Pipe Dreams: Sixth in a continuing series on whether capturing carbon is a climate solution or a dangerous distraction.
Imagine a clean energy future, and you might picture giant turbines twisting in the wind, or electric vehicles zipping quietly down the highway. Fossil fuels become relics, or disappear altogether.
ExxonMobil has a different vision. In this story of the future, oil refineries continue to distill crude. Fossil fuel-burning power plants churn away, too.
Oil and gas aren’t the problem, Exxon chief executive Darren Woods has said. The problem is their carbon pollution. So last year, Exxon proposed a herculean industrial effort for the Houston area that would allow the region’s fossil fuel infrastructure to continue operating at full throttle for decades while steadily lowering its climate emissions.
Using a technology called carbon capture and storage, Exxon said it could collect 50 million metric tons of carbon dioxide annually from industrial smokestacks by 2030, and double that amount by 2040. The company would then compress the gas and deliver it through hundreds of miles of new pipelines to injection wells drilled beneath the Gulf of Mexico, where the climate-warming gas would remain locked away forever in porous rock.
Exxon is proposing to create an entirely new industry, built to capture carbon and reinject it, all so that energy companies can keep on pumping and burning oil and gas. The $100 billion mega-project would tie together dozens of facilities owned by 12 of the world’s biggest corporate polluters, including oil majors like Chevron, power generators like Calpine and chemical giants like Dow. It would also require substantial government financing, Exxon said.
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Exxon and others have already made strides in securing this support. Since the company released its proposal, Congress has given the Energy Department $20 billion to spend on carbon capture and clean hydrogen projects and authorized another $250 billion in loan guarantees for these and other emissions-cutting technologies. Lawmakers also increased the value of a carbon-capture tax incentive such that, if Exxon and its partners meet their 2030 goals for Houston, they would stand to reap more than $4 billion every year from taxpayers for up to 12 years. The prospect of these multibillion-dollar government handouts has riled many climate advocates.
“Paying them to do this is paying a ransom on the planet,” said Corey Williams, who until recently served as the research and policy director at Air Alliance Houston, an environmental advocacy group.
“We’re not penalizing them, we’re considering paying them,” he added. “That to me couldn’t be more backwards.”
Many analysts and environmental advocates received Exxon’s announcement with skepticism. Some critics see the company’s commitment to carbon capture as a form of greenwashing, a disingenuous gesture toward lowering emissions serving as cover for the real investments in oil and gas. Exxon’s only publicly announced investment in carbon capture this year has been a $400 million expansion of an operation in Wyoming, compared with a projected $22.5 billion in total capital expenditures. The company has also said it expects to sell even more oil and gas five years from now than it does today.
Even if the world’s current capacity for capturing carbon were increased by a factor of 10, it would equal only 1 percent of global CO2 emissions. What’s more, over the last several decades, only a few dozen carbon capture operations have been built, and collectively they capture far less CO2 than what Exxon said it could achieve over just eight years. Nearly every attempt to build these types of projects has hit delays, failed to reach targets or simply never been completed.
The Houston region is home to one of the greatest concentrations of heavy polluters in the country, but most of the emissions come from refineries and power plants, which are among the most expensive applications for carbon capture technology. Every project needed for the Houston hub, as the proposal is known, would need to be unprecedented in nature and scale.
Exxon, Chevron and others have proposed some of the first projects that could begin to make up the hub, but they have yet to publicly commit anything beyond small initial investments despite raking in what could be record profits this year: Exxon earned $17.9 billion from just April through June.
Williams and other community advocates also worry that the carbon capture projects, if built, would do little or nothing to limit the release of cancer-causing air pollutants like benzene and heavy metals that spew from the refineries and petrochemical plants into surrounding neighborhoods. The people who live in these neighborhoods are predominantly Latino, and the air they breathe is some of the dirtiest in the nation.
The hub might not deliver the climate benefits Exxon claims, either. The carbon capture equipment would require vast quantities of power. Even if that electricity were generated by emissions-free sources, many advocates and experts argue it would be more effective to simply send that power into the grid and displace fossil fuels altogether, rather than run carbon capture operations.
Many of the Houston projects would involve converting natural gas into hydrogen, a clean-burning fuel, while capturing the associated CO2. But research indicates that upstream methane leaks in natural gas systems, which remain widespread, can reduce or negate the climate benefits of using the fuel to make hydrogen.
In short, many experts say, Exxon’s vision is an extreme long-shot—some would say bad-faith—proposal for the largest-ever deployment of a technology that has failed to prove itself at scale, despite billions of dollars of public subsidies and private investments and decades of effort.
