A most unusual energy project is taking shape in Lake Charles, La. The $3.8 billion plant, which will produce a variety of specialized chemicals, is likely to please not only environmental activists who backed Barack Obama, but also the fossil fuel lobby that supports President Donald Trump.
The Federal Financing Bank is planning to loan $2 billion towards the construction of this “clean energy” refinery, owned by Lake Charles Methanol LLC. The plant will refine petroleum coke (petcoke), a petroleum waste product, into methanol, and will also produce other chemicals and “capture” carbon dioxide (CO2) for resale to oil producers in Texas. The petcoke would otherwise have been exported and burned for power generation in countries with looser environmental controls like India and China.
Plans to use carbon capture technology enable the plant to qualify for a $2 billion loan guarantee from the Department of Energy.
Some environmental groups like carbon capture because it limits the amount of carbon dioxide spewing into the air. The oil industry also favours the process because it can use the captured CO2 to extract more oil from existing wells. One such project is operating in Canada where the captured CO2 is liquefied, transported by pipeline and injected into wells near Weyburn, Saskatchewan. The process makes the trapped oil less viscous so that more can be pumped to the surface.
According to Louisiana senator Bill Cassidy, the Lake Charles project has “the Obama administration and Breitbart News on the same page.” Indeed, the federal program designed to support projects like these, known as the Advanced Fossil Energy Loan Guarantee, was set up under President George W. Bush and promoted by Obama’s administration.
Under the program, the Department of Energy backs ambitious clean-technology projects through loan guarantees, thereby encouraging private investors to put up equity capital. The bulk of the financing for the project will take the form of a $2 billion loan from the Federal Financing Bank and will have to be repaid with interest.
The program has accomplished little until now, and the Lake Charles project is set to be the first to be financed with the help of the Fossil Energy Loan Guarantee.
President Trump promised on the campaign trail and in his American First Energy Plan that his administration is “committed to clean coal technology.” Carbon capture and storage technology is what makes clean coal possible. Post-combustion “scrubbing” carbon capture technologies can reduce coal emissions by up 90 percent. Defunding DOE programs that support carbon capture technology might make his campaign promise much harder to achieve.
The Trump administration is unlikely to reverse the decision to support the Lake Charles project. Even so, The Hill has reported that it is considering deep cuts to the Department of Energy, including the Office of Fossil Energy, which administers the carbon capture program. These cuts could “stall clean energy advances,” according to a recent article in the MIT Technology Review.
Carbon capture projects, like the Lake Charles plant, have wide support in Washington, D.C. Last year, 19 members of the House of Representatives from both parties introduced a bill to make permanent a tax credit for carbon storage designed to encourage more carbon capture. According to Hunter Johnston, a spokesman for Lake Charles Methanol LLC, the tax credit “is absolutely necessary to provide incentives for industrial projects that plan to capture CO2 for use in enhanced oil recovery.”
The incoming energy secretary, Rick Perry, was also a strong proponent of carbon capture during his time as governor of Texas when captured CO2 was sold to the oil industry to enhance recovery from oil wells.
During his confirmation hearing, Perry signalled his support for projects like the Lake Charles methanol plant, in part because of its bipartisan backing. Perry said that this is the type of program that the DOE should be engaged in to have really concrete, successful end results.
Perry deflected questions about reports that Trump was eyeing cuts to the DOE that would defund carbon capture initiatives. Even so, carbon capture does have its critics. They point to projects like the Kemper Plant in Kemper County, Miss., that has faced delays and cost overruns. However, the Kemper Plants troubles are a result of mismanagement; construction was started when little of the design work had been completed.
Some environmental groups, including Friends of the Earth and Greenpeace, criticize carbon capture projects on the grounds that they encourage the mining and burning of coal and can lead to the extraction of more oil through the sale of the CO2. Others, like Kurt Waltzer, managing director of the Clean Air Task Force, a non-profit organization concerned with reducing atmospheric pollution, support carbon capture projects because they have the potential to quickly reduce emissions in countries that are heavy users of coal, such as China.
“Our view is that climate is a long game and we need to make progress where we can, when we can,” Waltzer said. “There are folks who are going to support [carbon capture] even if they don’t believe in climate change, and we’ll take their support because we want to get the technology developed. We’re worried if we don’t have the technology in place that we’re not going to get to a zero carbon world in time to keep and protect our climate.”
Evan Balgord is a dual citizen of Canada and the United States. He is a Global Journalism fellow at the Munk School of Global Affairs at the University of Toronto. Before that he was the Deputy Director of the John Tory for Mayor War Room and Special Assistant to the Mayor at City Hall. He covers politics, policy, and governments. Twitter @ebalgord