The Carbon Corner - Issue #4

Our fourth issue of the Carbon Corner drops today, and we have a doozy for you. On Friday, the DOE announced a seven billion dollars ($7B!) planned investment in Carbon Capture projects, marking the most significant global commitment to the space in history.

It’s a lot to unpack, so let’s dig in…

DOE to invest $7 Billion in Carbon Capture

On September 23, the U.S. Department of Energy (DOE) announced a $7 billion investment in carbon capture, transportation, and storage infrastructure. This investment can be categorized into two main facets: $4.9 billion for CCUS systems at power plants and $2.1 billion for loans and grants for shared transport.

Senator Joe Manchin believes this “$7 billion investment announcement.. is great news for American energy independence and security.” We agree wholeheartedly that this investment will greatly impact the possibilities in this space.

Some investments highlighted in the bill are remarkable both in size and scope of support for the sector:

- $2.54 billion for six integrated carbon capture demonstration projects (carbon capture hubs)

- $100mm for pipeline FEED support

- $2.1 billion in loans and loan guarantees for CO2 transportation infrastructure

- $2.25 billion or development of new commercial-scale carbon dioxide storage projects with an individual capacity of over 50 million tonnes

This announcement may pave the way for interstate pipeline projects to proceed to FID and construction. Funding for these projects has been questioned as the industry awaited improved 45Q subsidies. Debt investors in the nascent sector were keenly awaiting further support for the massive capital investments required to move CO2 from emitter locations to sequestration projects in North Dakota, Illinois, and elsewhere.

We believe this announcement signals a “full steam ahead” for CO2 sequestration megaprojects in the Midwest and Gulf Coast.

CCS heats up the Concrete Sector

Industrial CCS projects are gaining more steam as major carbon dioxide emitters of all stripes join the fray.

This week, the Clean Energy Ministerial CCUS and the Global Cement and Concrete Association have joined together in the effort to operate net zero facilities in the cement sector. The companies have agreed to conduct expert workshops with in-house members, stakeholders, and partners and to produce joint reports outlining progress and opportunity. The team plans to arrange public events that will further the CCS efforts.

By some estimations, global concrete production is responsible for ~6-7% of global anthropogenic CO2 emissions. Mitigating this key source of greenhouse gases is therefore critical and becoming a more salient focus of CCS efforts in the US and abroad.

Participants in the concrete sector are becoming more organized around the need for carbon dioxide emissions mitigation. Discussions are ongoing as to participation in carbon hubs around the US.

QatarEnergy Decarbonization Efforts

You may recall that last week we covered news on a Memorandum of Understanding (MOU) between HMM and PANASIA. This week we bring you similar news of a signing between General Electric (GE) and QatarEnergy. The goal is to develop a plan for Qatar that covers CCS development, hydrogen utilization, and the possible use of ammonia in GE gas turbines.

The project’s first focal point will be at Ras Laffan Industrial City, where GE has more than 80 gas turbines

Coal Industry Fights to Stay Relevant with CCS

North Dakota’s “Coal Country” areas are heavily powered and economically stabilized by using coal for energy. In an effort to salvage jobs and power, Minnkota Power Cooperative has been moving forward with Project Tundra. Project Tundra is a 1.4 billion dollar project that will attempt to capture and store 90% of emissions at Milton R. Young Station, a 700-megawatt powerhouse.

Similar past projects, such as Petra Nova and Boundary Dam, have not achieved a level of success that would support Coal CCS projects. Minnkota’s, however, has been emboldened by the incentives provided in the Inflation Reduction Act.

As stated by Minnkota representative Ben Faldhammer, “At the end of the 12-year [45Q tax credit] period, the project will be paid for, so at that point, we’d have to make an assessment.” Construction of the facility is expected to start in 2023.

Private Equity Doubles Down on CCS

Big news out this week as Quantum Energy Partners ups the ante in the CCS space.

The private equity firm has committed $400 million to Trace Midstream to form Trace Midstream Partners II, LLC and Trace Carbon Solutions, LLC.

Both companies will be headquartered in Houston and focus on developing CCS assets and supporting midstream infrastructures across the United States.

This announcement comes on the heels of other major Private Equity industry commitments, like Encap Flatrock’s similarly sized $350mm investment behind Elysian Carbon Management.

The announcement was unspecific about where Trace would focus efforts for CCS investment; however, their previous midstream businesses were built in North Louisiana and the MidContinent and later sold.

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We await more announcements regarding funding allocations for the DOE investment and critical path permitting announcements for several Class VI and LCFS permanence projects.

Each week seems to pick up more steam in the CCS space, we are excited to see what next week will hold!

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