The next big revenue stream for biorefineries–carbon dioxide?

Written by Jonathan Eisenthal

From the very start ethanol companies have produced co-products that are essential to the bottom-line. It began with distillers grains, which has grown to a major animal feed industry in its own right. Lately, many ethanol plants have retrofitted equipment to extract corn oil from the distillers grains, for use as a value added feed, industrial or energy product. On the horizon, a new market is developing that could turn one of ethanol’s waste products–one that is accounted a liability by some ethanol critics–and turn it into a new source of cash: carbon dioxide.

A white paper from the National EOR Initiative–a joint effort of Minnesota’s Great Plains Institute and Washington DC-based Center for Climate and Energy Solutions–makes the argument for an incentive to help build an industry around the capture of carbon dioxide for use in what is known as enhanced oil recovery. The gas can be injected into geological formations that hold oil that cannot be captured by conventional well drilling technology. The EOR Initiative brought in oil and coal industry representatives, ethanol producers, electric generation utilities, labor and environmental groups–who all see a win-win in the use of industrial waste carbon dioxide for enhanced oil recovery.

“The best estimate I’ve seen is that 26 to 61 billion barrels of oil could be economically recovered with today’s EOR technology,” said Brendan Jordan, director of Bioenergy and Transportation Programs for Great Plains Institute. “That would more than double America’s proved reserves. Next generation EOR technology could bring that up to between 67 to 137 billion barrels of oil.

Oil companies are already paying cash on the barrel to major CO2 producers to capture, purify and pipeline the gas to oil fields where it can be used in EOR.

“From an environmental perspective, where there’s concern about an industry’s carbon footprint, all of the CO2 used in EOR remains permanently sequestered deep underground in a properly managed project,” said Jordan.

This has implications for ethanol opening markets where carbon intensity of fuel is a factor. California’s low carbon fuel standard has been suspended, pending a court case, but British Columbia and European Union both have rules in place that either require reduced carbon intensity or pay a premium for fuel produced with less net carbon released to the atmosphere.

“The ethanol industry’s interest in minimizing its environmental impact has always gone hand-in-hand with a natural interest in efficiency and profitability,” said Greg Schwarz, chairman of Minnesota Corn Growers Association. He is a corn, soybeans and turkey producer as well as a longtime investor/leader in farmer-owned ethanol production. “The CO2 market may not be economical for Minnesota ethanol producers to participate in next year, but it’s possible that the transportation infrastructure could develop quickly, and when it does, it will be one more way that our homegrown energy production companies can contribute to Minnesota’s economy and help the environment at the same time.”

According to Jordan the limiting factor for ethanol companies’ participation in this emerging industry is the economics of developing a pipeline over any distance in order to get the CO2 to market. Electric generation utilities produce enough CO2 to justify the expense, but ethanol companies produce far smaller quantities of CO2.

Currently, one ethanol company, Arkalon Energy in Kansas, has installed carbon capture and transport infrastructure. Its location fairly close to Oklahoma oil fields makes the move economical. Jordan observed that as the industry develops, particularly if an incentive is put in place, major CO2 producers will have major pipelines crossing territories close enough to ethanol plants to justify building trunk lines between the ethanol plants and the main CO2 pipeline, in a set up somewhat analogous to how electricity and natural gas are transported.

“We were able to organize a bipartisan press conference in Washington announcing the recommendation of the National EOR Initiative–a bipartisan press conference is a rare thing these days, so we were proud to get to that point,” said Jordan.

Senators Max Baucus, Kent Conrad, John Hoeven, Richard Lugar, and Congressman Rick Berg, Congressman Michael Conaway all issued statements of support for the concept. The National EOR Initiative is now working on introducing a bill to create the incentive.

“(Using CO2 for EOR) is great from an environmental perspective, but it is also great from the perspective of increased domestic oil production–that’s why the concept attracted broad support and we are hopeful that we can create a policy around this use for carbon dioxide which succeeds both economically and environmentally.”

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