Tayvis Dunnahoe
Special Projects*
In July, the US Department of Energy announced a draft loan guarantee solicitation offering $8 billion for innovative and advanced fossil energy projects and facilities that substantially reduce greenhouse gas (GHG) emissions and other air pollutants.
According to Bill Gibbons, DOE press secretary, the draft solicitation is awaiting stakeholder feedback prior to establishing final parameters for the loan guarantee program. DOE expects to receive comments from industry and the public until early September.
The Advanced Fossil Energy Projects solicitation is authorized by Title XVII of the Energy Policy Act of 2005 (EPACT) through Section 1703 of the Loan Guarantee Program.
DOE's loan programs currently support more than 30 projects with an estimated portfolio of $34.4 billion. Among projects supported are wind farms, solar generation and thermal energy storage systems, one of the first commercial-scale cellulosic ethanol plants in the US, and the first new commercial nuclear power plant to be licensed and built in the US in more than 30 years. The program also supports vehicle manufacturing facilities. With the latest draft solicitation, extraction technology for unconventional oil and gas resources may also be included in this list.
Fossil energy research
In what has been coined an all-of-the-above approach to develop US energy resources, US Sec. of Energy Ernest Moniz said, "Fossil fuels currently provide more than 80% of our energy, and adopting technologies to use them cleanly and more efficiently is critical to our approach." By investing in advanced fossil energy research, Moniz sees DOE playing a critical role in accelerating the introduction of low-carbon fossil fuel technologies into the marketplace that will reduce GHG emissions.
The solicitation will support new or significantly improved unconventional resource technology and facilities. The scope of the current draft focuses on four main areas including carbon capture and sequestration technology, low-carbon power systems, efficiency improvements, and advanced resource development.
The solicitation will support projects that avoid, reduce, or sequester air pollutants or GHG emissions, an important part of the administration's long-term plan. Applications for projects and facilities may include any fossil fuel technology that is new or significantly improved compared with commercial technologies already being deployed in the US.
One important technology area is the funding of low-carbon power systems. With the advent of duel-fuel and dedicated natural gas power generation systems such as those deployed in the Eagle Ford shale and the Bakken, companies may find additional capital through loan guarantee programs to increase the thin margins that currently limit this technology in some resource plays.
In South Texas, the Alamo Area Council of Governments in San Antonio is actively pursuing an emissions inventory to alleviate possible sanctions from recent violations of the Clean Air Act. With higher concentrations of carbon dioxide now effecting the San Antonio area, several institutions are working with industry to understand the possible benefits of generating power through abundant gas to cut down on diesel consumption and decrease the emissions levels for development activities in the region.
Cameron Prell, a lawyer in the Washington, DC office of McGuireWoods LLP, said, "It appears the administration is directing [DOE] to pursue this solicitation for a number of reasons, including the need to help push industry to demonstrate that certain technologies are commercially viable and capable of achieving significant reductions while still using fossil fuels." The addition of fossil energy research in DOE's solicitation could prove to be solid investments over other technology areas such as wind, solar, and electric vehicles.
Projects deploying technologies that reduce or sequester air pollutants or anthropogenic GHG emissions are typically unable to obtain commercial financing due to high technology risks. Therefore, the goal of DOE's solicitation is to foster such technology areas, which have taken on interest from several operators over the last year or two.
Green completion technology could also be enhanced through this program especially in more sensitive areas such the Monterey shale in California, Ohio's latest developments in the Utica, and possibly New York once the dust of moratorium settles and hydraulic fracturing becomes a regulated enterprise.
Methane capture and the use of field gas has been taking place in the US since 2011. Several operators, including Norway's Statoil and Houston independent Apache Corp. now power drilling fleets with natural gas. As of 2012, Apache became the first operator to complete a well with a dedicated natural gas-powered system. To date, the margins for these technologies have been thin due to the abundance of diesel and relative low cost however, with air quality becoming more of an issue in many resource plays, operators are looking for methods to reduce their footprints even further.
While the parameters of the loan guarantee from DOE are in flux, the cutting edge of unconventional resource technology may find additional funding through this program once it has been finalized.
*Tayvis Dunnahoe is editor of OGJ's Unconventional Oil & Gas Report.