By: Andy Rowell and Lorne Stockman

i) CO2-Rich Gas vi) Gorgon Plods On
ii) Big Oil Jumps on the CCS Bandwagon vii) API Goes All-in on Subsidized CCS
iii) Doubts Set In viii) A New Era, a New CCS Dream
iv) The API Lobby Machine Kicks In ix) Gorgon’s Failure: A Sign of Things to Come
v) Free Public Money x) The Climate Solution Mirage

At the turn of the century, Big Oil faced increasing pressure to respond to the climate crisis. One typical response was BP rebranding itself ‘Beyond Petroleum’. It created a bright yellow and green Helios logo based on a Greek sun god. But the company remained focused, as did the rest of the industry, on new ways to extract oil and gas. The industry’s decade became defined by ultra-deepwater drilling and fracking.

Meanwhile, U.S. oil giant Chevron had started to study how to capture and store the carbon dioxide (CO2) associated with the fossil gas in a giant Australian gas field called Gorgon. It would later be joined in the project by Exxon and Shell.

It had taken the oil industry 25 years to arrive at this point. Although the first Carbon, Capture and Storage (CCS) project had actually gone onstream in 1972, the first international CCS conference had only been held in the Netherlands in 1992. It was not until the late nineties that Australia became a key global advocate of the technology.[1] Not least because some of Australia’s recent big gas finds, Gorgon being one of them, contain a lot of CO2.

CO2-Rich Gas

Although fossil gas is often touted as the clean fossil fuel, it is increasingly associated with large amounts of CO2 found in the reservoir along with the gas. This is a problem, as most of the CO2 must be removed from the gas to meet market requirements. So, gas processing plants are already tasked with separating the CO2 from the gas. Indeed, the first CCS project launched in 1972, was at a gas processing plant in Texas. In most cases though, the separated CO2 is simply vented.

But without CCS, Gorgon’s 14% CO2 content would mark one of Australia’s biggest gas fields as a very dirty source of gas. Chevron was not exactly a climate leader at the time, having commented that “(t)he global community seems to be rushing to fix a problem it doesn’t understand by mandating expensive tools that may not work”.[2]

Big Oil Jumps on the CCS Bandwagon

By the early 2000s, other oil companies were starting to pay attention to CCS. In 2002, Shell issued a glossy 50-page report entitled “Meeting the Energy Challenge”, which outlined how the company planned to meet energy demand for the next 50 years.[3] It contained a small section on what they called “carbon dioxide capture.” The booklet noted that stabilizing carbon dioxide emissions “could take more than a century”.  Shell had already set up a carbon capture team that year, with some of the company’s best technical experts tasked with solving the CCS conundrum.

The goal set by the Shell team was fairly ambitious: “to dramatically cut the cost of capturing and reusing CO2 by 2010.” The report added that the company was “working with governments and environmental organizations to ensure that CO2 stored underground is a safe long-term option.”

Chevron was also getting excited about the prospects for CCS. In 2002, Warner Williams, the then Vice President of Health, Environment and Safety addressed the Sixth Society of Petroleum Engineers Conference in Kuala Lumpur. “We have joined eight other companies in studying the capture and storing of carbon dioxide emissions in geologic formations,” said Williams. He added “As a 19th-century writer put it, ‘A dreamer lives forever … a toiler dies in a day.’ “Right now, our industry is facing a world full of dreamers and hopers; they are counting on us to deliver, and the need is urgent,” said Williams.

The following year, in 2003, the oil company said it saw “CO2 capture and storage (…) as a vital technology to ensure a safe, reliable supply of energy to meet the world’s needs.” But it recognized that the success of the Gorgon project “was subject to technical feasibility studies that are now ongoing.”