Still, many policy experts have come to believe that some amount of carbon capture will be needed to meet climate targets, and the Biden administration has made the technology a key part of its climate policies. So the Houston hub, perhaps the biggest and boldest plan to capture carbon from smokestacks, is drawing significant attention from major corporations and the federal government.
The hub inched closer to reality last month, when Congress passed a major climate and tax bill that includes the substantial expansion of a federal carbon capture tax credit. The change could push many of the proposals, including one announced this year by Exxon for its Baytown refinery, across the economic threshold of profitability. Some academic modelers are now projecting a 13-fold increase in carbon capture by the end of the decade because of this tax credit expansion.
Oil and gas executives reacted to the bill’s passage with “wild enthusiasm,” said Charles McConnell, energy officer and director at the University of Houston’s Center for Carbon Management and Energy Sustainability, who is serving as an academic adviser to Exxon and the other companies pursuing the hub. “To say any more would probably be more than I care to share.”
This lucrative incentive comes on top of the billions of dollars that last year’s infrastructure bill sent to the Department of Energy to help build carbon capture projects and clean hydrogen hubs. And when that money begins flowing next year, a good portion is widely expected to land in Houston.
More Money for Carbon Capture Than Ever Before
Early last year, Exxon’s top executives were in the uncomfortable position of playing defense. An upstart hedge fund had launched a campaign to replace several of the oil company’s directors, trying to convince shareholders that fresh blood was needed to reposition Exxon’s business to address climate change. The hedge fund presented data about an inevitable transition away from fossil fuels and how Exxon’s investments were failing to anticipate that trend. The shareholder vote was scheduled for late May. A few weeks before the critical vote, Exxon’s management floated a counter-narrative about its bright future that revolved around the Houston hub.
On the day the company announced the proposal, Woods and Joe Blommaert, who was then chief of Exxon’s low carbon business, wrote a column for The Wall Street Journal arguing that the Houston hub would help the nation meet its climate targets and serve as a model for the world. As the central pillar of Exxon’s low-carbon strategy, it would build on the company’s expertise “managing hydrocarbon molecules,” as executives like to say, rather than attempting to enter entirely new businesses like wind or solar energy.
“Based on Energy Department numbers, we estimate there is adequate capacity along the Gulf Coast to store around 500 billion metric tons of CO2,” they wrote. Tens of thousands of new jobs would be created in the process, they said, and thousands of existing jobs would be preserved.
The success of their proposal, however, was contingent on government funding. And Exxon executives and lobbyists had already been working to line up support from public officials.
The week before the announcement, Woods had presented the hub proposal to Houston’s mayor, Sylvester Turner, in a phone call, according to emails obtained in a public records request. The day after Exxon went public with the carbon capture plan, Turner followed with his own press release praising the effort as “the type of bold ambition and investment we will need to meet our climate goals.”
Within weeks, the commissioners of Harris County, home to Exxon’s Baytown refinery and many of the industrial facilities along the Houston Ship Channel, passed a resolution in support of the company and the proposal, too.
Exxon’s shareholders nevertheless voted to replace three corporate directors in May. But the vote did not change the company’s pursuit of the Houston hub.
Most of the financing Exxon needed from government would come at the federal level, where its lobbyists began discussing the Houston proposal with members of Congress and agencies last spring, according to lobbying disclosures. One Exxon lobbyist pitched the hub to officials at the Department of Labor, according to emails obtained in a records request, claiming it would create “tens of thousands of new jobs.”
In May of last year, Woods met with Energy Secretary Jennifer Granholm and discussed the company’s efforts on carbon capture and storage. To build the hub, Exxon would need the department to expand or amend its loan programs, according to a presentation given to state regulators last year by Erik Oswald, vice president of strategy and advocacy at Exxon’s low-carbon business.
Charisma Troiano, an Energy Department spokeswoman, declined to elaborate on what was discussed at the meeting with Exxon, saying only that “the department and the secretary meet with a lot of companies interested in carbon capture given the recognition that it is needed to reach President Biden’s net zero by 2050 goals.”
After a lobbying blitz from Exxon and many others, Congress soon allocated more money to carbon capture and storage than any government anywhere has to date, and much of it closely matched what Oswald said his company needed for the Houston hub. The infrastructure bill that passed last year, for example, created a new Energy Department program that will provide $2.1 billion in loans and grants for building carbon dioxide pipelines and authorized billions more for clean hydrogen and carbon capture demonstration projects. The bill also directed the Interior Department to issue regulations within a year that would open offshore areas to CO2 storage, another step Exxon needed. Days after the bill was signed, the company secured the mineral rights beneath a swath of federal waters off Houston that align closely with where Exxon has said it would inject the hub’s CO2.
