Steve Melzer Presentation

NARO Texas Outline

7-12-24: 11:00-11:50

The Two Very Different Types of Geologic CO₂ Storage: Implications for Mineral Valuations

1. Big Incentives for Emissions Capture, the Emission Sources, & the Two Capture Drivers: Taxes vs. Incentives
2. Economic and Environmental Sustainability; Two Competing Imperatives?
3. Who Regulates All of This?
4. CCS & CCUS, Big Projects and Capital: Key Factors on Where to Put the Captured CO2?
5. What are the Permanent Storage Analogs?
6. What are the Storage Risks?
7. What Roles do Storage and Mineral Rights Play?
8. What is Incidental Storage?
9. Big Projects, Huge Volumetrics & Dollars Involved
10. Valuation Affects? The Mineral and Storage Rights ‘Skirmish’
11. Summary and Who is Best to Permit Storage Sites?

Abstract

It is a widely accepted belief that capture and geologic storage of industrial emissions is a looming threat to mineral estates.  Wrapped up in the concerns is the use (condemnation) of geological pore space to permanently store the surface captured carbon dioxide (CO₂) thereby preempting any future removal of valued minerals. This is especially true in rich oil and gas mineral areas like most of the State of Texas.

            But planning over the past 15 years carefully considered this concern and the formulation of the coming incentives for carbon emission capture took this worry into account.  These incentives, now in place and called 45Q, have taken on a life of their own to encourage new facilities and retrofits to industrial plants to capture their emissions and thereby avoid what could be become obstacles to the sale of their products such as fertilizer, ethanol, electricity and many more.

            What to do with the captured emissions can be grouped into two categories.  One is injection into the earth’s reservoirs as a waste product (commonly referred to as sequestration or, alternatively, utilize the captured CO₂ to make a second product.  Work is underway to find new uses of CO₂ such as in concrete, enhancing yields of biological products, etc.  But all of these are dwarfed by the potential utilization of CO₂ to enhance the production of oil like has been underway for 50 years.  This process is called CO₂ Enhanced Oil Recovery (EOR) and this process has produced over 3 billion barrels of oil while incidentally storing over a ton of CO₂ for every barrel produced. 

So how does this CO₂ EOR process work?  The sourced CO₂ is injected in injection wells and a portion returns to the surface with the produced oil, is recaptured, recompressed and returned to make more oil in a closed loop system. Throughout the 50 years of EOR, the process has always been designed to minimize the volumes injected and stored since the CO₂ was very expensive.  Today, the CO₂ is becoming available in large quantities and now the EOR projects are now being designed to better optimize the storage of CO₂ along with the production of oil.  These new projects are often even economic when the produced, ultimately combusted, oil released CO₂ to the atmosphere is less than the incidentally stored CO₂ used in producing it.

I will be reviewing these ideas and the approaches to mineral estate enhancements at the coming National Association of Royalty Owners (NARO Texas) meeting in Austin on Friday, July 12th.  Some examples of the EOR (with incidental storage) projects coming to Texas will also be included.  For more information and the full agenda see https://www.naro-us.org/event-5655135