One Company’s Trash
Dakota survived by becoming a recycler: the by-products of its waste streams bring in more than $150,000 a day. And its most lucrative by-product–the one that finally secured its future–is carbon dioxide.
Scrubbing oil out with CO2 isn’t as lucrative as striking a major new field. “The big-name oil companies don’t go after these. These are like bunts, and they’re looking for home runs,” says SFA Pacific’s Simbeck. But the bunts are worth making for the second-tier oil companies that now dominate U.S. and Canadian oil production. Put the CO2 in the ground, and you’re likely to get more oil–that is, if you have CO2. Most carbon dioxide used in oil fields comes from natural deposits of either CO2 on its own or CO2 entrained with natural gas. Oil-field operators north of Beulah had neither.
By the mid-1990s, Dakota looked like a survivor, and Calgary, Alberta-based PanCanadian Petroleum, the operator of one of Canada’s largest oil fields, was ready to negotiate. Production at PanCanadian’s field in Weyburn, Saskatchewan, peaked in the 1960s, but company geologists believed that CO2 would rev it back up. Under a 1997 deal, Dakota built gas compressors and a pipeline to deliver the CO2 to Weyburn, and PanCanadian agreed to pay Dakota for financing costs on the equipment, plus pay a demand charge. In February, Dakota signed up a second Saskatchewan oil producer, Apache Canada, which will begin taking CO2 next year.
Judy Fairburn, a vice president of operations for EnCana (PanCanadian’s new name after merging with Calgary-based Alberta Energy), says that buying Dakota’s CO2 increased production costs at Weyburn, and that PanCanadian predicated its investment on receiving $16 to $18 a barrel. That was a good bet: oil now fetches about $50 a barrel, and Weyburn is delivering 26,000 barrels per day–its highest level since the 1970s. “This oil field is definitely into its second wind,” says Fairburn.
With natural gas selling at $7 per thousand cubic feet, Dakota is looking good, too. Asked if Dakota might be out-earning its oil-field customers, Fairburn nervously laughs. “I’ll have to calculate that,” she says. “They’re certainly well positioned.”
They are–and not just because of what they are helping to take out of the ground. As the oil rises in the Great Plains, Dakota Gasification’s industrial CO2 is pooling underground, creating an environmental benefit that could be worth millions of dollars more in years ahead, if the United States ever decides to adopt a cap-and-trade emissions policy. A $34 million research study sponsored by the International Energy Agency has been tracking the CO2 underground. Its final report, released last fall, confirmed what everyone expected: the same strata that sealed in Weyburn’s oil for 50 million years should hold its CO2 for thousands of years, if not longer.
Gasification is again in the spotlight, and not just because of its ability to store away greenhouse gases. Today’s record-high natural-gas prices show no signs of slipping, despite record levels of gas exploration in North America. And the technology is improving. Dozens of gasification plants have been built since 1984–most of which turn coal-derived syngas into ammonia fertilizers–and their cutting-edge power equipment costs less to build and operate than Dakota’s. Major suppliers of the equipment, like General Electric, are taking orders for more. Dakota was not only lucky in its decades-long struggle to prove the viability of coal gasification, it was also right.