SHELLGAME: DoE Claims Massive CO<sub>2</sub> Injection Could Quadruple US Proven Oil Reserves

SHELLGAME:
DoE Claims Massive CO₂ Injection Could Quadruple US Proven Oil Reserves

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March 10, 2006 1100 PST (FTW) - The Department of Energy has just announced that US oil reserves could be quadrupled if we use massive CO₂ injection to recover neglected oil from old fields. CO₂ injection is nothing new— we’ve been doing it for thirty years. Professor Kenneth Deffeyes of Princeton himself (a colleague of the legendary M. King Hubbert) has advocated expansion of this technique, as observed in FTW’s pages last year:

But there’s a difference: whereas the DoE story (below) is cryptic about its reasons for emphasizing CO₂ injection over water injection, 3-D seismic, horizontal drilling or any other technique, Deffeyes was frank and logical. The new enthusiasm for carbon dioxide as an oil recovery tool is based on a hidden enthusiasm for “coal gasification,” the Fischer-Tropsch-derived process of making “natural” gas synthetically from coal. Montana, Illinois, Pennsylvania, and other coal-rich states are gearing up for a massive coal-gasification push. But the trouble with coal is (still) carbon. Burn it, and you get the massive pollution of gasses and particulates that blackened London in the days of Charles Dickens. Process it with the most modern technology into synthetic natural gas, and you get much less smog, along with plenty of CO₂. But that CO₂ can be bought by oil companies and blasted into deep wells, where it forces unrecovered oil up toward the surface.

A briefing paper from the Australian Uranium Information Centre explains the scale of CO₂ injection in US Enhanced Oil Recovery, or EOR: “Captured carbon dioxide gas can be put to good use, even on a commercial basis, for enhanced oil recovery… Overall in the USA, 32 million tonnes of CO₂ is used annually for enhanced oil recovery, 10% of this from anthropogenic sources.” Makes you wonder how they get away with extracting that other 90% from natural CO₂ deposits.

Injection for EOR is an excellent use of a poisonous greenhouse gas. But it still finds us burning more oil, and it raises the question of just how much liberated CO₂ will escape the industrial resource loop. I asked an anonymous official at Dakota Gasification Co., who told me that after July 2006, when some new equipment will be online, “220 million standard cubic ft per day (mmscfd) of CO₂ will be produced, of which 160 mmscfd will be going down the pipeline to Canadian facilities for injection into oilfields.”

Similar numbers are found at the US government’s IEA Weyburn CO₂ monitoring and Storage Project study. It claims 250 mmscfd of CO₂ is produced at Dakota Gasification Co. from coal, of which 95 mmscfd is currently injected at Weyburn oilfield. Where does the other 60 million cubic feet go? Up the emissions stack. Of course, the conventional burning of that coal would release a vastly greater amount of CO₂ and sequester nothing. That’s quite a carbon savings (tell it to the Greenland Icesheet), but only if the geology of the eventual gas storage keeps its integrity and prevents leakage. The IEA study lists four possible avenues for unwanted CO₂ escape:

For the sake of the world’s islands and major coastal cities, let’s hope none of that unintentional CO₂ leaking happens. The other place to store carbon dioxide is in geological formations underwater, where (the Australian paper explains) Norway has been having significant success. “Since 1996, Statoil has injected about a million tons of CO₂ per year and saved $55 million per year in taxes.” That gas is trapped in a saltwater aquifer some 800 meters below the ocean floor. Under the leadership of geochemist James W. Johnson of the Lawrence Livermore National Laboratories, the US Department of Energy is developing criteria for natural underground storage sites, hoping to follow Norway’s example. Surely Livermore’s research will have a greater chance of implementation if Congress passes a carbon tax before Hell freezes over (or the Arctic melts).

The apparent purpose of the new meme—inject enough CO₂ and you can quadruple US oil reserves—is to promote advanced recovery of oil from existing fields. Its real purpose is probably to promote coal gasification by creating and expanding a market for CO₂.

That latter purpose is the better one, provided the carbon sequestration people are well funded, thorough, and lucky. If they’re not, we could face an accelerated climate collapse as runaway CO₂ floods the atmosphere—and this can happen acutely at an underground sequestration site, or chronically at a coal gasification plant. Serious carbon taxes like those implemented by Norway would be a good curb on “accidental” leakage at US plants.

Any funding that goes to coal gasification will be unavailable for renewables.

