The CO2 Conference

Thank you, Mike Moore and Steve Melzer. It is great to be back again in person at the annual CO2 Conference and to see so many close colleagues again.

I also want to recognize one of my predecessors as Assistant Secretary for Fossil Energy and Carbon Management, Chuck McConnell, as well fellow DOE colleagues Tom Sarkus and Sarah Forbes, who will talk about hydrogen and carbon management funding following my remarks.

Let me begin on a personal note. I have had the opportunity to engage with this conference and work closely with many of you over nearly two decades.

I want to thank Mike Moore and Steve Melzer for their years of leadership in organizing and hosting this annual conference. This event has played a major role in building understanding and support for carbon management, not only in the Permian Basin oil and gas community, but also nationally and among stakeholders outside industry.

In 2010, I reached out to Steve seeking his involvement and support in bringing together industry and other stakeholders to develop incentives for carbon capture and storage. He personally helped set up a wide range of meetings that year at this conference and supported other outreach to industry executives and elected officials. Those early efforts led to the formation of the industry, labor and NGO coalition that supported the 2018 reform and expansion of the 45Q tax credit and the most recent enhancements to 45Q included in the Inflation Reduction Act.

Please take a moment and join me in recognizing Steve and Mike for their years of dedication and effort.

The improvements to 45Q I just mentioned—and others have spoken about them in some detail already today—did not happen by accident. They were, in fact, the product of years of bipartisan work in Congress, together with consistent support from stakeholders across the political spectrum and all regions of the country.

In fact, the bipartisan CCUS Tax Credits Amendments Act in the Senate, ACCESS 45Q Act in the House, and the bipartisan and bicameral CATCH Act provided for direct pay, a multiyear extension, increased credit values, and reduced eligibility thresholds for 45Q that were incorporated directly into the larger tax credit package in the Inflation Reduction Act that ultimately passed Congress. The improvements to 45Q were and remain deeply bipartisan.

And you have played a major role in those successes. So, I want to thank all of you for your commitment to the kind of collaboration that reaches beyond political and policy differences to achieve pragmatic solutions. Together, we have made huge strides in the development and deployment of carbon capture and storage, and I would like to take stock of where we are today.

As all of you in this audience know, carbon capture at fully commercial scale began over a half century ago in here in West Texas. And, over the past three decades and in both Democratic and Republican administrations, the Department of Energy – and, in particular, our Office of Fossil Energy and Carbon Management – has invested in research and development that has demonstrated carbon capture to be a viable and scalable decarbonization option for multiple industries.

From pilot projects for novel, cutting-edge carbon capture technologies to front-end engineering and design, or FEED studies for commercial carbon capture retrofits to large-scale, real-world demonstrations of carbon capture technologies and geologic CO2 storage, this work has helped industry prove out the technical and commercial feasibility of carbon capture, transport and geologic storage.

In the process, DOE’s technology and infrastructure investments over a quarter century and across multiple presidential administrations have helped place the United States squarely in the forefront of global leadership on carbon management. Today, in the United States, we have 18 commercial-scale carbon capture and storage projects out of 50 operating commercial projects worldwide.

And we are building on that research and development legacy by implementing a historically unprecedented framework of federal funding, financing and tax credits. This began shortly before the Biden-Harris Administration took office with passage of the bipartisan 2020 Energy Act, which authorized an expansion of the scale and scope of DOE programs to include commercial scale technology demonstration and infrastructure deployment with industry.

This was followed by the Bipartisan Infrastructure Law in 2021, which is providing $62 billion in funding to DOE over 5 years for technology and infrastructure, and the Inflation Reduction Act, which authorizes hundreds of billions in tax credits to incentivize even greater amounts of private capital for investment in energy and industrial projects. For carbon management, this portfolio of funding, financing and tax credits made possible by this legislation is the most important investment by any government in the world to date.

The Bipartisan Infrastructure Law provides more than $15 billion for carbon capture, removal, conversion, transport and storage projects and for hydrogen production that includes carbon capture and storage. This funding spans multiple offices at DOE, including my office of Fossil Energy and Carbon Management, the Office of Clean Energy Demonstrations, and the Loan Program Office.

