The Octopus of the Red River flexes its arms again, and that’s one reason why anti-carbon capture and sequestration efforts, as well as attempts to rein in the Port of Caddo-Bossier that have been blunted, in Louisiana seem destined to fail.
Over the years, fueled by a property tax, the Port has built up a considerable kitty, as well as increased powers the envy of governments whose elected officials actually face elections. Most prominently, the Port’s Board of Commissioners, all appointees of various local governments, can make economic development deals involving tax abatements anywhere within the two parishes that override the desires of the elected (and in some cases appointed) officials of the local governments involved.
But that power spreads even further. Recently, a Louisiana House of Representatives panel defeated an attempt to deny the use of eminent domain for CCS purposes. Given that the practice carries at best microscopic environmental or economic benefits and is driven solely by federal government subsidization through tax credits that becomes economically viable at vastly expanded scale only as part of an artificially-constructed market for carbon reduction credits, yet is full of question marks for safety and environmental degradation at vastly expanded scale, taking away the ability to force CCS on property owners made sense.
However, redistributive politics triumphed. This widget-making scam works like this: the federal government, if you do this in mass quantities and pay the “prevailing wage” – which needlessly increases project costs – and follow apprenticeship rules, pays in the form of a credit against income tax $60 a ton if used for enhanced oil recovery, $85 a ton if geologically stored, and $180 a ton if captured directly from (otherwise) emission into the air. Further, the credit obtained may be sold for cash, typically in the global marketplace where a number of states force onerous carbon-reduction mandates onto emitters who can use the credits to meet these legal requirements (termed “compliance” credits, as opposed to “voluntary” credits).
But even with these rules, the economics are poor. Currently, direct air capture costs at a typical minimum of $400 per ton (and as high as $1,000) and in fact even with an enormous rollout of capacity of 700 times current DAC, it is unlikely to go below half that minimum figure. Thus, additional sources of income from capture have to come into play to be economically viable: you not only have to capture it to grab the insufficient tax break, you have to collect further by dealing with it in some fashion.
Presently, EOR is the means, as almost 80 percent captured ends up with this use, which, although the credit is relatively small, can prove profitable because of the extra fossil fuels scooped out and sold as a result. However, the problem is this is happening at incredibly small scale, and as DAC expands enormously to its predicted 700x level, EOR will use a mere 0.11 percent of all DAC carbon.
That means storing the rest, which pays $25 more a ton but also means extra costs in obtaining storage resources and access to transport it considerable distances. So, DAC plus storage credits may not be enough, so then one would have to go after particularly compliance credits (as these lately have averaged $77 per ton although with a wide range, as opposed to voluntary ones which averaged a bit over $6 a ton although for very small scale, discrete uses the price could go over 500 times that).
Therefore, there has to be an entire ecosystem involved to make this profitable. In expanding the market, there’s no reason to direct capture unless you have the assurance that it can be stored and a government-created market exists to get credit for what you have stored. This is why anything that throws sand into the gears, such as removing the hammer of expropriation to round up storage sites, cannot be tolerated, for the economic model for the whole system, not just for the storers but also the capturers and traders, falls apart.
Even so, it may not be enough to make economic sense without further subsidization. Into that breach stepped the U.S. Department of Energy. Last week, DOE announced that one of the six Louisiana projects that Republican Gov. Jeff Landry had allowed to move forward in regulatory vetting to engage in storage (through well injection into pores beneath land) had passed a necessary federal review allowing it to tap $600 million in subsidies. Without subsidies, it may become economically impossible to limit debt to build a capture facility that has a realistic chance of being paid off.
And this the Port was instrumental in snaring because a link in the chain, Bia Energy, it attracted with its taxpayer-subsidized incentives (as well as state taxpayer subsidies through the Department of Economic Development). Bia Energy set up a carbon capture operation at the Port for methane in their production of bio-methanol, which is used for feedstock and fuel. Its captured carbon will be hooked up to a pipeline going to the CENLA Hub storage facility operated by the firm CapturePoint that was fast-tracked.
The Port, of course, has expropriation powers in both parishes that could be used both storage (not fertile given the area’s geology) and pipeline (a much more likely use). Again, keep in mind that the whole subsidization and regulatory ecosystems have to work perfectly or it all falls apart. Anything that interferes with the Port’s ability to strike these deals, such as greater public input, whether direct, into selection of commissioners potentially threatens these ecosystems.
This is why there is such fierce resistance to any measure to constrain Port activities within the Legislature, such as GOP state Sen. Thomas Pressly’s SB 170 that would add the Port to the list of other port commissions whose members need Senate approval for appointment, and to which the Bossier Parish Police Jury already raised unanimous objections. It’s battling its way through the process, while farther-reaching bills by Republican state Rep. Danny McCormick were rejected outright in committee.
And which also explains the defeat of removal of expropriation for CCS and the almost certainty that no bill attenuating CCS in even the slightest degree will pass any committee, much less receive a hearing. Just follow the money – the vast majority of it from taxpayers.
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