Doubts Set In

In 2005, the reality was beginning to bite about how difficult it is to capture and store carbon dioxide safely at scale. EnergyWashington Week reported the reality of capturing CO2 from power stations: “A power plant equipped with a CCS system (with access to geological or ocean storage) would need roughly 10 to 40 percent more energy than a plant of equivalent output without CCS.”[4]

The idea of having to use more energy, which in turn produces more CO2 in order to reduce CO2 seemed counter intuitive to many. Indeed, a panel of experts, financed by the German Federal Ministry of the Environment examined the potential costs of CCS in 2006 and found “no direct cost advantage for technologies using fossil fuels is recognizable compared to advanced renewable energy technologies”.

And then came the Gorgon project’s first red flag. In June 2006, the Australian Environmental Protection Agency recommended that the project should not proceed based on potential environmental risks. It was overruled.

The API Lobby Machine Kicks In

In 2006, the oil industry’s largest lobby machine began a renewed CCS campaign. The American Petroleum Institute (API) launched its own Climate Challenge brochure which touted CCS. But it let slip one of the main reasons the industry was interested in the technology: not to save the climate, but to help extract more oil and gas.

“Injected carbon dioxide helps enhance oil production by chemically modifying the oil, which reduces friction against the rock and increases oil flow.” As a means of increasing oil production, CCS became more clearly than ever the antithesis of a climate solution. This was not lost on the experts. That same year, Platts Energy Economist reported that “there are major doubts about the viability and desirability of CCS.”[5]

Although the API launched a working group to look at the benefits of CCS in 2007[6], there were also warning signs coming from its own consultants. Buried in a technical report, one consultant warned: “Some estimates suggest that the amount of infrastructure necessary to perform geologic storage on a meaningful level is equivalent to the existing worldwide infrastructure associated with current oil and gas production” (our emphasis added). Once again a warning sign about the impossibility of CCS becoming a practical solution at the scale needed. That same year, 2007, BP scrapped a GBP500 million Scottish carbon capture scheme.

None of these problems stopped the API pushing CCS as a solution. Two years later, in 2008, the API was among a “coalition of environmentalists, industry and state regulators” lobbying the EPA over CCS, arguing for state flexibility in siting and monitoring the underground storage of CO2.[7] The API was also lobbying to “resolve” liability issues for CCS.[8] The health and safety risks of a major CO2 leak for communities are severe. That is why the Australian Government – not the oil companies – accepted the liability for Gorgon project.

By 2008, some six years after the formation of its CCS division, the reality was beginning to bite at Shell. That same year, the New Scientist reported that: “The energy company Shell, though enthusiastic about the technology, doesn’t foresee CCS being in widespread use until 2050.” [9]

If Shell’s projections were correct, CCS would be too late to have any meaningful impact on emissions in the time scale required. But this did not stop the U.S. oil industry, with the help of the API, succeeding in turning CCS into a money spinner.

Free Public Money

2008 saw Congress first pass a tax credit, known as 45Q, that pays companies to capture CO2. As InsideClimateNews reported, due to the tax credits, “Exxon was presented with another way to make money from the technology. The massive amounts of carbon dioxide captured at its Wyoming facility put the oil and gas giant in a position to claim more credits under the tax break than any other company.”[10] If successful, Exxon could potentially capture enough carbon dioxide to claim up to $70 million a year.

With the prospect of lucrative tax credits, you can see why the industry pushed the technology. The following year, 2009, Shell produced a glossy video on CCS in which it talked about the Gorgon project having the potential to store 3 million tons a year.

The video was called “CCS – A bridge to a low carbon future”.  The video quoted Robert Socolow from Princeton University saying: “how do we reduce the amount of carbon dioxide into the atmosphere? Either by “burning less oil and gas” or by “renewables” or by adding something to the fossil fuel system, so carbon dioxide doesn’t go to the atmosphere.” You can probably guess which was the oil industry’s preference. Especially when there’s free public money to support it.

“Beware of the scale!”

And still the warnings kept coming. In October 2009, the Edmonton Journal ran an article on Burying CO2 fix or folly. Quoting Vaclav Smil, an energy expert at the University of Manitoba, Smil declared “carbon sequestration is irresponsibly portrayed as an imminently useful option for solving the challenge (of global warming).”