For FECM alone, we have awarded $4.1 billion in carbon management funding from the infrastructure bill and our regular appropriations since January 2021. And in fiscal year 2024 alone, the National Energy Technology Laboratory, which is part of FECM, awarded an unprecedented $9.8 billion in mostly infrastructure bill funds to 626 projects across a wide range of DOE programs.

In carbon management, our recent FECM priorities have built on historic R&D investments in first generation capture technologies and flagship commercial demonstration projects. This includes an evolving focus on commercial-scale deployment of carbon capture in natural gas combustion, both in power generation and industry; in heavy industries with lower concentrations of CO2 and higher costs of capture, such as cement, steel and chemicals; clean hydrogen and ammonia produced from natural gas with carbon capture and storage; and the region-by-region buildout of CO2 transport and storage hubs.

Let me focus for a moment on natural gas. In just ten short years, the U.S. has shifted from being poised to become a major natural gas importer to becoming the world’s largest producer and exporter of natural gas. And our export capacity will double between now and 2030 based on authorized projects under construction, and domestic demand for natural gas is expected to grow as well.

This extraordinary transformation of America’s natural gas sector creates both urgency and opportunity for the task of deploying carbon capture, transport and storage across the natural gas supply chain, from upstream production and processing, through pipeline transport and liquefaction, and ultimately to the many domestic and international end uses of U.S. gas, including electric power generation, combustion in industry, and ammonia and hydrogen production.

As we look ahead, we see significantly increasing domestic demand for electricity, a prospect which has garnered a lot of industry, policymaker and media attention in recent months. The AI-driven proliferation of data centers could consume up to 9% of U.S. electricity generation annually in the next five years, more than double the consumption from just last year. And this comes on top of anticipated continued electrification of transportation and some industrial processes.

And the increased demand for electricity comes with the expectation of 24/7 dispatchability to ensure reliability—especially for data centers and industry—which means an increased role for natural gas power generation with carbon capture and storage, in addition to other firm low and zero-carbon generation options.

When it comes to natural gas, that is why we have focused on carbon capture on combustion streams at power plants, and we are devoting more attention to capture at LNG liquefaction terminals, petroleum refineries, and industrial facilities.

To that end, the Department is supporting two commercial scale carbon capture demonstrations—potentially serial numbers one and two in the world—one at a combined-cycle natural gas power plant in California and the other at a cogeneration facility near Houston. We are also funding a number of industrial and power sector front-end engineering and design studies, or FEED studies, that developers must undertake to secure project financing.

While we are excited about the potential for carbon capture to help decarbonize natural gas and the opportunity for the U.S. to lead this effort globally, and we are frankly years behind where we ought to be, given the expected growth in demand for dispatchable low and zero-carbon power over the next few years, rising U.S. natural gas exports, and expectations for increasing decarbonization of the broader natural gas supply chain and end uses for natural gas.

Now, I want to turn to hydrogen and ammonia for a moment. These are exciting areas where the Department has a real track record, with the most notable success being Air Products’ first-of-a-kind commercial scale demonstration of carbon capture storage from two steam methane reformers at Valero’s Port Arthur refinery in here Texas. This DOE-funded pioneer project has successfully captured and permanently stored 90 percent of the CO2 emissions from the syngas stream—a million tons of carbon dioxide annually for over a decade.

Since January 2021, our Office of Fossil Energy and Carbon Management has committed about $138 million in projects to advance additional clean methods to produce hydrogen and to improve the performance of hydrogen-fueled turbines.

With low-carbon hydrogen production from natural gas already commercially demonstrated, our research, development and early demonstration projects have focused on producing clean hydrogen with carbon capture at lower costs from other feedstocks, including municipal solid waste, legacy coal waste, waste plastics, and biomass.

