Carbon Dioxide, the Bane of Environmentalists, Is in Demand in the Oil Industry

In Texas, the nation’s largest oil-producing state, the demand for CO2 is soaring — because carbon dioxide can help squeeze oil out of formations deep underground — and new carbon dioxide-producing plants 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. Also in December, a major new pipeline operated by Denbury Resources of Plano began ferrying carbon dioxide from Mississippi to oil fields near Houston.

“The demand for carbon dioxide is very, very large,” said Steve Melzer, president of the Texas Carbon Capture and Storage Association.

Texas has been using carbon dioxide to help extract oil since the early 1970s. Much of the state’s supply is piped in from New Mexico and Colorado, where dome formations yield abundant CO2. In recent years — due to high, though 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, Mr. Melzer said.

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 Centernear Sweetwater; the other is a $2.2 billion plant near Odessa built by Summit Power.

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