“Beware of the scale,” he said. “Sequestering a mere 1/10 of today’s global CO2 emissions (about three billion tons) would thus call for putting in place an industry that would have to force underground every year the volume of compressed gas larger than or …equal to the volume of crude oil extracted globally by the petroleum industry whose infrastructures and capacities have been put in place over a century of development.”[11]

Ironically, Smil was repeating what the industry already knew – that massive investment in infrastructure is necessary for CCS to make even a small dent in global emissions. Few industries are more adept at getting governments to subsidize and de-risk its investments than the oil industry. And in CCS, it sees a massive opportunity, whether it succeeds or not.

Smil was not the only one concerned. Six months later, the Guardian newspaper reported that “A new research paper from American academics is threatening to blow a hole in growing political support for carbon capture and storage as a weapon in the fight against global warming”. The document from Houston University concluded that CCS “is not a practical means to provide any substantive reduction in CO2 emissions.”[12] The API was not surprisingly among many groups to issue a rebuttal to the paper.

Gorgon Plods On

Meanwhile, the Gorgon Project was slowly making progress. By October 2010, all necessary permits and approvals had been received. And two years later, in 2012, Australia’s energy minister Martin Ferguson, announced that the Gorgon project was still on track for CO2 injection to start in 2015.

A decade on from the formation of Shell’s CCS unit in 2002, the company’s thinking had evolved. The company’s website in 2012 predicted that “Fossil fuels will continue to provide the bulk of energy for the next decades. So, developing ways to capture and store the CO2 that comes from burning them is essential to help avert serious climate change. Carbon capture and storage (CCS) is currently the only technology available to mitigate emissions from large-scale fossil fuel use.”

So, the company was dismissing renewables, and betting big that CCS would enable business as usual for oil and gas. This meant that a lot was riding on Big Oil’s flagship project: Gorgon. On its website Shell stated: “Once injection operations are at full capacity in 2015, 3-4 million tonnes a year of naturally occurring CO2 produced with the natural gas will be captured and injected into a deep sandstone formation around 2.5 kilometers beneath the island. Gorgon is the world’s largest CCS project.”

API Goes All-in on Subsidized CCS

The following year, 2013, would see the API take on the EPA as it grappled with CCS regulation and waste streams. The API was worried that as the EPA looked to regulate CCS it might inadvertently impair the use of CO2 in enhanced oil recovery (EOR) operations.[13] Clearly, API’s interest centers around one thing, drilling for more oil.

The following year, 2014, the API sued the EPA along with other groups.[14] Once again its priorities were obvious. Greenwire reported that the API’s “interest, however, is only tangentially related to the rule at issue. Carbon dioxide streams are also used in enhanced oil recovery, where they are injected into wells in order to help them produce more oil.”[15] In 2015, the industry challenge to the rule was rejected.[16]

The API was by now spinning the benefits of CCS at the same time as continuing to fund the world’s largest PR company, Edleman to spout climate denial. In a report published in September 2015, the API portrayed CCS as going mainstream and boasted that there were now 200 active or planned projects. The trouble is most of these never materialized.

But despite the hype, progress remained glacially slow, especially at Gorgon. In 2016, a year after the CCS project’s start date, Shell’s website was still silent about the fact that the project had yet to start.

Despite these warning signs, 2016 saw a new push in the US Congress to expand the 45Q tax credits for CCS with a bill that had “support from fossil fuel industries”, according to InsideClimateNews. Although the bill would eventually fail, Exxon lobbied for the legislation, and its political action committee gave donations to the key politicians pushing for the tax credits.

In February 2018, though, a reformed 45Q was introduced by then President Donald Trump as part of the Bipartisan Budget Act. In light of this, the Treasury issued a consultation process on what actually was considered “secure geological storage”. To lobby on these and other issues, Exxon joined a new lobby group, entitled Energy Advance Center. Its submission to the Treasury argued that CO2 used in EOR operations should be considered “disposed of by the taxpayer in secure geological storage”.