DOE has also encouraged the shift to low-carbon ammonia for fertilizer production and other applications. The Office of Fossil Energy and Carbon Management is supporting Wabash Valley Resources in Indiana through our CarbonSAFE program to develop a local geologic storage site. And we are pleased to report that the company will receive financing from our Loan Program Office to retrofit a brownfield location to gasify waste products to make ammonia, together with carbon capture and storage.

Another promising opportunity is the development of sustainable aviation fuel from ethanol coupled with carbon capture, which has a real advantage given the low cost of capturing CO2 from fermentation and the potential for the ethanol industry to achieve economies of scale through development of regional CO2 transport and storage hubs.

And speaking of hubs, I believe that when we look back on our carbon management efforts, one of our most enduring achievements will be the harnessing of Bipartisan Infrastructure Law funding to develop an estimated 20-40 dedicated regional geologic storage hubs through our CarbonSAFE program.

We believe this hub approach will create economies of scale and reduce the costs of carbon management for multiple companies and industries.

And the infrastructure bill has provided a range of tools to foster hub development. For example, the $3.5 Regional Direct Air Capture Hubs Program has awarded the first two of an expected four hubs, one here in Texas and the other in Louisiana, as well as five FEED studies and 14 pre-feasibility studies for potential future direct air capture hubs throughout the country.

Yesterday, I had the privilege of touring Oxy’s Stratos project near Midland. While DOE is not funding this particular project, Stratos will be the first truly large-scale direct air capture project in the world. Coming online next year, the plant will capture 250,000 metric tons per year of CO2 from ambient air, bring another 250,000 tons of capacity into operation in 2026, and serve as the anchor of a future Permian Basin direct air capture hub. This project underscores the tremendous pace of innovation underway, as well as the extraordinary leadership of U.S. companies like Oxy and this region in advancing carbon management.

Further on the hub front, DOE announced $7 billion for seven Regional Clean Hydrogen Hubs to accelerate commercial scale deployment of clean hydrogen production. All but two of these regional hubs feature production of hydrogen with carbon capture and storage, either from natural gas or biomass.

So, the Bipartisan Infrastructure Law has reduced the cost and commercial risk for industry to bring technologies to market, demonstrate them at scale and undertake the buildout of infrastructure required to enable the wider deployment of these technologies.

At the same time, the Inflation Reduction Act has made available more than $350 billion in clean energy and industrial tax credits, including the 45Q incentive. As has been noted by others already, 45Q provides up to $85 per metric ton for carbon capture and $185 for direct air capture for projects that begin construction by the end of 2032, and it is available for the first five years of service as a direct payment. The most important carbon management incentive in the world, 45Q is mobilizing tens of billions of dollars of private capital for investment in carbon capture, direct air capture, carbon conversion, transport and storage projects.

As other speakers have already mentioned, we are seeing a powerful response to 45Q in the marketplace. According to a project tracker maintained by the Clean Air Task Force, around 220 new carbon management projects have been publicly announced to date in the United States. By any measure, this represents an extraordinary surge in project development activity and, again, compares to just 18 projects operating today with a combined annual capture and storage capacity of under 25 million metric tons.

But we must also acknowledge significant challenges before us—from demonstrating carbon capture across a wide range of industries, some of which do not yet have technology deployed at commercial-scale anywhere in the world; to ramping up federal permitting of projects, the inadequate scale and pace of which is putting project deployment at risk; and to ensuring local community and stakeholder support for the levels of project deployment made possible by available federal funding and incentives.

Permitting is a responsibility that falls heavily on government, and it is appropriately top of mind for project developers and their investors, especially the Environmental Protection Agency’s Class VI program for geologic storage of CO2.

Over 150 applications for Class VI CO2 geologic storage permits are currently pending before the Environmental Protection Agency. On the positive side of the ledger, this surge in Class VI applications underscores rising industry interest in deploying carbon management projects, as well as the dramatic impact that the enhanced 45Q tax credit and other federal policy support is having in the marketplace.

However, deeply frustrating permitting delays risk undermining our ability to achieve the full deployment potential of current incentives, funding and financing in the Inflation Reduction Act and Bipartisan Infrastructure Law and our ability to deploy carbon management at scale over time. 

