Business News

Boom or Gloom?

by Jeremy Alford

A different look at cap and trade: President Barack Obama’s greenhouse gas emissions bill could lead to a completely different future for Louisiana’s chemical plants and oil producers. Due chiefly to a proposed emissions-cutting bill that proponents argue could slow global warming, Louisiana’s chemical industry is already exploring ways to capture and transport carbon dioxide. Depending on which way the political wind blows in coming years, the practice of sequestering CO2 could become a profitable and environmentally-friendly venture for some plants — not to mention the oil and gas industry.

That’s because the so-called cap-and-trade system being debated by Congress would establish new emission standards for coal-powered plants, manufacturers and chemical facilities like those in Louisiana. Each entity would get an emissions allowance under the system that would be based on tradable credits. In theory, a coal plant in the northern United States that exceeds its emission limit could buy — for cash — credits from a south Louisiana chemical plant that has cut its carbon dioxide output or is capturing it.

Dan Borne, president of the Louisiana Chemical Association, says his membership is “all over the map” on supporting President Barack Obama’s energy proposal. He says some members view it as a “carbon tax that would increase the cost of business.” For instance, Borne says an oil refinery pumping out 100,000 barrels of crude daily would potentially have to make upwards to $300 million in changes to make the system work.

Borne adds that he’s also concerned about the lack of incentives for natural gas exploration, since there’s a high likelihood that would increase demand. Still, petrochemical companies in Louisiana would likely be paid by coal producers and others to capture carbon dioxide under the proposed legislation, which would in turn create jobs for industrial manufacturers on the local level, Borne admits. “There are a lot of different ways to connect the dots, and that’s why some manufacturers are for it,” he says. “There are a lot of moving pieces to this. We’re trying to watch them all. You’re either at the table or on the menu. And our membership wants to be at the table.”

This line of thought that Louisiana plants could benefit from cap-and-trade has been buoyed recently by Dow Chemical’s Plaquemine plant, which will capture CO2 so it can later be used by an oil producer in Texas. Dow’s new relationship with Denbury Onshore was announced last week.

Officials with Dow say the arrangement to ship off their carbon emission made sense on a number of levels. “Dow has publicly stated that by 2015, we will reduce GHG emissions by 2.5 percent per year per pound of product,” says Dave Kepler, Dow chief sustainability officer. “This is the kind of technology and collaboration it will take to continue to make progress against our sustainability scorecard.”

By-product CO2 from Dow’s Plaquemine plant will be shipped via pipeline for use in Denbury’s enhanced oil recovery operations. This process calls for CO2 to be pumped into the ground, from where it pushes up oil that’s been left over by previous, traditional operations.

Earlier this year, the Louisiana Legislature passed a set of tax breaks for companies using CO2-enhanced exploration. Even though the trend seems to be picking up, Natural Resources Secretary Scott Angelle says that he knows of no other incentives that might be introduced in next year’s regular session.

The “green pipeline,” as Denbury calls it, will transport the CO2 stream 320 miles when it’s finished sometime next year. It’s projected to run from Donaldsonville, through Plaquemine and then to the Hastings Oil Field, south of Houston.

Borne says the pipeline is still looking for other plants to hook up with and Dow’s involvement may be just the beginning, especially if the political prospects for cap-and-trade begin to gain momentum. “I think anything that puts a value on CO2 and that can reduce your footprint is a great thing, and a lot of folks are already looking into that in anticipation of greenhouse gas legislation passing sooner or later,” Borne says. “Anything that can mitigate that cost of cap and trade and the other taxes the Obama administration is pushing is something that our members are looking at.”

Jeremy Alford can be reached at [email protected] .