The “zero emissions” label refers to the amazingly low level of on-site pollution produced by this process. But it is as inappropriate here as it is for nuclear power. The emissions are simply transported “elsewhere.” Unless geosequestration of CO₂ becomes totally safe and affordable on a massive scale (and that includes retrofitting every coal burning plant in the world), the waste could prove just as deadly as nuclear waste in the climatological long run.

As we never tire of telling you, none of this means much unless we get off the debt-based money system and radically curb our consumption.

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

NEW YORK - The United States, where oil production has been declining since the 1970s, has the potential to boost its oil reserves fourfold through advanced injection of carbon dioxide into depleted oil fields, the Department of Energy said Friday.

The United States, the world's top oil consumer, has been successfully pumping small amounts or carbon dioxide into depleted oil and natural gas fields for 30 years to push out hard-to-reach fossil fuels.

The department said 89 billion barrels could potentially be added to current proven U.S. oil reserves of 21.9 billion barrels through injection of carbon dioxide, the main gas that most scientists believe is warming the Earth.

The amount is about what the United States, at current demand, uses in 12 years.

Adding billions of barrels in reserves is dependent upon the availability of commercial carbon dioxide, the department's fossil energy office said.

A United Nations report in September said that burying large amounts of carbon dioxide could play a big role in fighting global warming but would be a costly fix.

Electricity prices could typically rise by 25 to 80 percent if power plant operators adopted the technology, according the the report by the U.N.'s Intergovernmental Panel on Climate Change.

Montana acquired 533 million tons of federal coal near Ashland three years ago. A private company owns more than that interspersed checkerboard fashion among the state's holdings.

And there are others, too, who have ideas for turning the coal into energy, revenue and profits.

Because the price of oil is at unheard- of levels, and the United States needs alternative energy supplies, Gov. Brian Schweitzer has targeted an old/new process to turn the coal into diesel and jet fuel. Sen. Max Baucus, D-Mont., has put tax incentives for the process into the new energy and highway bills, and several U.S. energy technology firms have perfected the method.

In a recent interview, Schweitzer said "there are a great number of believers, potential partners, who will put their money down."

The process is called Fischer-Tropsch, named for the German scientists who developed the process in the 1920s for converting coal to diesel fuel, which later ran the Nazi war machine. In more recent decades, the process was used in South Africa to fuel its vehicles when the world would not trade with the apartheid nation. It still produces 150,000 barrels of fuel a day from coal. Energy technology firms in the United States and elsewhere have fine-tuned F-T to make both its process and products pollution-free.

To develop the state's Otter Creek Tracts - 11 square miles in three separate parcels - the State Land Board would have to offer a specific amount of coal for bid, or any person or consortium that wished to develop the resource could ask the board to offer it for bid, both subject to board approval.

The State Land Board, which consists of the governor, attorney general, secretary of state, state auditor and superintendent of public instruction, is constitutionally mandated to manage the state school trust lands for their maximum return in the short term and long term. The state acquisition of the Otter Creek Tracts was specifically designated to the school trust lands.

Schweitzer said the land board "might" offer coal tracts for bid in the near future. But before doing that, he said, he wanted to explore possibilities with companies like General Electric, Shell USA and Exxon/Mobil. The latter two have coal-and-gas-to-liquid fuel projects in China and Qatar.

Montana has 120 billion tons of state and federal coal reserves under its surface, mostly in Eastern Montana. Schweitzer said 115 billion tons of that coal is recoverable. He said using the Fischer-Tropsch method, one ton of coal would produce 1.5 barrels of diesel fuel. A barrel is 42 gallons.

Most of those presently using F-T to produce diesel and other petroleum products start with natural gas. But that fuel is getting expensive and scarce. Thus Montana's coal would have to be gasified first then turned into diesel.

Coal gasification is an old technology, he said, pointing to the Great Plains coal gasification plant near Beulah, N.D. which has been turning out synthetic natural gas since the early 1980s.

The F-T fuels are also clean - no sulfur, mercury or arsenic. Those ingredients are recovered from the process and are marketable byproducts on their own.

Schweitzer said a 150,000 barrel per day unit would cost about $7.5 billion to build. However, F-T units can be built in modules, so a 22,000 barrel per day unit could cost $1.2 billion, he said.

One impetus for the development of the F-T fuel is that the Pentagon wants to have a single battlefield fuel. The F-T product can be used as jet fuel also.

There are some obstacles, the governor acknowledged: Several different companies hold different patents for the process. For example, a Tulsa, Okla., company, Syntroleum, uses a process with common air, rather than pure oxygen, which make it safer and less expensive to make.

