Midwest carbon capture projects face mixed prospects

A yard sign in New Liberty, Iowa, in 2023. Carbon capture and storage projects, including pipelines to transport the CO2, have faced opposition from local landowners and environmental groups.

Bloomberg News

Carbon capture — a process with proponents and opponents on both sides of the political spectrum — may be at a pivotal point in the U.S. with the change of administrations in Washington.

Carbon capture got a boost in the Midwest last month when regulators in North Dakota and Minnesota approved permits for an $8.9 billion, 2,500-mile pipeline that would run through their states.

The Summit Carbon Solutions pipeline would carry carbon dioxide captured during the production process at 57 ethanol plants in Iowa, Minnesota, Nebraska and the Dakotas to underground storage wells in North Dakota, according to a letter of support from Brian Jennings, CEO of the American Coalition for Ethanol. The goal is to store 18 million tons of CO2 there annually, according to Summit.

Summit did not respond to requests for comment, but the Iowa-based company said on its website that it “will not use any government funding” to build the pipeline.

Once the project is up and running, Summit could qualify for tax credits under Section 45Q of the Internal Revenue Code, which covers carbon dioxide sequestration.

South Dakota regulators rejected Summit’s permit application for the 700-mile stretch that would cross through their state last year. In November, Summit reapplied.

Carbon capture and storage, or CCS, is endorsed by the Intergovernmental Panel on Climate Change as an option for cutting greenhouse gas emissions toward the goal of net-zero carbon emissions.

Climate change, which is warming world temperatures, is largely caused by human activities that emit carbon dioxide, methane and other greenhouse gases into the atmosphere.

In 2021, the Bipartisan Infrastructure Law created a $2.5 billion pot of money administered through the Department of Energy for carbon capture projects in the U.S.

And in 2022, the Inflation Reduction Act doubled down on tax credits for CCS projects by raising tax credit values, lowering the qualification threshold and extending the construction timeframe, Reuters reported.

But carbon capture has drawn criticism from the right, where the electoral base denies the evidence of climate change — 87% of Republicans are skeptical of net zero, according to a March 2024 Pew Research Center survey — and from environmentalists, who argue that the technology cannot safely be scaled and that most captured CO2 goes toward producing more oil.

Injecting CO2 into the ground helps push more oil out, and a North Dakota official said that’s been a key factor in regulatory approvals for carbon capture projects in the state.

North Dakota has long known that CO2 “was great for enhanced oil recovery,” North Dakota Agriculture Commissioner Doug Goehring told The Bond Buyer.

He’s one of three members of the North Dakota Industrial Commission, which approved that permit, along with the governor and attorney general.

The two states with the best geography for carbon sequestration are Wyoming and North Dakota, he said. North Dakota is also exploring utilization of captured carbon, not just storage, at the Minnkota Power Cooperative’s Project Tundra, located at Milton R. Young Station in Beulah.

“Summit Carbon’s pipeline is a separate issue from what we were trying to do, and sometimes it gets confused,” Goehring said. “The whole climate policy thing… was never part of our conversation. These other projects in other states are just looking at sequestration.”

Project Tundra is a public-private partnership. An energy extraction tax was levied out of the industrial commission to fund research for the project, and was matched with private sector funds, he said.

“There is a huge amount of money, energy and time being put into promoting carbon capture and associated technologies at the moment,” said Rachel Kennerley, carbon capture campaigner at the Center for International Environmental Law, a Washington, D.C.-based environmental nonprofit. “It’s a smokescreen… Every investment that goes into this is actually an investment in prolonging the use of fossil fuels.”

The technology dates to the 1970s, when Chevron used CCS to increase oil production at a field in Scurry County, Texas.

Kennerley pointed to a joint report released by Democratic staffers on the House Oversight and Senate Budget committees that found CCS needs to be rolled out at 185 times its current deployment rate to reach net zero goals.

“You have this real distance between what the carbon capture industry claims it can do, and what companies are willing to put money behind,” Kennerley said. “In the EU, the industry is open about the fact that there is no market for this technology. The only way it can be delivered and rolled out is by de-risking the entire value chain — so across capture, processing, transport and storage; through a huge amount of public money; and by governments creating a market for it.”

Northern Lights carbon capture and storage project in Norway — Shell, Equinor and TotalEnergies SE own the Northern Lights carbon capture and storage project in Blomoyna, Norway. The project will inject CO2 into a saline aquifer beneath the seabed.

