kleinmanenergy.upenn.edu. Thanks for listening to Energy Policy Now and have a great day.

guest

Peter Psarras

Research Assistant Professor of Chemical Engineering
Peter Psarras is a research assistant professor in chemical and biomolecular engineering at the School of Engineering and Applied Sciences and the Kleinman Cetner for Energy Policy.
host

Andy Stone

Energy Policy Now Host and Producer
Andy Stone is producer and host of Energy Policy Now, the Kleinman Center’s podcast series. He previously worked in business planning with PJM Interconnection and was a senior energy reporter at Forbes Magazine.