The Obama administration views carbon dioxide as a pollutant that warms the earth, and it imposed new regulations at the beginning of the year to begin to control CO2 emissions. But to Texas oilmen, carbon dioxide is a useful — and scarce — commodity that is vital to extracting hard-to-reach oil reserves.

In Texas, the nation’s largest oil producer, the demand for CO2 is soaring — because carbon dioxide can help squeeze oil out of formations deep in the earth — and new carbon dioxide-producing facilities are in the works. 

Last month, Texas air-quality regulators approved crucial permits for two coal-fired power plants that will capture their carbon dioxide emissions and sell them for use in nearby oil fields. A major new pipeline operated by Plano-based Denbury Resources began ferrying carbon dioxide from Mississippi to oilfields near Houston last month.

“The demand for carbon dioxide is very, very large," said Steve Melzer, the Midland-based president of the Texas Carbon Capture and Storage Association. He added that some oil-extraction projects are on hold because they cannot buy enough carbon dioxide.

The Texas Tribune thanks its sponsors. Become one.

The idea of capturing carbon dioxide and pumping it underground is gaining traction in the power sector. It sounds like an exercise in environmental idealism: Take the heat-trapping gas — belched prolifically from coal plants, which generate 45 percent of the nation’s electricity — and bury it, benefiting the atmosphere and combating global climate change. Of course, it is something of an environmental conundrum that stowing the greenhouse gas underground can also help to produce more fossil fuels.

Carbon dioxide is a “fantastic solvent,” said Susan Hovorka, a scientist with the Gulf Coast Carbon Center at the University of Texas’ Jackson School of Geosciences. In a nearly liquid form, it can mix with the underground oil, making the oil more fluid and easier to extract. Water gets pumped in before the carbon dioxide; when carbon dioxide is unavailable, water suffices, but it is not as effective.

Some of the carbon dioxide comes back out with the oil, but that gets separated and reused in the wells. When the project has finished producing oil, the vast majority of the carbon dioxide stays underground and will not leak out of the tiny pores it is wedged into, said Hovorka, whose team has monitored two oil fields in the state and verified that the gas does not escape.

Capturing carbon dioxide can increase a coal plant’s capital cost by 30 percent — a key reason why no major power plant with that capability has been built in the United States. One pilot-scale project, slated to expand, has been operating in West Virginia since 2009, and another plant that may capture and store carbon dioxide is under construction in Indiana. In addition to the two proposed Texas plants, projects are in the planning phases in California, Illinois, Kentucky and Mississippi, said Julio Friedmann, director of the carbon management program at Lawrence Livermore National Laboratory.

Texas, however, has a major advantage over most other states: it can put the carbon dioxide to use. The West Virginia plant pumps carbon dioxide underground just to keep it out of the air, but Texas plants can sell it to oil companies. 

Texas has been using carbon dioxide to help extract oil since the early 1970s. Much of the state’s supply gets piped in from New Mexico and Colorado, where dome formations yield CO2 in abundant quantities. In recent years — due to high, albeit fluctuating, oil prices that motivate oil producers to expand operations — demand for carbon dioxide has far outstripped supply in the Permian Basin. Prices there for carbon dioxide for new projects have more than doubled in the past five years and are now close to half the wellhead price of natural gas, measured by volume, according to Melzer.

The Texas Tribune thanks its sponsors. Become one.

It seems odd that Texas, which because of its heavy industry discharges more carbon dioxide into the air than any other state, would need to import it. But this could begin to change, in a modest way, with the construction of the two coal plants that received air permits last month. One is a $3.5 billion to $4 billion plant called the Tenaska Trailblazer Energy Center near Sweetwater; the other is a $2.2 billion plant near Odessa built by Summit Power. 

Neither power plant is being built yet, but they plan to capture 85 percent or more of their carbon dioxide emissions and sell them to oil companies. Laura Miller, Summit’s director of projects in Texas, said the Odessa plant will get one-third of its revenue from selling power, one-third from selling fertilizer — a byproduct of a coal-gasification process to be used by the plant — and one-third from selling carbon dioxide.

Some environmentalists — in effect acknowledging that the country cannot quickly wean itself off coal, the dirtiest fossil fuel — have tepidly endorsed the concept of capturing carbon dioxide from coal plants and storing it underground. Jim Marston, the Texas head of the Environmental Defense Fund, which received a written commitment from Tenaska to using carbon-capture technologies, noted that the state’s planned plants would help show that the technology works.

Whether Texas’ plants actually get built remains to be seen. Around the country, some similar projects have folded or stalled due to cost. The failure last year of federal legislation that would in effect have put a price on greenhouse gas emissions hurt the economics of the plants, which will sell power at market prices in Texas. 

But federal and state help have pushed the Texas projects along. Both Texas and the federal Environmental Protection Agency have recently issued new rules governing carbon capture projects designed to provide clarity for the industry — and have also provided financial help. In Summit’s case, the plant received $450 million in federal incentives, and it is eligible for state incentives, including a tax credit, approved in the last legislative session, worth up to $100 million.

A few Texans are already looking far ahead, to when carbon dioxide, because of its heat-trapping properties, gets buried for its own sake — not just in oil fields. The Gulf Coast Carbon Center recently received $10 million in funding from the federal stimulus package and Texas’ General Land Office to study the possibility of storing carbon dioxide emissions under the Gulf of Mexico — “not that anyone is going to want to do it tomorrow,” Hovorka said.

Texas Tribune donors or members may be quoted or mentioned in our stories, or may be the subject of them. For a complete list of contributors, click here.