A Department of Energy spokesperson declined to answer questions about any projects DOE is funding through its Carbon Capture Demonstration Projects Program, such as Project Tundra, or its Front-End Engineering Design Studies Program, such as the Duke Energy and Heidelberg Materials Inc. projects in Indiana.

“DOE’s investments in innovative carbon capture projects will ensure American leadership in developing the cost-effective emissions reducing technologies needed to decarbonize power and hard-to-abate industrial sectors,” said the spokesperson, who asked not to be identified.

North Dakota’s Clean Sustainable Energy Authority, a division of the North Dakota Industrial Commission, provided $250 million in low-interest financing to Project Tundra, according to the project’s website. The authority also provided grants to other carbon capture projects in the state.

Tundra is still in the research and development stage, but once the equipment for capture is in place there, Minnkota will have to go through the permitting process and do bonding for wells and site reclamation, Goehring said.

In Minnesota, Summit secured a permit on Dec. 12 when the state’s Public Utilities Commission approved a plan to run 28 miles of pipeline through the western part of the state.

“Under Minnesota law, a CO2 pipeline project of this size does not require a certificate of need,” said MPUC spokesperson CoriAhna Rude-Young. “If the applicant provides record information that satisfies the permit requirements in Minnesota law, they are issued a permit.”

According to a legal report shared with The Bond Buyer, an administrative judge recommended in November that the commission find the environmental impact statement from the Department of Commerce adequate and issue a permit.

Clean Up the River Environment, or CURE Minnesota, a nonprofit environmental and social justice group, said in a press release that Minnesotans overwhelmingly opposed the pipeline in written comments and public hearings.

Landowner opposition is a big challenge for carbon pipeline projects.

North Dakota’s Goehring acknowledged there may be some legal risk from landowners to the Summit project, but noted, “The law is pretty clear on this… when there’s something that’s deemed for the public good. When you have a common carrier, they have to hit a certain percentage of easements signed.”

Summit, he said, has around 90% of easements signed in North Dakota. “The majority have signed off,” he said. “And it still has to meet all the other requirements for safety, siting and bonding.”

Also pursuing carbon capture is the Dallman coal-powered plant in Springfield, Illinois. Dallman’s pilot project received $57.76 million from the Department of Energy for a capture plant that would be used for future testing of carbon capture and utilization, rather than storage.

Amber Sabin, media relations director at City Water, Light and Power in Springfield, noted that the current pilot research at Dallman involves catch and release, so neither storage nor utilization is happening yet.

Beyond the Department of Energy funds, the state has allocated $20 million to the project. Linde-BASF, makers of the carbon capture technology, have pledged $7 million toward the total cost of $85 million, Sabin said.

Both Dallman and Illinois’ municipal bond-financed Prairie State Generating Station face state law deadlines to cut carbon emissions at the coal-fired plants.

According to a 2022 final report, Prairie State’s CCS plans would require a 15-mile pipeline to be built near the coal-powered facility in Marissa.

Kennerley at the Center for International Environmental Law noted there are technical problems across the carbon capture process, including “problems during transportation of CO2, where leaks can happen — sometimes it’s pipelines, sometimes it’s ships. There are leakage and safety concerns there.”

Carbon capture wells in Decatur, Illinois, operated by Archer Daniels Midland sprung holes and began to leak last year. The U.S. Environmental Protection Agency accused ADM of violating its EPA permit in September.

A carbon capture law signed by Illinois Gov. JB Pritzker in July created a regulatory framework for CCS projects, including provisions declaring CCS pipelines a public use and setting a 75% threshold for landowner consent.

Carbon capture could help the two coal-fired plants stay open. But Alyssa Harre, vice president of external affairs for Prairie State Generating Company, told The Bond Buyer that the cost estimate from the 2022 study does not include a projected additional $176 million in annual operating and maintenance costs, property and income taxes, insurance costs, or the costs to transport and permanently sequester the carbon dioxide.

“Prairie State and its not-for-profit municipal and cooperative owners cannot bear the substantial costs and risks of building and owning a CO2 capture facility at this time, especially given regulatory uncertainty that comes with a change in the federal administration,” she said.

“We continue to evaluate all potential options to reduce carbon emissions,” she said, including working with a third-party developer to finance, build and operate the project using federal tax incentives.

The fate of CCS projects under the Trump administration remains unclear. But Goehring believes there is a case for carbon capture with or without net zero.

“We thought if carbon footprint is going to be part of the whole conversation, we could… minimize [our plants’] carbon footprint,” he said. “The reasons we started looking at carbon sequestration were to save our power plants and to look at enhanced oil recovery.”