The US Environmental Protection Agency has given Lucid Energy the go-ahead to develop the largest carbon capture and storage project in the Permian Basin.
The company plans to sequester 500,000 tonnes of carbon dioxide and hydrogen sulphide per annum from its Red Hills gas processing complex in three Class II wells.
The first well, which already sequesters about 25,000 tonnes per annum, will store up to 100,000 tpa. A second Class II well, which is already permitted and approved by the EPA, will sequester up to 260,000 tpa. An anticipated third Class II well, which is not yet permitted, can store another 260,000 tpa, which the company hopes will begin in 2024.
With all three wells, Lucid will have about 120,000 tonnes of excess capacity of CO2 storage to accommodate volume growth over time. The company is also considering a Class VI well, which would allow the company to sequester CO2 from third parties.
“Since our entry to the Delaware Basin five years ago, Lucid has targeted investments in large-scale gas treating assets, which empower our customers to develop highly economic drilling locations with associated off-spec gas,” Lucid chief executive Mike Latchem said.
“This strategy has proven beneficial for all stakeholders, as Lucid currently removes more CO2 from Permian Basin shale production than any other midstream operator. In turn, Lucid is the perfect candidate to develop the largest CCS project in the Permian Basin by simply modifying and expanding our existing operations.”
While Lucid Energy will not be the largest carbon capture project in the Permian, it will be the largest project that is simply capturing and storing the carbon, rather than using it for enhanced oil recovery. The project will reduce greenhouse gas emissions by 33% companywide.
While Lucid Energy plans to receive 45Q tax credits for the project, the final model for 45Q is still up in the air. Expansions to 45Q were set to be in the US’ Build Back Better plan, but the plan is losing support.
“The ultimate form of 45Q is important because it will a little bit drive how we set this business up. It will impact what we actually do,” Lucid chief financial officer Ryan Moss told Upstream.
“We’re trying to get as far as we can and do as much as we can, and be in a position to execute on our strategy, but there’s this really important consideration, which is, what will 45Q ultimately look like?”
Advocates for expansions to 45Q are calling for the tax credits to increase from $50 per tonne to at least $80 per tonne of CO2 captured, but some are concerned that will not be enough to commercialise CCS projects across the US. Limits to 45Q have also been introduced, such as prohibiting projects that use CO2 in enhanced oil recovery from being eligible for the credits.
“We’re moving forward with this with the full intent of it being successful. And with a 45Q or some other revenue model, we are totally convinced that this is an important project and will be an important service that needs to be provided to our customers,” Moss said.
“We’re convinced that one way or another, we will be able to make money.”