By 2020, InsideClimate reported that as officials at the Treasury Department and the IRS finalized a proposed rule for the expanded tax credits on CCS, the oil and gas industry launched a final lobbying push to get the most lucrative tax breaks with limited oversight.

Late last year, the API pushed for 45Q tax credits to be expanded, a theme it returned to on March 25 this year, launching its so-called Climate Action Framework. The lobby group argued that “API supports federal policies to achieve the “at-scale phase” of CCUS commercial deployment … This includes extending and expanding the 45Q tax credit and permitting reforms to streamline CO2 infrastructure development.”

With uncanny timing, the Framework was launched the same day that, according to the Columbia Climate School, “a group of senators led by Tina Smith (D-MN) and Shelley Moore Capito (R-WV) introduced the 45Q Carbon Capture, Utilization, and Storage Tax Credit Amendments Act of 2021, a crucial bipartisan piece of legislation that provides amendments to the 45Q tax credit. This amendment seeks to boost project financing and scaling of CCUS projects in the United States.”

A New Era, a New CCS Dream

As Biden replaced Trump, a new front opened in the U.S. industry’s push for CCS subsidies. In May, Bloomberg Green reported that “U.S. LNG developers seeking to burnish their green credentials and boost their competitiveness on a crowded global stage are touting a costly and largely untested technology: carbon capture.”

The move, said Bloomberg Green, “comes as the industry works to clean up its image and bring a dozen stalled (LNG) projects into development by landing contracts with environmentally conscious buyers in Europe and elsewhere.”

But as one Houston energy economist put it, “The question is, ‘(i)s anybody ready to pay for it?’ (…) The only way that is going to happen is if there is a direct subsidy to these carbon capture projects, or a price placed on carbon emissions.”

Gorgon’s Failure: A Sign of Things to Come

Meanwhile, over twenty years after Chevron first touted its Gorgon project, it remains bedeviled by problems.  Despite receiving A$60 million of taxpayers’ money, it was nearly three years after gas was first extracted before the first CO2 injection occurred on August 6th, 2019.

By this time, Australian government data showed that due to the technical problems, Gorgon emitted over 7.7 million tons of CO2 in 2016-17, wiping out all the savings made by rooftop solar across Australia in the same period.

This led Western Australia’s Environmental Protection Authority to conclude that Chevron should be held accountable for venting gas from the Gorgon project, arguing that due to the two-year delay in storing emissions, Chevron was likely to fail to meet the requirement to capture and store at least 80% of the project’s emissions.[17]

But after all the delays, Chevron hoped the project was back on track. It promised that the project would be “full speed in 2020”. The new dawn for CCS was just over the horizon.[18]

But that didn’t happen. Just as the API was lobbying for further tax breaks in the US, the Australian press reported further problems at Gorgon: “Greenhouse gas emissions from Chevron’s Gorgon LNG project will increase after the safety regulator curtailed burial of carbon dioxide as wells to control underground pressure are not working,” reported the Boiling Cold website.

It continued “The ongoing problems revealed by Boiling Cold will add to concerns about how easily and quickly CCS can be deployed more widely.” Indeed the problems were so bad that The Conservation Council of West Australia said Chevron should be forced to shut the plant down until it can demonstrate its CCS was working. The council’s director, Piers Verstegen, was quoted saying the project had been “a disaster from the beginning”.

The Climate Solution Mirage

And that’s the problem with CCS. It is a climate solution mirage. An analysis by the Tyndall Centre found that the 28 CCS facilities currently operating globally only have the capacity to capture 0.1% of fossil fuel emissions, or 37 megatons of CO2 annually.

