11 The Far Ranging Socioeconomic Benefits of CO2-EOR and the Unique Role of Texas Frank Clemente Ph.D. Senior Professor of Social Science & Energy Policy Penn State University Note: Jude Clemente, Energy Analyst, Department of Homeland Security, San Diego State University, made significant contributions to this report.

The Context of CO 2 -EOR “efficient capture and separation of by-product CO 2 from the next generation of low emission power plants could provide massive, long-term sources of ‘EOR-Ready CO 2 ”, U.S. DOE, “ Availability of CO 2 limits the industry’s ability to expand CO 2 -EOR” Charles Fox, Vice President, Kinder Morgan, In 1985 the United States produced 9 Mb/d of oil and imported 5 Mb/d. In 2005, we produced 5 Mb/d and imported almost 14 Mb/d. –U.S. EIA, 2008 The United States has over 80 billion barrels of “stranded oil” recoverable through CO 2 -EOR.---U.S. DOE, 2006

The “Win-Win” Contributions of CO 2 -EOR 1.Supply -- Produce 2 million barrels of oil per day for 100 years. 2.National security -- reduce dependence on countries such as Venezuela, Iran and Russia 3.Economy -- Reduce trade deficit by over $ 70 billion per year. 4.Environment -- Productively use and safely sequester CO 2 5.The future -- Enable the U.S. to realize the full potential of our greatest energy resource -- coal

The U.S Faces Intense Global Competition for Incremental Oil Supply – Incremental Demand for Oil in Millions of Tons From 1980 to 2005 the U.S accounted for 18% of the global increase in oil consumption. From that figure will only be 5% *Developing Asia Excludes China and India; U.S. EIA, International Energy Outlook, 2008

What Two Million Barrels a Day from CO 2 – EOR Would Do

CO 2 is the Pathway to Over 50 Billion Barrels of Oil in TX and OK.* Oklahoma has more than 38 billion barrels of stranded oil and a large portion recoverable by CO 2 – EOR. “East and Central Texas have nearly 74 billion barrels of oil which will be left in the ground or “stranded”….( much of) This stranded oil is in mature reservoirs that appear to be technologically and economically available to enhanced oil recovery (EOR) using carbon dioxide (CO 2 ) injection” “Large volumes of CO 2 supplies will be required in East and Central Texas (and Oklahoma) to achieve the CO 2 – EOR potential” * Calculated from Office of Oil and Natural Gas, U.S. Department of Energy, 2006

The Location Of Stranded Oil Recoverable Through CO 2 – EOR * Billion Barrels With State of the Art technologies, Texas has over 35 billion barrels of recoverable oil * Excludes Alaska and Offshore, Office of Oil and Gas, U.S. DOE, 2006

Adapted from Office of Oil and Gas data, U.S.DOE,2006 The Scale of CO 2 – EOR’S Potential Contribution CO2 – EOR could provide over 40 years of current U.S. production

And The Stranded Oil Is There Over 350 billion barrels of oil are “stranded in the continental United States * * Excludes Alaska and offshore; Adapted from Office of Oil and Gas data, U.S. DOE 2006 Billion Barrels Texas alone has over 120 billion barrels of stranded oil – More than 30% of the U.S. total.

Why Texas is so Important to CO 2 - EOR 1.Over 35 billion barrels of potentially recoverable oil are in Texas – 40% of U.S. total. 2.Texas has been using EOR since 1972 and current production is over 200,000 barrels per day – over 20% of Texas production. Regulatory experience with EOR is well established. 3.Texas already has an extensive pipeline infrastructure capable of transporting CO 2. 4.Texas accounts for 20 % of U.S. oil production but conventional output has declined from 2.6 Mb/d in 1980 to about 1 Mb/d currently. 5.CO 2 –EOR will enable Texas to reassert its role as the cornerstone of U.S. oil supply. “the benefits of EOR production will result in $200 billion in additional reserves and 1.5 million jobs in Texas” Myra Crownover, Chair of Energy Resources Committee, Texas House of Representatives, 10/2008 Adapted from Office of Oil and Gas, U.S. DOE,2006

Areas in TX and OK Amenable to CO 2 - EOR Office of Oil and Gas, USDOE,2006

Twelve Strengths of the EOR Process 1.Injected CO 2 pushes “stranded” oil to the well bore, increasing recoverability. 2.CO 2 lowers the viscosity of oil and increases the flow rates. 3.CO 2 is liquid-like at 800 meters and oil field reservoirs are effective traps for buoyant fluids – the reason oil accumulated there. 4.CO 2 becomes less mobile over time, reducing leakage risks. 5.Cement plugs insure no leakage from well bore.

Twelve Strengths of the EOR Process (con’t) 6. Oil produced from CO 2 – EOR is 70% “carbon free” – based on difference between carbon content in the incremental oil from EOR and the volume of CO 2 stored in the reservoirs. 7. Intergovernmental Panel on Climate Change concluded “CO 2 can remain trapped underground”. 8.Provides an extensive “value added” market for the sole of CO 2 emissions from new coal fueled power plants and will defray some of the cost of CCS.

Twelve Strengths of the EOR Process (con’t) 9. Helps resolve two key issues constraining storage of CO2 – (1) establishing mineral rights and (2) assigning long term liability 10. U.S. trade balance improves by $ trillions over lifetime of the process. State and local government revenues increase by $ billions. 11. New, well paying jobs created and broad positive impacts on economic growth 12. National security significantly enhanced as imports of foreign oil reduced by 18%

Two Decades of U.S. Oil Production From CO 2 – EOR Oil Production From CO 2 – EOR (Barrels 000) Thousands of Barrels of Oil Texas produces 80% of U.S. CO2-EOR Texas Public Utility Commission,2008,

16 Why The United States needs CO2-EOR

The United States Must Expand Domestic Sources of Oil 1.U.S. consumption of oil has increased from 17 Mb/d in 1990 to 21 Mb/d in 2007 – an increase of 22%. 2.Over the same period, U.S. production of oil has decreased from 7.4 Mb/d to 5.1Mb/d – a decline of 31%. 3.In order to meet demand, imports of foreign oil increased almost 70% -- from 8 Mb/d to 13.5 Mb/d. 4.As a result, the U.S. now imports 65% of its crude oil and this pattern is expected to continue through 2030.

The United States Must Expand Domestic Sources of Oil (con’t) 5.These imports are costly and in 2007 the U.S. paid $ 300 billion to buy oil from foreign suppliers. 6.These imports are risky and pose a threat to U.S. energy security. Over 10 % of our oil imports are from Venezuela. Russia and Iran account for 17% of the world output. 7.Even “secure” sources of energy supply are questionable – Mexico supplies 12% of our oil imports, but production is projected to decline over 35%. 8.The specter of “peak oil” looms over world markets – global production of conventional oil has been flat since 2005.

19 Our Growing Dependence on Foreign Crude Oil DependenceDependence U.S. EIA Annual Energy Outlook,2008

20 The Cost of Dependence— Transferring wealth of the American People Annual Cost of U.S. Petroleum Imports

21 Modernization – The Rise of the Automobile In 2002, there were 812 million vehicles globally. By 2030 there will be 2.1 billion. Source (Dargay, Gately and Sommer, 2007)