Ethanol's Carbon Underground

Positioning into the low-carbon biofuels marketplace, ethanol producers are moving forward with sequestration strategies. A more lucrative federal tax credit, along with a reduced minimum production requirement, is making the economics attractive.
By Luke Geiver | June 11, 2020

After more than 20 years of research, sponsored largely by the U.S. Department of Energy, the practice of carbon capture and storage (CCS) is poised to become a self-sustaining commercial industry. “The CCS industry in the U.S. is at a turning point,” says Andrew Duguid, senior engineer and CCS expert at Battelle Memorial Institute, a national research and development laboratory that has been a leading player in developing CCS options for two decades.

Since the 90’s, Battelle researchers have explored the potential of deep geologic formations—more than one mile below the surface—for storing CO2 produced from power plants, petrochemical facilities, biofuel production plants and other industrial sources. Deep saline or saltwater formations, depleted oilfields, coal seams or other geologic layers below the surface with voids are all “very promising,” and offer a realistic long-term option for carbon management, Battelle’s team believes.

In 2018, federal carbon storage and utilization tax credits were revamped to further incentivize the use of new technology in conjunction with CO2 producers. The new 45Q tax credit provides a credit of $60 per ton of CO2 captured and stored. The previous version of the credit only provided $20, or less, per metric ton. The new tax credit also reduces the amount of CO2 that must be produced and captured from a facility in order to receive the credits. The new version sets the minimum at 100,000 metric tons instead of 500,000 metric tons.

The promise of CCS as an industry is not just linked to new tax credits or better technology. CO2 volumes across the ethanol industry paint a clear picture of the potential for major CO2 capture, storage and usage. A 2018 study by Lawrence Livermore National Laboratory revealed that 200 existing biorefineries produce nearly 45 million metric tons annually. Researchers looking into the economic viability of CCS found that roughly 60 percent of current CO2 emissions could be captured for less than $25 per metric ton.

According to Duguid, there is now a market for high-purity CO2 sources to take on projects without the need for government research funding. “Ethanol plants and other high-purity CO2 sources are now in the screening and planning phases for projects.”

CCS Ethanol Projects
Near Decatur, Illinois, Archer Daniels Midland has provided an example of a successful CCS project linked to ethanol production. ADM is currently injecting roughly 1 million metric tons of CO2 per year. The project has a U.S. Environmental Protection Agency approved Class VI CO2 injection permit—the main regulatory requirement for all CCS projects—and serves as an example of what other plants may expect to do as they implement their own systems.

In North Dakota, Red Trail Energy LLC announced in March that it was commencing with its own CCS project. Red Trail obtained the permits for a Class VI injection well used to sequester CO2 produced from the plant. A drill pad has been constructed and the process of drilling the injection well began in late April. According to Red Trail, its CCS project will enable the facility to store CO2 underground before selling the product to states with low-carbon fuel standards like California or others in the Pacific Northwest. Gerald Bachmeier, Red Trail’s CEO, said the ability to capture, store and later sell carbon produced at the North Dakota ethanol facility will improve the company’s long-term financial viability.

Also this year, the DOE’s Department of Fossil Energy awarded roughly $18 million to The Board of Trustees of the University of Illinois to characterize and obtain Class VI permits that will be used to construct two sites. Carbon storage sites will be built near two locations in the state: the One Earth Energy LLC ethanol facility and Prairie State Generating Co. The sites will store a combined 6.5 million metric tons of CO2 captured annually, according to the DOE. One Earth Energy will go through a CCS assessment first, while Prairie State Generating will continue its study to determine the effectiveness of a capture system designed by Mitsubishi.

Duguid and his team have developed a full suite of CCS-related services that can help ethanol producers take on a project from start to finish. “We have built an understanding of every aspect of implementing CCS projects from screening through project operations,” he says, adding that his team can help reduce risk, help projects work in several economic conditions and in some cases, find investors or end-users for captured and stored carbon. He also stresses that the expertise of Battelle and the promise of CO2 CCS does have a limit: CCS projects looking to claim 45Q tax credits have a Dec. 31, 2023 construction deadline.

Getting Started
Battelle features a group of geoscientists and engineering experts that have worked for decades designing or managing carbon capture, utilization or storage programs related to saline storage or carbon dioxide-enhanced oil recovery. A typical offering is phased, starting with screening for CCS storage possibilities, followed by design, construction, permitting, operations, post injection monitoring and finally decommissioning possibilities. Geology near the plant makes each project different Duguid says, but no matter the locale, each process in the project is designed to reduce uncertainty while minimizing risk.

Plants do need to consider their long-term operations and outlook with respect to CO2 production, Duguid says. If a plant intends to expand within the timeframe covered by the collection of credits (12 years from commencement of injection), plant operators should consider modeling subsurface storage volumes as they may happen throughout the life of the project.

Battelle offers different solutions based on the plant’s needs. “We have some clients that will need a full-service solution that includes the development of the project, finding investment partners, construction, injection, monitoring and reporting,” Duguid says. “Other clients prefer only some of these because they may be fully funded or plan to do their own injection, monitoring and reporting.”

In addition to the requirement of capturing at least 100,000 metric tons per year of CO2, projects must meet the EPA’s underground injection control program permit requirements. This includes having an approved monitoring, reporting and verification plan, and for those taking advantage of California’s low-carbon fuel standard, meeting the CO2 storage permanence requirements.

Because Battelle has worked on CCS projects during the research and development stages all the way through the commercialization process, the team is confident with every aspect of a project. And, Duguid says, the industry can now move forward with confidence, knowing that projects can happen, markets are open and CO2 end users and investors are primed and ready to link up with ethanol producers. “Our experience has allowed Battelle to pivot from research,” he says, “to commercial offerings that serve the ethanol industry.”

Author: Luke Geiver
Ethanol Producer Magazine
701.738.4944
lgeiver@bbiinternational.com