But even that is a false picture. Firstly, that includes the Gorgon project, representing over 10% of that global capacity. Gorgon has never, and is unlikely to ever, operate at its nameplate capacity of 4 million tons per year. Second, of that stated global capacity, just 19 percent, or 7 megatons, is captured for actual geological sequestration. And again, 4 megatons of that is supposed to happen at Gorgon. The great majority of what is captured globally is actually being used for EOR to produce more oil, which leads to more carbon dioxide, escalating climate change.

The dream to produce CCS at the scale needed to avoid climate crisis remains just a dream and a distraction. In the words of Senator McKim, Deputy Leader of the Australian Greens in the Senate: “You have to ask yourself, who in their right mind would think it’s cheaper to dig up a fossil, set it on fire, try to capture the emissions and bury it – rather than just whacking up some solar panels?”[19] It is as far removed from reality as it was when Warner Williams from Chevron told a room of Petroleum Engineers “A dreamer lives forever … a toiler dies in a day.’

CCS remains the strategy of an industry striving to survive by delaying action on climate change. Despite billions of dollars of investment and tens of millions in subsidy, the industry’s flagship CCS project, Gorgon, is a failure. And now the industry wants more tax breaks for false solutions. Five decades on from the first CCS project, the technology remains riddled with problems, unproven at scale, and not fit for purpose. It is beyond time to focus on the real solutions to the climate crisis and injustice that the fossil fuel industry has wrought. Neither CO2-rich gas or LNG, with or without CCS, qualify.

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End Notes

[1] The Age (Melbourne, Australia), “What is carbon capture and storage (and does it work)”? Online, January 25, 2021

[2] Chevron Website, Important Questions About the Climate Change Issue, Kyoto Protocol. 2000.

[3] Shell, Meeting the Energy Challenge, The Shell Report 2002, Royal Dutch Petroleum Company and Shell Transport and Trading Company, 2002.

[4] EnergyWashington Week, “International Panel Finds Carbon Sequestration Has High Price Tag”, October 12, 2005

[5] Platts Energy Economist, “Carbon Capture and Storage: panacea or an expensive red herring?; Proposals to include Carbon Capture and Storage in the Kyoto Protocol’s Clean Development Mechanism will be discussed at UN Climate Change talks in Nairobi on November 6-17”. November 1, 2006

[6] Carbon Control News, “Industry Favours EPA Rather than States’ Rules for CO2 Storage”, October 1, 2007

[7] Water Policy Report, “Coalition Urges State Flexibility in Upcoming Carbon Storage Rule”, March 31, 2008

[8] EnergyWashington Week, “Big Oil Seeks Quick Resolution On Carbon Storage And Pipeline Liability”, July 8, 2008

[9] New Scientist, “Let’s bury coal’s carbon problem; If we could capture carbon dioxide and store it underground we would slow global warming, so why is progress so slow?”, March 29, 2008

[10] Inside Climate News, “Exxon Touts Carbon Capture as a Climate Fix, but Uses It to Maximize Profit and Keep Oil Flowing”, September 27, 2020

[11] Edmonton Journal (Alberta), “Burying CO2: Fix or folly?”, October 4, 2009

[12] The Guardian, “US paper raises doubts over viability of carbon capture,” April 26, 2010

[13] Greenwire, “Carbon Capture: EPA aims to clarify rules for CO2 use in oil recovery”, December 20, 2013

[14] Carbon Control News, “EPA Defends Narrow Scope Of CCS Waiver In Bid To Dismiss Industry Suit”, November 10, 2014

[15] Greenwire, “Climate: Skeptical judges question industry assault on EPA’s carbon capture rule,” March 26, 2015

[16] Greenwire, “Climate: Judges deny industry challenge of EPA carbon capture rule”, June 2, 2015

[17] International Oil Daily, “Chevron Faulted for Gorgon Emissions”, September 30, 2019

[18] Peter Ker, “Chevron says Gorgon to capture carbon at full speed in 2020,” AFR Online, November 19, 2019

[19] The Age (Melbourne, Australia) “What is carbon capture and storage (and does it work)”? Online. January 25, 2021