Last month, the climate legislation passed by Congress included a significant expansion of a carbon capture tax credit as well as a new clean hydrogen production tax credit. While the new value of the carbon capture credit isn’t as high as what Exxon has sought—$100 per metric ton—it comes close, increasing the value by about 70 percent, to $85 for every metric ton of CO2 captured and stored underground. That places the value, not coincidentally, just above the estimated cost of applying carbon capture to hydrogen production, and close to the cost for several other applications.
This tax credit change is likely the most important subsidy of all for the Houston hub: 50 million metric tons of carbon dioxide could work out to more than $4 billion annually. Companies have until 2033 to begin construction to qualify for the credit and are eligible to receive it for 12 years.
The bill also authorized the Energy Department to offer $250 billion in loan guarantees for projects that would help energy facilities “avoid, reduce, utilize, or sequester air pollutants or anthropogenic emissions of greenhouse gases.” This closely matched a request in Oswald’s presentation last year. Of the eight items he listed as “what’s needed” from government, the infrastructure and climate bills delivered all or part of six.
In March of this year, while the climate bill’s fate was uncertain, Exxon announced the first proposal for the hub, a plan to make hydrogen with natural gas while capturing the process’s emissions, at its Baytown refinery complex. Chevron soon followed with its own proposal, a CO2 storage project in state waters off the Gulf Coast. Two weeks later, BP and Linde, a chemical company that is among the 12 supporting corporations, said they would team up to produce low-carbon hydrogen and “support the storage of carbon dioxide captured from other industrial facilities—paving the way for large-scale decarbonization of the Texas Gulf Coast industrial corridor.”
Exxon declined to make anyone available for an interview, but spokesman Todd Spitler emailed a statement that pointed to several carbon capture proposals the company has announced around the world, most of which are in the early planning stages, as evidence of its intentions to deploy the technology.
Earlier this year, Woods spoke directly of the company’s carbon capture efforts at a major oil industry conference in Houston.
“It’s not unlike the things that our industry has done, and our company in particular has done, as we move around the world, is building some of these industries grassroots, from scratch,” he said. “We’ve got an opportunity to essentially build a new business here from scratch, working with the government and with industry.”
‘If You Can’t Do it Here’
Buffalo Bayou was once a swampy, mosquito-infested creek that seeped through Houston to Galveston Bay. Its shallow waters couldn’t accommodate oceangoing vessels, so local leaders, aiming to build a true inland port, embarked on a series of projects beginning in the late 19th century to dredge and widen the waterway.
Today, the Houston Ship Channel is lined by a nearly unbroken, 20-mile stretch of refineries, storage tanks and petrochemical plants. They comprise all the industrial pieces needed to convert hydrocarbons into the fuels, fertilizers and plastics that feed the modern economy. Their smokestacks and flares form an industrial skyline of white plumes and orange flames, belching greenhouse gases into the thick Gulf Coast air and toxic pollution into residential neighborhoods. Depending on the wind, their stench can hang heavy above the houses, carrying a foul smell of sulfur and crude, even a hops-like tang.
Exxon’s Baytown refinery and petrochemical complex is the largest of these, sprawling over 3,400 acres, four times the size of Manhattan’s Central Park. It is one of the country’s biggest sources of carbon dioxide pollution, pumping out more than 11 million metric tons in 2020, the last year for which data is available, according to figures reported to the Environmental Protection Agency.
This concentration of polluting industry happens to sit next to some of the best geology for storing carbon dioxide underground: Formations beneath the Gulf of Mexico could hold more than 100 billion tons of CO2, according to one study. Add in the fact that the companies already hold many pipeline rights of way and enjoy the permissive oversight of Texas regulators, and you have what many experts say is the ideal place to build a major carbon capture hub.
“If you can’t do it here commercially, you can’t do it anywhere,” said McConnell of the University of Houston, who has been advising Exxon and the other hub companies. McConnell led the Energy Department’s Office of Fossil Energy from 2011 to 2013, and he said his experience there is not lost on the companies as they seek federal funding.