And it is the cost that heretofore has kept the process in the experimental/pilot project stages. For F-T, the break even point comes when crude oil is more than $35 a barrel. Friday crude oil futures settled at $60.57 a barrel.

Schweitzer sees the state's coal beds as a solution for America's energy security and for economic development in Montana.

"This will be done in partnership and we have an equity role in it," he said. "It gives us control over our own destiny, a say in the construction. We don't walk in as a pauper."

Schweitzer said the development will be a business deal and there will be no risk to Montana's air or water. "More than any other, I want it (Otter Creek development) to be a reality."

So does Chuck Kerr, president of Great Northern Properties based in Houston, which owns the sections in the Otter Creek Tracts that the state does not. In tract 3, Chevron owns a section and the Consol coal company also has sections.

"We're tickled to have the state as a partner," Kerr said in a phone interview. "The federal government is too rigid and slow."

Kerr, who grew up in Billings, shares Schweitzer's enthusiasm for the Fischer-Tropsch process. And now that oil prices are above $40 a barrel and not likely to drop below that level, it makes economic sense.

"There is a lot of money to be made now with commodity prices where they are," Kerr said. "And we are in this for the long haul, not for a quick trip. Our grand kids have a vested interest in these reserves."

GNP is the largest private holder of coal reserves - 20 billion tons - in the United States. Most of the coal is in Montana and North Dakota. GNP in 1992 bought the coal reserves from Burlington Resources. The coal tracts, 40 in Eastern Montana, were part of the federal land grant to the Northern Pacific Railway. Three-fourths of the holdings are lignite coal, while one-fourth, at Otter Creek, is high-quality sub-bituminous.

"It will take billions to develop," Kerr said. "It will take both of us. Otherwise it would be impractical to mine every other square mile."

"We are willing to work with the state, align our interests to maximize the value of the coal to GNP and the state," Kerr said.

During the Gov. Judy Martz administration, which pushed the U.S. Department of Interior to make good on its promise to transfer Otter Creek to Montana, GNP signed a coordination agreement with the state to proceed towards cooperative leasing of their respective checkerboard coal land interests.

One of the drawbacks is lack of infrastructure in the area, namely a railroad and a coal mine. A pipeline for the F-T fuel would be useful, too.

A Billings natural resources company is a member of a consortium that has had an eye on the Otter Creek Tracts from the beginning.

"The state would be remiss if it missed an opportunity to use some portion of the coal reserves to foster investment for infrastructure," said Mike Gustafson, president of Wesco Resources of Billings.

Gustafson said the energy business is now in chaos and there is a role for coal more than ever.

He said the state should offer 350-400 million tons of Otter Creek coal (state and GNP), which would be large enough to sustain the capital investment to build a railroad and a coal mine.

Gustafson, who has a permit to build the Tongue River Railroad from just north of the Wyoming border north to the Burlington Northern Santa Fe mainline near Miles City, is part of a joint development group, Otter Creek Energy Project. Other members are Bechtel Enterprises Inc., the investment arm of the global construction firm, and Kennecott Energy Co., which owns and operates coal mines in Montana and Wyoming. The BNSF is affiliated in an advisory capacity.

The OCEP has proposed a three-phase, multibillion dollar energy package for Otter Creek. The first phase would include a 750-megawatt coal fired generator, a 100-mile power line to tie into existing transmission, a 3-million-ton a year coal mine for the power plant with the electricity being sold in Montana and the Pacific Northwest. An estimated completion date is 2008-10.

Gustafson said the leasing could be done in the same manner as the federal government with one slight modification, a due diligence clause that requires an operating mine within 10 years of the successful bid.

He estimates the railroad from Ashland to Miles City would cost about $200 million to build and another $80-$90 million to open a mine producing 12 million tons per year. He argued that any customer for the coal is going to want to know what the delivered price was going to be before signing a contract. The state must offer a sufficient amount of reserves in its first bid to sustain the infrastructure once it is committed, he said.

He sees other coal technologies as long-term developments, and doubts the F-T process will be part of the energy mix in the short term.

"Natural resources development is incremental," he said. "The transition (to F-T) will be there when it is commercial."

According to Jack Holmes, president of Syntroleum, that time is now, both economically and strategically.

"We need a certainty of cost," Holmes said, noting that oil prices ran up in the early 1970s and then fell back. That run up was a result of a producer embargo. The price of oil now is fueled by worldwide demand. Most analysts doubt it will drop below $40 a barrel.

Because of economic variables, Holmes was reluctant to estimate a cost for a 100,000 barrel a day facility.

