A proposed carbon-capture system that has the potential to prolong coal-burning plants and reduce emissions is making headway in North Dakota, but not without some controversy.
Minnkota Power Cooperative, one of the main players of the proposed project, is trying to better educate the public and fend off some of the negative assumptions from an Ohio-based think-tank that has called the project misleading, potentially unsustainable, and one that could unnecessarily cause rates to increase for rateholders.
Minnkota officials in a recent meeting with the Herald’s editorial board said some of the criticisms are not correct.
Project Tundra, which has been in the works for a number of years, is an effort headed by Minnkota Power Cooperative, UND’s Energy and Environmental Research Center, North Dakota Industrial Commission and the Lignite Energy Council. It would install a carbon-capture system at Minnkota’s Milton R. Young Station in Center, N.D.
Carbon capture is the process of sequestering CO2 at the source of emission before it’s released into the atmosphere. The proposed $1 billion project would potentially capture more than 90% of the carbon dioxide emissions from coal-burning plants – or the equivalent of taking 600,000 cars off the road, according to information from Minnkota – and be stored indefinitely in rock formations about a mile underground near the facility. Because carbon makes oil rise to the surface quicker, it could also be used for enhanced oil recovery. Not only would capturing waste carbon help prolong the coal industry, which has faced challenges due to natural gas production, but it would be a boon from an environmental standpoint, officials at Minnkota said, because of increasing concerns about air pollution and climate change.
“Our membership believes, and we as a staff believe, that we’re going to live in what we call a carbon-managed future,” said Robert “Mac” McLennan, president and CEO of Minnkota Power Cooperative in Grand Forks. Finding ways to get carbon-free energy while still, as McLennan says, “keeping the lights on” is the challenge.
Fossils fuels will likely continue to play an important role in energy production for “decades or hundreds of years to come,” said Charles Gorecki, chief executive officer of the Energy & Environmental Research Center at the University of North Dakota, “but we have the technology to eliminate the carbon emissions in the atmosphere and that is the thing we’re trying to overcome.”
Money for the project would come from the use of the 45Q Tax Credit that Congress passed, directed at carbon-capture projects, and leveraged with investor dollars such as from the U.S. Department of Energy. The DOE has funded multiple phases of the project, including $9.8 million last year for advanced research and engineering design – steps that Minnkota said must be taken before deciding whether to move forward with construction.
One of the biggest criticisms levied at the project recently, however, has been about its financials. The Institute for Energy Economics and Financial Analysis (IEEFA), based in Lakewood, Ohio, published a report in September saying, among other things, that DOE money is being used to start the project, instead of evaluating whether it is viable in the first place, and that the project “faces significant risks and uncertainties that could undermine its economic viability and lead to higher electric rates for the ratepayers of the cooperatives that buy power from Minnkota or Minnesota Power.”
Minnkota has 11 member cooperatives in North Dakota and Minnesota. In a meeting with the Herald’s editorial board, McLennan said the criticisms are simply not warranted.
“They misrepresent because they don’t understand the details,” he said.
If Project Tundra were to substantially impact electric rates, McLennan said Minnkota would not proceed with the project and that efforts to structure any arrangement is being made to shield member cooperatives from risks.
“It’s not zero or nothing,” he said. “The reason I say that is because if we put a price on carbon ... one of the analyses will be do we put Tundra in from a technology perspective or do we have to build a whole new set of assets because we can’t run our coal plant? Either one of those is going to have a substantial impact on consumers, potentially at that point. … I want to be careful when I say it’s not going to impact our members, what we’re saying is that we’re not taking a billion dollars and putting it on the backs of our members.”
Another criticism from IEEFA was that Project Tundra was based on a similar project near Thompsons, Texas, called Petra Nova, that stalled production in August due to low oil prices. Who’s to say something similar wouldn’t happen to Project Tundra?
That is true, McLennan said. The Texas facility did serve as a model when Project Tundra was first proposed, but time and circumstances have changed and it is not the model now. For one thing, 45Q didn’t exist at the time, he said.
Petra Nova was modeled with expectations that “increased oil production would more than offset the cost for the product,” he said. What happened, however, was that “oil went from $60 or $70 a barrel to $40. … Their model was to use enhanced oil recovery for those additional barrels. … What we’ve done is, because Congress passed 45Q and because we’re not quite ready in North Dakota yet on a large scale basis to do EOR (enhanced oil recovery), we said let’s just use the tax credit element to pay for the technology. … Petra Nova didn’t have 45Q available to use that monetary mechanism.”
He said that’s not to say Project Tundra wouldn’t utilize EOR – the process of using water and gas to drive oil to the surface – after the 12-year tax credit ends, if deemed necessary. But “they modeled theirs on more oil coming out of the ground, we’re modeling ours off of taking advantage of or monetizing the tax credit that Congress passed.”
Minnkota also has, since about 2015, been taking a look at the technology side of the project, McLennan said, such as installing a CO2 scrubber at the Young facility. Apparently, the geology of the area is prime real estate for such tasks.
Gorecki said the EERC and its partners have been studying the interior of certain regions across North America since about 2003, analyzing in several states where the best places would be to safely inject and monitor carbon underground.
North Dakota's geology, Gorecki said, especially on the Williston Basin, “is not only ideal for generating and storing for millions of years oil and gas, but it also has formations filled with salt water that are ideal for storing carbon dioxide – the same types of shales that are preventing the oil and gas from coming to the surface.
“We have characterized those and studied those in the region of the Milton R. Young power facility over the last several years,” he said. “In addition to collecting all of those logs and core data, we’ve also collected 3D seismic surveys, which is effectively like taking an ultrasound of the subsurface, like we would do on a pregnant mother, to see what’s going on inside. … We see that we have great geology for storing carbon dioxide in the region of the Milton R. Young power facility.”
All of the data will be used in the permitting process if North Dakota decides to go ahead with the storage project, he said.
There are still hurdles to overcome before it gets to that point. “There's a very stringent permitting process for us to do this and so we have a lot of work (to do before we) know if we’ll be able to safely store it,” McLennan said.
If built, Project Tundra could be the largest carbon-capture facility in the world.
McLennan said he and his team are trusting the science and are confident in the capture and storage technology of the project. He also said they’ll know better by mid to late 2021 if the project will move forward. A more immediate item is the upcoming presidential election and IRS rules.
“You have clearly two very diverse views about how to manage climate change or CO2 production or greenhouse gases,” McLennan said. “The big unknown is, if we change administrations – and this is not partisan by any means, it's the platforms they put on the table today – I think you’ll see a change from incentive base to a more regulatory base. … I think we could still work our way through that, because we’ll be able to demonstrate that we're still removing a significant amount of CO2 from the atmosphere. What I don’t know is whether or not coal would be allowed to continue to operate going forward, period.”
Discussions are continuing with debt, equity and tax equity partners, he said, noting the final structure would be defined by IRS rules.
“If the IRS, by the end of this year, doesn’t put out rules that are very conducive to figuring out how to get investors, we probably won’t see it go forward,” McLennan said. “If we change administrations and they say to redraft them completely in a way they’re not advantageous, you’re going to have a harder time with the project. ...
“The first test is going to see what happens with the elections. The other will be, can we get a portion or segment of the population comfortable with the idea to take coal out of the ground, take the heating value out of it, generate electricity off of it, and put the CO2 back as a solid form through an industrial process? Those are the landmines I think that are in front of us.”