The United States and the world remain far off track for the larger goal of zeroing out greenhouse gas emissions by midcentury. Many experts have charted pathways for achieving zero emissions within the power sector by building massive amounts of renewable energy, and light-duty transportation, through electrification. But billions of tons of carbon pollution are emitted every year by the manufacturing of iron, steel, cement, chemicals and many other products central to society. These sectors account for roughly one-sixth of global CO2 pollution, and currently, carbon capture and storage is one of the few tools for reducing them.
“It’s not an option,” McConnell said. “It’s a requirement.”
Some supporters of the technology also argue that applying carbon capture to a select number of fossil-fueled power plants could make the electric grid much more efficient and reliable than if it depended entirely on renewable sources. Because wind and solar power are intermittent, an all-renewable grid would require building tremendous capacity to meet peak demand, far more than what might be needed most of the time. There are substantial hurdles to building so much renewable energy production, including opposition from communities where it would be sited and backlogs in permitting.
One of the people who makes this argument is Brad Crabtree, who is now the Energy Department’s assistant secretary for fossil energy and carbon management, the position McConnell once held.
“When you retrofit, for example, a power plant with carbon capture, it has a special value in the broader decarbonized grid that often doesn’t get fully recognized,” Crabtree said. “It can result in efficiencies elsewhere,” driving down costs system-wide, he added.
Before he joined the Biden administration, Crabtree was the director of the Carbon Capture Coalition, a collection of energy companies, unions and environmental groups that advocates supportive policies. Now he is overseeing billions of dollars in federal funds created by those policies to help build demonstration plants, pipelines and storage sites, much of which could be done by coalition members.
McConnell said the Houston companies are serious about building the hub and have developed rigorous plans for doing so. “These guys know what they want to do,” he said.
Substantial hurdles to developing a major hub remain, including uncertainty about long-term liability associated with storing CO2 underground and securing the permits and investments needed to build pipelines. Still, McConnell said, the new, higher tax-credit value means companies can now start running business modeling for specific projects.
“That’s what’s exciting,” he said. “That’s what is going to put the tailwinds into the sail here. I think you’ll see a lot of interesting business developments. They won’t all move forward, but it’ll be interesting. This is a big deal.”
Is Carbon Capture Viable?
Carbon capture and storage might be one of the best technologies for reducing emissions from certain polluting industries, but there is substantial debate about which sectors those are. And just because it might be needed doesn’t mean it’s viable.
As of last year, 27 carbon capture operations were running globally, capable of preventing some 37 million metric tons of pollution, according to the Global CCS Institute. Four more were under construction and another 102 in various stages of planning. Even if every one of those planned projects were completed, all of the world’s carbon capture plants would prevent about 150 million metric tons of pollution annually, or less than one-half of 1 percent of global CO2 emissions, which amounted to about 36 billion tons last year.
Economics would suggest that the most cost-effective plants will be built first. Policy experts, on the other hand, want to focus on the most intractable sectors, like cement, that have few alternatives for cutting emissions. Houston’s industrial polluters, by and large, do not fit in either category.
Refineries are one of the largest sources of carbon emissions in the Houston region, according to EPA data, and they are among the most expensive to retrofit with carbon capture technology. They also hold a precarious position in the global transition away from fossil fuels. Declining demand would mean fewer refineries, raising the question of why the nation would invest tens of billions of dollars to lower the emissions from facilities that might close soon.
“If we really think about, what is the world that we need to make in order to achieve and stay at net-zero emissions within the next couple of decades, I don’t really personally see a role for the ongoing dependence on fossil fuels at the kind of intensity that that would indicate,” said Emily Grubert, an associate professor of sustainable energy policy at Notre Dame who recently completed a year leading the Energy Department’s office of carbon management, which conducts research into carbon capture. She added that while some diminishing volumes of oil and gas will likely be needed to produce materials or fuels for decades, “for like bulk oil production and refining, and transportation fuels in particular, we are not going to succeed at decarbonization if that’s still a thing.”
The largest source of emissions around Houston in 2020 were coal- and gas-fired power plants. Grubert and many other experts say that because the costs of wind and solar generation have fallen so rapidly—and with the costs of battery storage now declining, too—there is no compelling case for spending billions to retrofit these power plants rather than shutting them down. Building new wind and solar farms is simply cheaper, and perhaps more reliable.
Utilities and the federal government have already spent many billions of dollars trying to launch commercial-scale carbon capture power plants. Only one was completed in the United States, and it happens to be outside Houston—attached to a coal plant that was the second-largest source of greenhouse gas emissions in the region in 2020, after Exxon’s Baytown refinery.
