Feds putting $2 billion behind Louisiana methanol plant with carbon capture

Contained oil surrounds CITGO Petroleum Corp.'s waste oil holding tanks near Lake Charles, La., after leaking from the facility into the Calcasieu Ship Channel last week. (AP Photo/Lake Charles American Press , Brad Puckett)
Lake Charles, La. is already home to a sprawling petrochemical and refining complex. (AP Photo/Lake Charles American Press , Brad Puckett)

WASHINGTON – A wave of federally-funded carbon dioxide is headed to Texas oil fields.

The Obama administration is the principal investor in a $3.8 billion methanol plant in Lake Charles, La. that will separate carbon dioxide out of its smokestack and put it in a pipeline bound for Texas where it will be used to speed up oil production.

Located 140 miles east of Houston, the plant will be the first methanol facility in the world to use carbon capture and the first in the United States to make methanol out of petcoke, a dirty byproduct of oil refining, according to the U.S. Department of Energy.

With a U.S. government guaranteed loan that could reach up to $2 billion, the project would also mark the first time the Department of Energy has loaned money to a fossil fuel project under its advanced energy program – given to technologies deemed promising but unable to secure investors in the private sector. Past loans have gone to projects like the Vogtle nuclear power plant in Georgia and the now infamous solar panel manufacturer Solyndra, which filed for bankruptcy in 2011.

“On the fossil, there have been various inquiries over the years, but this is the first project that came in and really worked all the way through,” said U.S. Energy Secretary Ernest Moniz. “I’m pleased we reached this stage on a big fossil project that is quite ambitious and quite novel.”

Following from last year’s Paris agreement on climate change, the Obama administration has been pressing to promote low carbon forms of energy. The process of separating carbon dioxide out from the smokestacks of power plants and industrial facilities remains prohibitively expensive.

But the hope at the Energy Department is the Lake Charles project will be able to defray those high costs by selling carbon for use in enhanced oil recovery operations, in which drillers pump carbon dioxide underground into oil fields nearing the end of their lifespan.

The Department of Energy has already jump started carbon capture through grants to companies including NRG Energy, which is finishing up its Petra Nova project at the W.A. Parish coal plant south of Houston.

“We’re building it up,” Moniz said. “I still believe, as does the International Energy Agency, carbon capture will be a significant player.”

The Lake Charles project is headed by Houston businessman Donald Maley, the former vice president for energy investments at the financial firm Leucadia. When Leucadia passed on his proposal to build a similar project in Louisiana, Malley went out on his own and launched his own company this year, Lake Charles Holdings, according to the Energy Department.

A feedstock for the chemical industry, methanol production in the United States has been growing with the proliferation of cheap domestic natural gas in the hydraulic fracturing boom.

Earlier this year Houston-based G2X Energy began construction on a 1.6 billion methanol plant, also in Lake Charles.