At DOE we have partnered with EPA to develop additional tools and training opportunities to support permit applicants and reviewers across EPA and states. We have also leveraged National Lab experts to develop and deliver detailed trainings and technical assistance to EPA, states and permit applicants.

We how have eight DOE Labs working to provide prompt and robust support to EPA in reviewing certain technical information associated with Class VI permit applications.

And we have worked very closely with EPA to compile best practices for Class VI permit applicants to improve the quality of applications submitted. These best practices are aimed at reducing the overall review time, while maintaining the requisite high level of safety considerations.

DOE has also actively supported the delegation of federal Class VI permitting authority to states—known as state primacy—as a critical tool for meeting our own statutory responsibilities for implementing the Bipartisan Infrastructure Bill and to support the wider industry buildout of carbon management projects and infrastructure.

The good news is that many states are expressing growing interest in Class VI primacy, and
Congress has appropriated funds to help states develop the capacity to do geologic storage permitting at the state level.

There are also challenges to CO2 pipeline permitting that require new approaches and increased coordination on the part of governments at all levels. Congress recognized this and passed the bipartisan USE IT Act to advance collaboration between federal, state, and tribal governments and diverse stakeholders to encourage the development and construction of carbon capture and storage facilities and CO2 pipelines.

In the USE IT Act, Congress directed the establishment of task forces to provide recommendations to the federal government on identifying challenges that permitting authorities and project developers face and improving the performance of the permitting process and regional coordination.

In response, the Department of Energy and the Council on Environmental Quality have launched two federal Permitting Task Forces, one for federal lands and offshore and the other for private lands. The Task Forces include industry, NGO and community representatives; federal, state and tribal officials; and technical experts who are all working together to develop recommendations for improving and streamlining the permitting.

Finally, if we are to deploy carbon management projects and infrastructure at the scale required, we must also confront the reality of growing local opposition to energy and infrastructure projects. Such opposition is not confined to just carbon management projects, but also affects solar and wind energy projects and electric transmission lines.

And we are seeing mounting opposition across the political spectrum and multiple regions of the country. It is not just climate and environmental justice advocates on the Gulf Coast of Texas and Louisiana who oppose these projects. Opposition also increasingly comes from conservative landowners, farmers and ranchers, and state legislators and local officials in places like my own state of North Dakota, Wyoming and neighboring states.

So, over the past four years, we have undertaken a determined effort to change how we engage communities and local stakeholders and incorporate community benefits and workforce development into the projects that we fund. Integrating community and stakeholder engagement and community benefits plans into the review, selection, and implementation of projects has certainly added effort and complexity to the application process, but it also critical to ensuring that projects have the local support needed to move forward.

My Office of Fossil Energy and Carbon Management has also significantly increased our own analyses, communications and direct engagement with communities and a wide range of local stakeholders in those regions where projects are most likely to be deployed, with the aim of building local understanding of the experience, safety, benefits and need for the technology while directly addressing concerns and misinformation.

Given the growing local opposition to projects that we are experiencing, sustaining DOE and industry efforts at community engagement and benefits over the long term will be key to project success.

So, as we meet today, we still face challenges and barriers to scaling up carbon management, but we can look back with satisfaction and optimism in the knowledge that we have laid the policy and programmatic foundation for scaling up carbon capture, removal, conversion, transport and storage at scale, across the whole value chain, and economy-wide. And we are doing so in a way that delivers significant economic, jobs and environmental benefits to communities and regions across our nation and that positions America to maintain our global leadership in carbon management.

The community represented here in this room today has played an important role over many years in helping us get to where we are today. It is my hope that you will continue to actively support further deployment of carbon management, which had its genesis here in the Permian Basin a half century ago—and that you will be a voice for staying the course going forward.

In closing, it is an honor to join you for one of my last speaking engagements in my service at the Department of Energy and to be with colleagues who have informed and inspired my own work over many years.

Thank you and I look forward to taking questions.