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Big Oil Investing in Carbon Dioxide Pipeline, Not for Fracking But for Carbon Credits?

Oil magnate Harold Hamm of Continental Resources and the Iowa organizers of Summit Carbon Solutions say they do not plan to use the proposed Midwest Carbon Express pipeline’s carbon dioxide to frack for more oil in North Dakota. Yet Hamm is giving Summit $250 million to build its CO2 pipeline:

In an interview, Harold Hamm, the founder of Continental Resources said the storage area in Mercer and Oliver counties west of Bismarck, is an “ideal place” for carbon storage, a key component of North Dakota’s goal to be carbon neutral by 2030.

“We believe that this is the right thing to do for the right reasons, for the environment, for ag, for industry, for the country, and that’s why we’re here,” Hamm said [Jeff Beach, “Continental Resources Ventures into Carbon Capture with 5-State Ethanol Project,” Agweek, 2022.03.02].

Summit’s permitting chief Chris Hill says piping carbon dioxide from their 31 partner ethanol plants into the Bakken oil fields to bubble up more crude would break their business model, which depends on permanent storage of CO2, not the production of more carboniferous fuels:

Summit is banking on a federal tax credit of $50 for every ton of carbon dioxide stored. Summit says it will be capable ofstoring 12 millions tons of liquid carbon dioxide per year.

While there is a federal tax credit for using carbon dioxide in enhanced oil recovery, it drops to $35 per ton.

On top of that, Hill said using the carbon dioxide for enhanced oil recovery jeopardizes Summit’s plan for its other major source of revenue — taking a percentage of the premium price that ethanol plants would get from selling fuel on the low-carbon market.

Summit says it isn’t asking for any of the ethanol plants to help pay for the pipeline project, instead counting on markets such as California with low-carbon fuel standards to provide demand for low-carbon fuel.

With enhanced oil recovery “they wouldn’t give these ethanol plants credits,” Hill says [Jeff Beach, “Carbon Pipeline Headed for North Dakota Oil Wells? Summit Says ‘No’ But Skeptics Remain,” Agweek, 2022.02.28].

President Biden has proposed increasing those tax credits to $85 a ton for carbon capture and sequestration and $60 for enhanced oil recovery.

Hamm’s investment will help Summit raise money from other investors. Hamm’s money will also make it easier for Summit to not ask its ethanol plant partners to contribute to pipeline construction costs; instead of buying in with cash upfront, the ethanol plants are agreeing to give Summit a piece of the action they’ll get when they can sell their corn liquor to drivers in California.

But even if the ethanol plants’ CO2 doesn’t end up in Hamm’s oil-producing fields, North Dakota Governor Doug Burgum says carbon sequestration could extend the profit-making life of the Bakken:

It will not hurt the oil and gas industry, either, Burgum has said, if it can sequester enough carbon dioxide emissions to make Bakken barrels neutral, or even net negative. And, too, projects like the hydrogen hub at Beulah, which will use sequestration to decarbonize hydrogen fuel creates a long-term use for the Bakken’s ever growing supply of natural gas even in a low-carbon world.

Joining the carbon sequestration bandwagon adds life to the Bakken play. That will be true on both the North Dakota and Montana side, both of which sit on an oil reserve that remains largely untapped. Present-day technology is only mining 10 to 15 percent of the available oil and gas supply [René Jean, “Continental Resources Has a New Code It Wants to Crack—Carbon Sequestration,” Williston Herald, 2022.03.02].

So it appears Hamm’s play isn’t about acquiring carbon dioxide for direct use in fracking. It’s about acquiring a stake in carbon sequestration that will generate credits to offset the carbon emissions from ongoing oil production.

3 Comments

  1. Mark Anderson 2022-03-03 17:38

    Hamm’s was never really a good beer, but they had great commercials when I was a kid. This Hamm’s need to step up and promote himself. From the land of sky blue waters to the land of sky burning brightly or your Bakkons frying slightly. Who knows what they will come up with?

  2. Richard Schriever 2022-03-04 12:31

    Another FWIW heads up. Mercer and Oliver counties in ND are NOT in the Bakken formation. They are the locations of – in fact the heart of – the coal mining operations in ND.

  3. Donald Pay 2022-03-04 15:23

    Richard is correct. That is coal country, but they used to have some natural gas wells. Not sure if the gas wells still operate there. It was interesting because the ranchers who had natural gas wells were opposed to coal mining, which was just on the verge of booming when I lived in Mandan in 1981. I was involved with folks who opposed the coal mining.

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