Five years ago, NRG Energy began operating the Petra Nova carbon capture plant with nearly $200 million in Energy Department support and more in local tax breaks. By some measures the project was a success. It captured more than 90 percent of the carbon dioxide that passed through the system, according to an Energy Department report.
But the project was designed to capture only a fraction of the coal plant’s emissions, and according to the report it failed to reach its overall capture target because of numerous problems that arose, including equipment outages and difficulties delivering the gas to its ultimate destination, a nearby oil field. Ironically, the project’s finances depended on using the captured CO2 to squeeze oil out of the ground and generate cash from the sales, which helps explain Petra Nova’s largest failure.
In 2020, as oil prices crashed, the project ceased capturing any carbon emissions. It hasn’t restarted since.
‘I Don’t Really Feel Like it’s Solving the Problem’
The Ship Channel has spawned an almost entirely industrial landscape. But just past the fence lines, in many cases, are the homes and schools of the area’s mostly Latino residents.
Valero’s Houston refinery, for example, borders two sides of the Manchester neighborhood. About 200 yards from the gate are a playground and community center. On the wall is a mural showing smiling children playing below industrial stacks topped with bright orange flames, like a dystopian dream. One of the goals of the Houston hub effort is to keep refineries like Valero’s operating for decades, albeit with new, emissions-capturing equipment.
“With carbon capture, I don’t really feel like it’s solving the problem,” said Leticia Gutierrez, the director of government relations and community outreach at Air Alliance Houston, which campaigns for cleaning up the area’s air pollution.
To start, capturing 50 million metric tons, which is about one-third of the region’s industrial emissions, might not deliver the climate benefits it would appear to.
Many of the projects, including Exxon’s Baytown proposal and that of BP and Linde, would convert natural gas into hydrogen while capturing CO2 emissions. The clean-burning hydrogen could replace natural gas used at the refineries, and might fuel ships or heavy-duty trucks. Exxon has said the Baytown project could reduce the refinery’s emissions by “up to 30 percent,” or about 3 million metric tons per year, while also selling hydrogen to help others lower their emissions.
But academic research has shown that any benefits achieved by capturing CO2 can be offset by leaks of natural gas, which consist primarily of methane, a far more potent greenhouse gas. Even if these projects reduced carbon dioxide emissions, they could increase methane emissions, negating the larger goal.
Carbon capture equipment is also extremely energy-intensive. One utility in Wyoming, for example, said in regulatory filings that operating equipment at coal plants there would consume more than one-third of the plants’ electrical output, a phenomenon known as “parasitic load.”
For the Petra Nova operation near Houston, the company built a new natural gas turbine to power the carbon capture system, which required nearly 15 percent as much electricity as was generated by the coal unit it was attached to. That natural gas turbine also sent its own carbon dioxide and all its other emissions straight into the air.
This power consumption raises one of the core arguments against the technology: If you power carbon capture systems with fossil fuels, you generate additional pollution. If you power the systems with renewable energy, you consume precious clean power that could be put to other uses. Either way you are effectively driving emissions higher, at least somewhat, in an elaborate attempt to reduce them. This hardly seems efficient.
For the people who live close to the industrial development, however, carbon dioxide is not the most important pollutant. The region’s refineries and chemical plants spew toxic chemicals like benzene, which drive cancer risks far higher for workers and nearby residents. According to an analysis last year by ProPublica, the greater Houston region has “the third-biggest hot spot of cancer-causing air in the country.”
Gutierrez grew up nearby and still lives in the area, where she has raised three children. Her son developed asthma when he was a child, she said, and she found that his symptoms would clear when they would visit family in Mexico, in the mountains outside Monterrey.
Gutierrez herself has developed headaches and rashes, of which her family has no history, she said. The companies have said the hub’s use of carbon capture and hydrogen fuel could reduce some air pollutants from the area’s power plants and trucks, such as soot and sulfur oxides, but it is unclear how it would reduce the emissions of toxic pollutants.
Exxon declined to answer detailed questions about the projects.
“People sometimes ask me why I don’t move,” Gutierrez said while giving a tour of the area earlier this year. She stays because she loves her house, she tells them, and her community. Anyway, she said, she couldn’t afford to buy anything similar on Houston’s westside, where the air is cleaner.
Few if any residents have heard of the hub proposal, Gutierrez and other community advocates say, but people in the communities around the Ship Channel are skeptical of any plan presented by Exxon or other corporations to clean up the industry. It is unclear whether they would welcome it. One thing for sure is that the companies haven’t come to ask.