U.S. Oil Major Is A Big Winner Of Biden’s Climate Funding
- Occidental Petroleum won one of two grants by the Biden Administration to build the world’s first direct air capture plant in Texas.
- The U.S. Inflation Reduction Act increased credit values for carbon reduction projects across the board.
- Capturing CO2 from the air is the most expensive application of carbon capture, the International Energy Agency says
One of the biggest U.S. oil producers, Occidental, has just won one of two grants by the Biden Administration to build the world’s first direct air capture plant in Texas that would extract carbon dioxide directly from the atmosphere.
Occidental, the first U.S. oil firm to pledge net-zero emissions, including the emissions from its products Scope 3, is betting big on direct air capture (DAC) technology to directly remove the greenhouse gas and sell carbon removal credits to corporate polluters.
DAC is not directly threatening Oxy’s core oil business. It focuses on emissions reductions, not reduction of the currently available energy sources.
Environmentalists, of course, slam the carbon removal and carbon management efforts of Big Oil, claiming that DAC and carbon capture, utilization, and storage (CCUS) are the next greenwashing tools of companies that don’t want to reduce oil and gas production.
The Biden Administration, which has angered the oil industry many a time in the past two years with restrictive policies and attempts at too much oversight, is handing out billions of grants as part of the Investing in America plan. It has also significantly raised tax credit values for carbon capture technology with the Inflation Reduction Act.
And one of the top U.S. oil producers, Occidental, is a winner in both.
South Texas Direct Air Capture Hub
The U.S. Inflation Reduction Act increased credit values for carbon reduction projects across the board, with the tax credit for carbon storage from carbon capture on industrial and power generation facilities rising from $50 to $85 per ton, and the tax incentives for storage from direct air capture (DAC) jumping from $50 to $180 per ton. The provisions also extend the construction window by seven years to January 1, 2033. This means that projects must begin physical work by then to qualify for the credit.Related: Gazprom Claims It Accounts For Over Half Of Chinese Gas Import Growth
In early August, the U.S. Department of Energy (DOE) announced up to $1.2 billion to advance the development of two commercial-scale direct air capture facilities in Texas and Louisiana. The projects are “the initial selections from the President’s Bipartisan Infrastructure Law-funded Regional Direct Air Capture (DAC) Hubs program, which aims to kickstart a nationwide network of large-scale carbon removal sites to address legacy carbon dioxide pollution and complement rapid emissions reductions,” the DOE says.
One of the two projects, South Texas DAC Hub in Kleberg County, is being developed by Occidental subsidiary 1PointFive and its partners, Carbon Engineering and Worley. The project will seek to develop and demonstrate a DAC facility designed to remove up to 1 million metric tons of CO2 annually with an associated saline geologic CO2 storage site.
“We believe this selection validates our readiness, technical maturity and the ability to use Oxy’s expertise in large projects and carbon management to move the technology forward so it can reach its full potential,” Oxy president and CEO Vicki Hollub said.
Days later, Occidental signed an agreement to buy its partner, Carbon Engineering, a DAC innovator company with which it has been collaborating since 2019.
“Together, Occidental and Carbon Engineering can accelerate plans to globally deploy DAC technology at a climate-relevant scale and make DAC the preferred solution for businesses seeking to remove their hard-to-abate emissions,” Hollub said.
DAC: The Most Expensive Carbon Removal Application
Capturing CO2 from the air is the most expensive application of carbon capture, the International Energy Agency (IEA) says.
The CO2 in the atmosphere is much more dilute than in flue gas from a power station or a cement plant, which contributes to DAC’s higher energy needs and costs relative to these applications.
DAC is currently expensive, but Oxy believes it could bring the costs down, Richard Jackson, President, U.S. Onshore Resources and Carbon Management, Operations, at Occidental, has told the Houston Chronicle.
“The biggest challenge is scale, building million-ton plants at scale, proving that can be done. The market will be there once these products are proven,” Jackson said.
Wide adoption of DAC needs costs to drop from $600-$1,000 per ton today to below $200 per ton, and ideally closer to $100 per ton, according to David Webb, Chief Sustainability Officer, Managing Director and Senior Partner at Boston Consulting Group (BCG).
While the Biden Administration’s policies are accelerating DAC plans and pilot projects, technology, costs, and scale need to materially improve for direct air capture to become a profitable industry.
Critics say DAC and other carbon removal plans are different forms of greenwashing in which polluters, including oil firms, use these technologies as an excuse not to cut emissions from the oil and gas they pump.
“It’s a shiny technology that would allow the world to avoid making hard decisions about energy use and continue business as usual,” Andrew Logan, a senior director at Ceres, the non-profit coalition advocating for sustainability, told Bloomberg.
Climate groups are not convinced that carbon removal deals, in which companies capturing CO2 sell credits to polluters to offset their emissions, would accelerate global emissions reduction.
For example, the European Commission’s proposed Carbon Removal Certification Framework (CRCF) “leaves many important questions unanswered and vital issues unaddressed, and could usher in an era of greenwashed and money-wasting carbon removals,” non-profit think tank Carbon Market Watch says.
In the EC’s draft regulation, “there is a risk for the framework to be turned into a greenwashing exercise and provide another excuse for big polluters to avoid cutting their emissions,” according to WWF.
By Tsvetana Paraskova for Oilprice.com