Energy Dept Reverses Course on Direct Air Capture Safeguards

Last week, the U.S. Department of Energy (DOE) published final guidance for grant funding that will be provided to “Regional Direct Air Capture Hubs,” by the Infrastructure Investment and Jobs Act (IIJA). This funding will establish four regional hubs to deploy methods that capture carbon directly from the ambient air—known as direct air capture (DAC)—to reduce CO2 emissions. Unfortunately, the new guidance contains a major reversal from DOE’s previous position, which prohibited funding from flowing to projects tied to oil and gas production. With the reversal, projects using captured CO2 for “enhanced oil recovery” (EOR), which uses mined or captured CO2 to increase the extraction of oil (and sometimes gas) from depleted wells, can now qualify for federal grants.

DAC removes CO2 from the ambient air, not from any specific source like a smokestack (the latter is known as “carbon capture”). In May 2022, DOE published draft guidance for Direct Air Capture (DAC) Hub grants that refused to consider proposed DAC projects where “use and incidental or associated storage of CO2 [is] part of the recovery and production of hydrocarbons.” The proposed policy was a good one. It avoided creating a new taxpayer funded subsidy for oil and gas producers. It also kept DAC’s technological development somewhat apart from the oil and gas industry because the captured CO2 would not be coming directly from a facility burning coal or gas, or a refinery producing gasoline and diesel and other petrochemicals. And further, the stored CO2 would be destined for geologic storage only, not use by the industry to extract new amounts of oil and gas.  

Fast forward to November 2022, and DOE has reversed itself. Reporting suggests that the change was made due to pressure from a group of lawmakers led by Joe Manchin. In a July letter, Manchin argued that though the IIJA does not specifically direct DOE to allow EOR-linked projects to qualify for grants, it was Congress’ (or at least the group’s) intent that they not be excluded. As an apparent result, in the final Funding Opportunity Announcement (FOA) for the first round of DAC Hub grants, DOE notes: 

If CO2 will be stored in conjunction with hydrocarbon extraction during any phase of the project, the Applicants should detail plans for maximizing the amount of CO2 storage relative to associated hydrocarbon extraction over the life of the project or, where applicable, directly displacing non-anthropogenic CO2 currently sourced from geologic domes with anthropogenic CO2. 

In other words, DAC projects linked to EOR can now qualify for a federal grant. The policy change creates an undesirable association with fossil fuel production, which is likely to make development and deployment of DAC technology more contentious than it otherwise may be. DOE’s reversal also creates a new value chain subsidy for the fossil fuel industry whereby they can access money to help build a new kind of facility to provide them with CO2 that they can then inject into certain oil wells to access yet another subsidy available for oil production. 

The phrasing of the policy change also opens questions about how DOE will assess EOR-linked projects where the captured CO2 would displace the use of mined (“non-anthropogenic”) CO2 in the oil production process. While adherence to the original policy of prohibiting EOR-linked projects altogether was vastly preferable, it is to be hoped that DOE will double down on its commitment to consider the “[l]ife cycle analysis (LCA) of the entire Regional DAC Hub ... as the basis for evaluating the net CO2-equivalent removal potential” for these projects. Doing so should incentivize applicants to steer clear of EOR-linked projects when applying for these grants. 

The concerns raised by DOE’s policy shift were only heightened when DOE’s Assistant Secretary of Fossil Energy and Carbon Management, Brad Crabtree, urged industry to “show how positive EOR can be” for the climate at an oil and gas industry conference in Houston. The problem is that EOR is by no means a “positive” for the climate, and most careful lifecycle analyses show that its overall effect can lead to either higher or incrementally lower emissions on a lifecycle basis depending on a wide range of factors. And a focus solely on theoretical climate benefits ignores a host of other concerns with the practice which are top of mind for communities in proximity to these operations: air, surface water, and ground water pollution; land use impacts and seismic disturbances and subsidence; and increased noise and impacts to public health. 

Bottom line: the funding for emissions mitigation in both the IIJA and the Inflation Reduction Act holds extraordinary promise for reducing climate pollution produced by the United States. But, we need federal agencies and administration officials to focus on that goal and avoid propping up the very industry responsible for most historic greenhouse gas emissions. DOE’s decision to reverse course on DAC hubs linked to EOR is another unfortunate example of wavering in the commitment to drive emissions down as fast and far as possible. It also creates a new subsidy available to the oil and gas industry—an industry currently enjoying jaw dropping profits and the benefit of billions of dollars of ongoing subsidies.