Climate-change paradox: Greenhouse gas is Big Oil boon

Gazing across a rejuvenated old West Texas oil field, Larry Adams sings the praises of carbon dioxide.

That might seem odd. The gas is linked to global warming, which has prompted calls from governments and environmentalists alike to reduce oil use. But here at the SACROC field in America's fading oil belt, CO2 is providing the boost the industry needs.

By pumping the greenhouse gas deep underground, oil companies are squeezing out more oil and providing new life to fields that have been declining for decades. But if the companies can capture the carbon dioxide that other industries produce, then the greenhouse gas may become cheap and plentiful enough to be a boon to Big Oil.

"This process of using CO2 for enhanced oil recovery is just a niche today, but if other man-made sources became available, it could become a boom," says Mr. Adams, CO2 engineering manager for Kinder Morgan, the nation's largest transporter of CO2 for enhanced oil recovery or EOR.

The Houston-based company mines most of its CO2 from natural deposits in Colorado. It pipes the gas to West Texas oil fields where it is injected a mile beneath the surface. Despite steady growth in EOR production since 2000, it accounts for only about 5 percent of US production – some 240,000 barrels a day.

Now, Kinder Morgan and a few other companies envision greatly expanding that amount – if they can transport CO2 emissions that would be captured by power plants, cement factories, and other industrial facilities.

Capturing carbon dioxide at plants and factories – rather than spewing it into the atmosphere – is one of the few near-term solutions to global warming that's receiving serious consideration. Under this scenario, companies would bury the greenhouse gases they produce in deep saline aquifers – a process called sequestration.

Some environmentalists say EOR could speed the move to sequestration.

"We see EOR as a great ally for carbon sequestration," says A. Scott Anderson, energy policy adviser for Environmental Defense, a New York-based environmental group.

With the natural CO2 available for EOR in short supply, a few companies are scrambling to begin collecting some of the 6 billion tons of carbon dioxide that the US emits each year. If enough of this man-made gas were made available, it could quadruple America's recoverable oil reserves to an estimated 89 billion barrels, the US Energy Department reported last year.

Among the projects under way or under consideration:

•Blue Source, LLC, a company that helps businesses slash their carbon emissions, announced a deal last month to capture CO2 emissions from a Kansas fertilizer plant and inject it into an aging oil field nearby.

•Representatives of Basin Electric Power Cooperative in North Dakota told a US congressional commission in July that it is planning to capture CO2 from its Antelope Valley power station and sell it for EOR in the Williston Basin oil field. The field holds nearly 13 billion barrels of oil. But without CO2 injections, some 9 billion barrels would never be recovered.

•In June, Denbury Resources, a Plano, Texas, company that specializes in using CO2 to revive aging oil fields on the Gulf Coast, announced that it would buy all the CO2 emissions of a new coal-to-liquid fuel plant being built in Natchez, Miss.

Supporters of expanding EOR say it could provide a down payment on the huge cost of sequestration by helping to pay for the pipelines and other infrastructure needed to collect and pipe CO2 around the country.

"If people working on projects for CO2 capture, can connect with people in the oil field – and in many cases they are close to doing that – the oil industry could end up financing the capture and transport of CO2," Mr. Anderson says.

Others, however, are skeptical.

For one thing, the infrastructure is a major undertaking. To provide enough carbon dioxide to meet EOR demands, the oil industry would have to capture and pipe as much CO2 (in liquid form) in a day as Americans consume in oil in a 24-hour period.

For another, the plan does little to discourage the use of fossil fuels.

"If you use CO2 to squeeze oil out of the ground, and then you burn that oil, it releases at least as much CO2 as was pumped into the ground," says Joseph Romm, a senior fellow at the Center for American Progress. "You're not really helping the planet any."

Even so, companies are moving ahead. Last year, Denbury announced plans to buy CO2 from a planned fertilizer plant to be built in Donaldsonville, La. It has been buying up old oil fields south of Houston and plans a CO2 pipeline that could transport both natural CO2 in its own reserves and from power plants and other CO2 sources.

By pumping the CO2 underground," we not only help to protect the environment by reducing greenhouse gases, but also produce additional oil to help reduce our nation's need for imported oil," said Gareth Roberts, Denbury's chief executive officer, in a June statement.