June 2023 Carbon Capture Update: Two U.S. Regions Lead CCUS Development

North America is host to the majority of global carbon capture, utilization and storage (CCUS) projects, with the U.S. Gulf Coast and Midwest regions particularly attracting investment. In addition to tracking recent CCUS news, this month’s Carbon Capture Update highlights some factors contributing to these regions becoming CCUS hot spots. A deeper analysis on this subject was presented last month in BTU Analytics’ webinar, “America’s Carbon Potential.”

• Japanese conglomerate Marubeni announced an agreement with Canadian midstream operator Pembina to develop a JV blue ammonia plant in Alberta with the goal of exporting to Japan. A number of similar blue hydrogen and ammonia projects are already underway in North America, including the Ascension Clean Energy ammonia plant in Louisiana that recently gained Mitsui as a partner.
• Also in Alberta, GE subsidiary Moraine Initiatives Ltd has submitted a plan to Canadian regulators to build a new 465 MW combined cycle natural gas plant with integrated carbon capture. The project marks a major step by GE in becoming a developer of power plants with carbon capture, though the company has previously contributed to preliminary studies for several projects. Earlier this year, GE partnered with CCUS-tech firm Svante to develop integrated carbon capture for natural gas power plants.

Spotlight: U.S. Gulf Coast and Midwest Capture 35% of Global CCUS Development

Raising the 45Q tax credit for captured industrial CO₂ to $85/t, the Inflation Reduction Act has unsurprisingly spurred new interest for carbon capture in the U.S. Perhaps more surprising is how uneven proposed projects are distributed within the country. Markedly few projects are proposed across the Atlantic Coast or in interior industrial basins like the Ohio River Valley. Instead, as shown below, proposed projects center mainly in two U.S. regions: the Gulf Coast and Upper Midwest.

Among other factors, BTU Analytics has identified three things which make these regions particularly attractive:

1. A base of existing industrial facilities that could be retrofit with CCUS at a relatively low cost
2. Potential for enhanced oil recovery (EOR) or dedicated geologic storage
3. Access to new revenue opportunities, such as premiums paid for low-carbon products

The majority of lowest-cost retrofit potential in the Midwest can be found at ethanol plants, which corresponds to where most projects have been announced to-date. Three proposed CO₂ pipelines aim to connect dispersed ethanol facilities with centralized storage locations in the Illinois or Williston basins. However, these pipelines are highly risked, and individual projects will have difficulty progressing if such pipelines are not completed because most lack nearby alternatives for CO₂ disposal. Though, if successful, ethanol producers may be able to use carbon capture to earn premiums from markets like California’s Low Carbon Fuel Standard (LCFS).

Along the U.S. Gulf Coast, where 20% of globally planned CCUS capacity is sited, a mixture of existing hydrogen, ammonia, and natural gas processing facilities yields the second largest base of potential retrofits in the U.S. Suitable geologic storage is also widespread, stretching from Florida through southern Texas. Perhaps the most consequential factor in the Gulf Coast is that developers appear to be anticipating new markets for low-carbon products. Blue hydrogen and blue ammonia account for a large share of Gulf Coast CCUS projects, including several new-build megaprojects. The Gulf Coast’s deep-water ports also make this region ideal for exporting to Europe and East Asia, where low-carbon hydrogen and ammonia could soon become premium-priced alternative fuels. Japanese and European firms have correspondingly signed on as investors and partners in a number of these projects.

For more discussion on regional dynamics influencing CCUS development, including critical regulatory differences among U.S. states, see BTU Analytics’ complimentary webinar: “America’s Carbon Potential.”