News & Updates

Capturing the Moment: A roadmap to high-road carbon capture development

by | Dec 20, 2022 | Energy, Infrastructure, News

Carbon management technologies are emerging as a critical tool in the fight against climate change. Private sector companies across the United States are investing in ambitious new carbon capture utilization and storage projects. The Biden Administration and Congress have committed unprecedented resources to carbon management, first by investing billions of dollars in carbon management by providing low-interest loans and grants to private developers as part of the Bipartisan Infrastructure Law, and more recently by substantially increasing the value of Federal 45Q tax credits for carbon capture projects under the Inflation Reduction Act.

Large-scale carbon capture projects and pipeline networks are being planned across the country to reduce carbon emissions associated with ethanol production and other industrial processes. In the Midwest, three firms – Summit Carbon Solutions, Navigator CO2, and a joint venture between Archer Daniel Midlands Co and Wolf Carbon Solutions – have proposed projects that would capture carbon dioxide (CO2) from ethanol plants and build a pipeline network to transport CO2 to geologic injection sites in North Dakota and Illinois. When completed, these projects will allow pipeline developers and ethanol producers to take advantage of 45Q tax credits while earning premium prices for fuel that meets low-carbon standards established by states like California.

In total, Summit, Navigator and ADM/ Wolf’s plan to invest more than $8 billion to install carbon capture technology systems at existing ethanol plants and build approximately 3,650 miles of new pipeline infrastructure. These projects have the potential to minimize carbon dioxide emissions, while creating thousands of good family-sustaining jobs for local workers across the Midwest. The question for communities living along proposed pipeline right-of-ways, however, is which projects will live up to this potential.

The goal of this report is to examine the projected socioeconomic impacts of the Summit Carbon Capture pipeline, the first and largest of three proposed projects, with a focus on construction employment opportunities. Summit Carbon Solutions plans to invest approximately $4.5 billion to build a carbon capture and storage project across five states. The project will capture carbon dioxide (CO2) from 32 ethanol production facilities, transport the CO2 through a network of nearly 2,000 miles of pipelines, and finally inject it into the Bakken geological formation where the gas will be trapped and eventually mineralized, preventing release into the atmosphere.

Summit Carbon Solutions is currently in the process of permitting the project and securing land easements across Nebraska, Iowa, Minnesota, South Dakota and North Dakota. The company reportedly plans to complete construction in 2024 and begin operations in 2025.

The Summit Carbon Solutions project will receive significant public support through a combination of enhanced 45Q tax credits and price premiums that will be paid to meet low-carbon fuel standards. The 45Q tax credit is designed to incentivize carbon sequestration through a variety of methods. Summit’s project was initially proposed, and presumably profitable, even before passage of the 2022 Inflation Reduction Act (IRA) increased the potential value of the 45Q tax credit by nearly 70%. Thanks to the IRA, Summit’s investors now have an opportunity to capture a $2.9 billion tax credit windfall on top of the profits that were anticipated when project development began.

Summit Carbon Solutions has touted the local employment and associated economic benefits of the company’s 1,958 mile pipeline project. But it is unclear based on Summit’s construction plan to what degree anticipated economic benefits will be realized by communities along the pipeline route, or lost due to reliance on out-of-state construction workers who send paychecks home to communities located thousands of miles from the right-of-way.

This report quantifies the potential socioeconomic benefits of the construction jobs and career opportunities created by construction of a large CO2 pipeline system of the type proposed by Summit in order to better understand what economic benefits communities along the right-of-way can expect, and how project developers can maximize the benefits of new carbon capture projects.

We find the following:

  • A local pipeline construction worker can be expected to contribute roughly four times more to the local economy than a non-resident worker over the short-term ($63,000 versus $16,000 per job-year), and five times more over the long term ($79,000 versus $16,000).
  • If half of all construction jobs on the project are filled by local workers – a ratio typical for large energy projects that prioritize local hiring – the total associated economic impact is estimated to be $726 million.
  • By comparison, if just one in 10 construction jobs is filled by local workforce – a ratio often found on large energy projects that fail to prioritize local hiring – the associated economic impact would drop by nearly half to $380 million.
  • An economic analysis commissioned by Summit significantly overestimates the local benefits of the project based on a highly unrealistic assumption that local workers will account for over 90 percent of the project’s construction workforce.
  • Our analysis shows use of an overwhelmingly traveling workforce to build the project (10% local) could reduce the local economic benefit of associated construction jobs by 65% compared to the company’s estimates which are based on overwhelmingly local workforce (90%+).
  • Summit is expected to receive $7 billion in federal taxpayer dollars ($585 million annually for 12 years) for building and operating the project.
  • Passage of the IRA is expected to provide a $2.892 billion windfall on top of the profit built into the original proposal.

Ultimately, we find that the best way to maximize the economic benefit of Summit Carbon Solutions pipeline and other large CO2 pipeline projects is to prioritize the use of local workforce. This can be accomplished by requiring contractors to partner with registered apprenticeship programs that supply skilled local workforce and move local workers into construction careers. Specifically, we recommend that Summit Carbon Solutions take the following steps:

  • Develop a plan and demonstrate capacity to maximize use of skilled local workforce across the project footprint.
  • Commit to publicly filing quarterly reports on use of local workforce consistent with current practice for large energy projects in Minnesota.
  • Work with registered apprenticeship programs that serve the project area to identify, recruit and train skilled local workforce.

Through these simple steps, the Summit Carbon Solutions pipeline project can not only ensure that the project is built safely and well, but also maximize the project’s short- and long-term economic benefits by stimulating local payrolls and building the region’s skilled construction workforce. These benefits will in turn increase local support and set a positive precedent for future carbon capture infrastructure development.

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