11/22/2024

Texas Carbon Storage Projects Are In Flux As Trump Promises Federal Budget Cuts

Houston Chronicle | James Osborne | Nov. 20, 2024

Texas Carbon Storage Projects Are In Flux As Trump Promises Federal Budget Cuts

Off the coast of Texas, geologists are scanning the sea floor for what they hope will be the next big thing in energy development — undersea storage sites for carbon dioxide emissions.

But first, developers must convince President-elect Donald Trump, a noted climate change skeptic, to support a technology reliant on tax incentives that could cost the federal government billions of dollars a year by 2030.

Companies including Exxon Mobil, BP and Chevron, which are already in the early stages of developing carbon storage projects in the Gulf of Mexico, are lobbying for Trump to continue an $85 per ton tax credit for carbon storage signed into law in 2022 by the Biden administration. 

"These are important projects to decarbonize our industries and make our products more attractive. Regardless of what people in this country think of climate change, the world does take (carbon intensity) into consideration," said Alex Tiller, CEO of Carbonvert, a carbon storage developer with projects off the coast of Corpus Christi and western Louisiana. "I think this is an area where he might not take a sledgehammer to the incentive structure."

The Trump transition team declined to comment for this story. Some in Washington are unsure that Trump will continue to support a technology that has struggled to gain commercial traction after more than 15 years of federal support. 

The oil companies developing carbon storage in the Gulf are among Trump's largest donors, but the president-elect is also under pressure to rein in spending.

"It may mean if a cow isn't sacred, it gets slaughtered," said Bob McNally, president of the Rapidan Group, a Washington consulting firm. "I don't think (carbon capture and storage) is as sacred to Republicans and the oil industry as other cows, so to speak."

The initial cost of the tax credit is fairly low. The Joint Taxation Committee estimates the cost of the carbon capture and storage tax credit at only $50 million a year through 2026. But the Department of Treasury forecasts that interest in the tax credit could jump in the latter half of the decade, with an estimated cost of $30.3 billion through 2032

Only a handful of carbon storage projects are up and running in the United States. And questions continue to hang over the security of carbon storage technology, raising opposition from environmentalists who view carbon storage as a tactic by oil and gas companies to delay their own demise.

Last month, the agriculture conglomerate Archer Daniels Midland announced it was temporarily shutting down a carbon storage site in Illinois after discovering carbon dioxide was leaking from underground. Now environmentalists are pressuring the Environmental Protection Agency to hold up the permitting of new projects until more data is gathered.

"There haven’t been a lot of long term (carbon) storage projects in the world," said Virginia Palacios, executive director of the Austin-based non-profit Commission Shift. "This is material that’s supposed to be underground for thousands of years."

Texas, and Houston in particular, are betting big on carbon capture and storage, hoping the technology will help clean up the state's oil and gas sector at a time governments worldwide are moving to reduce greenhouse gas emissions before the worst consequences of climate change are felt.

There has been no end of announcements, with Exxon buying up the rights to store carbon across 271,000-acres under the Gulf of Mexico last month, and Chevron, TotalEnergies and Equinor working to develop a 140,000 acre site along the East Texas coastline.

So far, progress in getting carbon capture and storage operations up and running has been slow going, amid a backlog in permitting applications at the Environmental Protection Agency as the agency tries to get up to speed on a new technology. And rising construction costs have increased questions around the technology's economic viability. 

Carbon capture developers are hoping to get the permitting process moving faster under the Trump administration. Lee Zeldin, Trump's pick to head the EPA, sponsored legislation when he was in Congress to allow carbon storage facilities to issue tax-exempt bonds. 

"Permitting delays crept into the process, and made investment much less likely," said Charles McConnell, executive director at the University of Houston's Center for Carbon Management in Energy. "The problem is the Biden administration in put a much of money out there, but let the EPA sit on their hands."