Energy transition

Louisiana Carbon Storage Projects Surging on Fatter Tax Breaks and Blue Fuel Visions

At the center of a rush to build carbon storage is the state of Louisiana, where the number of applications to build long-term storage is equal to half the sites operating globally.

CF Industries’ complex on the Mississippi River in Donaldson, Louisiana
CF Industries’ complex on the Mississippi River in Donaldson, Louisiana, is the largest ammonia production facility in the world, and the state’s largest carbon dioxide emitter.
Source: CF Industries.

Louisiana’s energy companies are racing in a new direction chasing rich tax credits and hopes for blue fuels.

An economy built on producing oil and gas and turning them into fuels and chemicals is now the leader, by far, in projects to capture and store carbon dioxide emitted by the massive petrochemical and refining facilities along the Mississippi River.

Out of 28 applications for CO2 injection projects in the US, 15 are in Louisiana, said Steve Lee, director of the injection and mining division of the Louisiana Department of Natural Resources, during a recent presentation at the CO2 Conference in Midland, Texas.

If all those permit requests lead to operating projects, they would increase the current number of sites globally by 50%, according to an annual survey by the Global Carbon Capture and Storage (CCS) Institute, which supports the growth of storage.

The trigger for this uptick was the 2022 US Inflation Reduction Act that includes large increases in the tax credits—which can be paid in cash for up to 5 years to companies that reduce their emissions by capturing CO2 and then injecting it into subsurface storage.

In Louisiana, the key number in the bill is the top rate paid for injecting CO2 into sites designed to store it permanently—$85 per metric ton for facilities that begin construction prior to 1 January 2033.

For owners of chemical plants, this can go a long way toward paying the high cost of carbon-reducing projects required by investors and lenders, and it opens the door for them to get into the business of selling low-carbon blue fuels.

Louisiana, with its vast supplies of CO2 that can be separated out at an affordable cost and vast stores of open pore space in the ground, is a test bed for this hydrocarbon-based energy transition.

“Our geology is really good in Louisiana. Also, we have an extensive pipeline network and lots of CO2. Half of our CO2 is from industrial emissions, so it is good for capture,” Lee said.

Connecting those resources to create a CO2 storage business also requires large numbers of skilled deal makers, engineers, lawyers, and politicians because what they are building is neither simple nor an easy sell.

A recent deal, described in corporate releases, helps show the complexities and motivations required to capture, deliver, and store industrial CO2.

It starts at the world’s biggest ammonia-producing facilities in Donaldson, Louisiana, owned by CF Industries. The company wants to rid itself of the title of the state’s largest CO2 emitter with a plan to invest $200 million in a unit that will pull CO2 out of its exhaust streams, remove the water, and compress the gas to its supercritical state for shipment.

Based on what is known as the 45Q tax credit ($85/ton) for captured gas that is stored, CF could collect about $170 million a year if it reaches its 2 million tons a year target.

A significant chunk of that cash will flow to ExxonMobil for providing secure underground storage capacity and managing transportation by EnLink Midstream.

A pipeline route, reusing older lines, when possible, will move the gas more than 100 miles to Pecan Island, where ExxonMobil is working to create a storage hub on a 125,000-acre site. Hundreds of wells have been drilled in the scenic coastal location by ExxonMobil, going back to drilling by Humble Oil in the 1940s.

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