More likely, an F-T module plant of 17,000-20,000 barrels a day would be constructed first, he said. "We call them trains. The vessels are expensive. You'd build one or two to begin with."

Holmes has visited Montana at the invitation of Sen. Conrad Burns, R-Mont., who has expressed an interest in helping the military find a single battlefield fuel.

In extolling the cleanliness of F-T diesel, Holmes said the quality is so high that it can be burned straight or blended with regular diesel fuel.

The one downside he identified was Montana's transportation costs because of its relative remoteness from markets.

In the just-passed energy bill, Baucus included an investment tax credit for coal gasification technology used with the updated Fischer-Tropsch process and in the highway bill, he included a 50-cent-a-gallon tax credit for F-T diesel

Montana is actively pursuing development of coal-to-liquids technology as a means of converting our significant coal reserves into synthetic gasoline and other fuels. Here are answers to some basic questions.

What is synthetic fuel?
Synthetic fuel, or "synfuel," is the name given to gasoline, diesel, jet fuel and other petroleum products that are made synthetically-that is, without oil.

What are the benefits of synthetic fuel?
There are several. First, America is blessed with abundant resources for making synfuel. Montana's coal alone could produce enough fuel to power every American car for decades, giving us energy independence from foreign regimes that now supply the U.S. with 58% of our oil. Second, synthetic fuel requires no engine modifications, burns cleanly, and is made with clean coal technology, a process that removes impurities, toxins and greenhouse gasses. Third, military security would be increased by the use of synthetic fuel, which is why the Department of Defense recently began a synthetic fuel program.

Where is synthetic fuel made today?
South Africa is the leading producer, making about 200,000 barrels of gasoline and diesel a day from coal. A number of other countries, including Qatar, Malaysia and China, are investing in synfuel programs in response to an increasing global demand for oil and other energy. Synfuels have been in use for many decades. Notoriously, in the 1940s the Germans fought World War II using fuel made from coal.

Why haven't synfuels been pursued in America before?
They have. In fact, the U.S. government was seriously exploring synfuel as early as 1925. In the 1940s, a Synthetic Liquid Fuels Act passed by Congress even appropriated over $80 million research and production. By the 1950s, America was producing thousands of gallons of synthetic gasoline a day at a test plant in Missouri. But the discovery of cheap oil, combined with a lobbying effort by the oil industry, caused the government to abandon its synfuel research. During the oil crisis in the late 1970s, the federal government briefly discussed synfuel production, but abandoned the idea again when the price of oil receded.

Why are synfuels cleaner than traditional fuels?
Synthetic fuels burn dramatically cleaner than conventional fuels, because the most harmful impurities are removed during production. In addition to removing sulfur, mercury and arsenic the process can also sequester greenhouse gasses in underground geologic formations. In fact, coal gasification and synthetic fuel production are the cleanest uses of coal to date.

How would the military benefit from synfuel?
The Office of the Secretary of Defense recently released a memo stating the military's desire to run all battlefield machinery on a single synthetic fuel. This would enable the military to avoid having to buy its oil from unstable regimes that are known to sponsor terror, and it would reduce the military's supply chain vulnerabilities such as those now occurring in the aftermath of the hurricane. As well, being able to run battlefield equipment on a single fuel, rather than multiple fuels, would give the military a strong logistical edge.

How is coal turned into liquid fuel?
Coal is made into fuel by first heating the coal into a gas form. The gas is then cleansed of sulfur, mercury, arsenic and other toxins. The gas is liquefied into a synthetic form of crude oil, which can be refined on site to create any of a number of liquid fuels. This process is also known as Fischer-Tropsch or coal liquefaction.

Are there other applications of this technology?
In addition to making liquid fuels, coal gasification can be used to generate electricity with virtually no emissions and, looking toward the future, can be used to produce hydrogen for use in fuel cells. Byproducts from the process include industrial materials such as naptha, waxes for cosmetics, fertilizer, and carbon dioxide for advanced oil recovery.

Is synthetic fuel cost effective?
Yes. The cost of making a barrel of synethic fuel is approximately $35 a barrel, including a sizeable infrastructure and labor force. However, important economic factors make production a cost effective enterprise, including the current price of oil and key economic incentives in the recently enacted federal Energy Bill, such as 80% loan guarantees for coal liquefaction projects in Montana.

How long will it take for America to produce enough synfuel to make a difference?
There are already a number of small plants being designed around America, but a large-scale national effort must involve the federal government and would take a number of years. Given South Africa's success in this field, we should assume that if the federal government became meaningfully invested in this concept, America could have a strong synfuel industry by the next decade.