Unearthing the Potential of a Hub-and-Spoke Approach for CCUS

The demand for carbon intensity and carbon emissions reductions across the globe, combined with economic incentives such as substantial federal tax credits, has stimulated significant interest in carbon capture, utilization and storage (CCUS). Given the minimal market availability for uses of carbon dioxide (CO₂), CO₂ injection for geological storage, previously implemented only at a research or pilot scale in the U.S., has become a realistic option for many industrial operations, including those associated with power generation; oil, gas and chemical; and bioenergy industries. The costs and risks associated with this emerging decarbonization option have prompted many companies to explore a hub-and-spoke approach that allows multiple emitters to share a single CO₂ storage facility comprised of one or more injection wells. These partnerships have the potential to reduce risk, increase operational flexibility and improve the economic viability of geological storage projects.

Research has shown that the global geological storage capacity for CO₂ is many times larger than what is required for CCUS to help achieve net zero emissions. CCUS has also been shown to be essential for the U.S. to reach decarbonization goals, a conclusion supported by the federal government through the significant Section 45Q tax credit program for capture and storage of CO₂. However, several requirements must be satisfied to develop a viable CCUS program. These include the acquisition of funding for substantial upfront and long-term costs, identification and characterization of a suitable geological formation, and establishment of CO₂ source(s) that will maintain the minimum injection rate required for tax incentive program compliance.

The hub-and-spoke approach for CCUS helps companies overcome these challenges by establishing partnerships between CO₂ emitters and other parties to share costs and risks, while leveraging the capabilities and strengths of the individual partners. Conceptually, multiple companies could transport CO₂ from individual sources to a single injection well (a hub) through a shared CO₂ pipeline network (the spokes). This approach allows companies to share in the investment, return and risk associated with these projects and facilitates collaboration across industries and regions. For example, a CCUS venture publicized in early 2021 involves major oil and gas production, information technology, oil and gas service, and bioenergy firms partnering to develop a large-scale storage project. Another active partnership is constructing a pipeline to transport CO₂ streams from biofuel production facilities in Iowa to injection facilities in the Dakotas. This project will have the capacity to transport and store 10 million tons of CO₂ annually.

Though several geological CO₂ storage projects are in development, and hub-and-spoke partnerships appear to be a viable option for many of these, large-scale CO₂ injection and storage is still a new and evolving field. Government and private industry groups are working to reduce uncertainties and financial obstacles. One way this is being accomplished is through ongoing research to improve understanding of alternative geological formations for CO₂ injection, expanding options beyond the deep saline aquifers that have been primarily studied and utilized to date. Efforts are also underway to repurpose existing or develop new pipeline infrastructure to support CO₂ transportation to injection well sites. The final version of Section 45Q released in January 2021 allows companies to aggregate multiple carbon capture facilities into one project to pool risk and ease administrative burdens. It also increases the opportunity for businesses of all sizes to achieve the minimum capture requirements needed to secure the tax credit. In addition, state and regional private and governmental groups are promoting and investing in geological storage as means of replacing jobs and tax revenues previously provided by oil and gas production, transportation and refining.

Overall, the potential for this emerging solution is considerable for companies looking to reduce CO₂ emissions in an efficient and cost-effective manner. Evaluating, developing and executing this type of project is still a complicated process, spanning specialties from geological evaluation and permitting to process engineering, design and construction. Burns & McDonnell offers comprehensive in-house solutions, including geological subsurface analysis; robust pipeline capabilities; CO₂ separation and conditioning process and facility engineering and construction; and financial and business consulting to safely and successfully navigate a CCUS project from concept to completion.

Interest in carbon capture, low-carbon fuel standards and credit generation opportunities is gaining steam. Listen to Burns & McDonnell industry leaders discuss 45Q tax credits, technologies, viability of geological sequestration and how to get started with carbon capture implementation.