GAO report highlights success of ADM’s ethanol CCS project

By Erin Voegele | January 17, 2022

Archer Daniels Midland’s ethanol carbon capture and sequestration (CCS) project is one of several U.S. Department of Energy-supported CCS demonstration projects addressed in a report published by the U.S. Government Accountability Office in late December.

The report evaluates DOE management and oversight of CCS demonstration projects funded through the American Recovery and Reinvestment Act of 2009. While opponents of CCS site the report as evidence that the federal government shouldn’t provide additional support to CCS technologies, the Carbon Capture Coalition has welcomed the GAO report, noting it validates important success to date and highlights opportunities to improve management and oversight of CCS demonstration projects moving foward.

The report addresses the 11 CCS projects the DOE selected to receive a portion of $1.1 billion funding, with eight coal projects sharing nearly $684 million and three industrial projects sharing $438 million.

Three of the 11 selected projects were built and entered operations—including one coal project and two industrial projects. The coal project halted operations in 2020. The two industrial CCS demonstration projects remain operational.

ADM’s project is one of the two industrial CCS projects that are still operational. The ADM CCS project began operations in 2017 and sequesters CO2 generated at an Illinois ethanol plant in a well-characterized saline reservoir located approximately 1 mile from the plant.

The GAO’s analysis determined that the coal CCS projects were generally less successful than the industrial CCS projects, largely due to eternal factors that affected their economic viability. The GAO also identified significant risks to DOE’s management of coal CCS demonstration projects. Specifically, the GAO said the DOE’s process for selecting coal projects and negotiating funding agreements increased the risk that DOE should fund projects unlikely to succeed. This is because DOE fully committed to coal projects at their initial selection as opposed to allowing time for further review, as it did for the selected industrial CCS projects. The DOE also used expedited time frames for coal project negotiations.

The GAO said its analysis also shows that the DOE, at direction of senior leadership, did not adhere to cost controls designed to limit its financial exposure on funding agreements for coal projects that DOE ultimately terminated. As a result, the agency spent nearly $472 million on the definition and design of four unbuilt facilities, almost $300 million more than planned for those project phases.

“My managing future CCS projects against established scopes, schedules and budgets, DOE would be better positioned to mitigate its financial exposure if projects struggle,” the GAO said. “Additionally, absent a congressional mechanism to provide greater oversight and accountability—such as requiring regular DOE reporting on project status and funding—DOE may risk expending significant taxpayer funds on CCS demonstrations that have little likelihood of success.”

In addition to urging Congress to consider implementing a mechanism for greater oversight and accountability of DOE CCS demonstration project funding, the GAO is also recommending that the DOE improve its project selection and negotiation process and more consistently administer projects against established scopes, schedules, and budgets.

The GAO completed the study due to provision included in the Energy Act of 2020 that directed the office to review DOE’s practices, successes, failures, and any improvements in executing CCS demonstration projects. The 2021 Infrastructure Investment and Jobs Act authorized and appropriated billions of dollars in new investments in CCS demonstration projects, according to the report.

“While opponents of carbon capture have seized on the report as evidence that Congress should not provide additional federal policy support for deployment of carbon management technologies, the GAO’s actual analysis leads to different conclusions,” said Jessie Stolark, public policy and member relations manager at the CCC.

“First, the report concludes that DOE investments in commercial demonstration of carbon capture and storage at industrial facilities were highly successful, and Air Products and ADM’s world class hydrogen and ethanol carbon capture projects, respectively, continue to operate effectively today,” she continued.

“Second, in the case of coal-based power generation projects, where all but one failed to proceed to construction and commercial operation, it is important to understand that capturing CO2 from power plant flue gas costs significantly more than from hydrogen production and ethanol fermentation,” Stolark added. “For these power sector projects, the GAO report highlights the lack of additional federal policy support beyond DOE cost-share funding as a major barrier to their success.  As a result, these projects were unable to secure necessary private financing at a time when natural gas prices were falling and anticipated federal climate policy never materialized.

“Additionally, it is important to realize that the DOE-supported projects reviewed by GAO were under development long before Congress reformed and expanded the federal Section 45Q tax credit in 2018. These carbon capture projects were left without the kind of robust, financially certain federal tax credits available to other low and zero-carbon technologies at the time. By contrast, in the same 2009 ARRA legislation, Congress provided early commercial utility-scale solar demonstration projects access to federal DOE demonstration dollars and an investment tax credit. With this assistance, project developers and their investors had the capacity to finance this first generation of projects and successfully launch commercial utility scale solar generation in the U.S.

“Fortunately, Congress is poised to finally deliver the broad portfolio of federal policy support for carbon management that has long been available to other key clean energy and industrial technologies that are essential to meeting our climate goals,” she added. “The bipartisan infrastructure package enacted by Congress at the end of last year includes increased federal funding for commercial-scale demonstration and builds upon the 2018 legislation revamping the 45Q tax credit.  Additional provisions in pending budget reconciliation legislation to extend and increase the value of the 45Q tax credit and provide a direct pay option to project developers will, if enacted, go a long way toward providing federal policy parity for carbon management demonstration projects and addressing a major shortcoming identified in the GAO report.

“Finally, the GAO helpfully identifies important differences in DOE management and oversight of coal power plant carbon capture projects, as compared to industrial sector demonstration projects, that led to significantly increased expenditure of taxpayer dollars than would have otherwise occurred on projects that failed to advance to construction,” Stolark said. “It is critical that the right lessons are learned from the management of technology demonstration funding that flowed from the 2009 federal stimulus bill. Toward that end, the industry, labor and NGO members of the Carbon Capture Coalition will review the GAO recommendations and consider their own recommendations to the Administration and Congress. These considerations will be important as DOE stands up a new Office of Clean Energy Demonstrations and begins to implement the stepped-up federal funding in the bipartisan infrastructure bill for commercial-scale demonstration of industrial and power plant carbon capture, direct air capture and carbon utilization technologies.

“To be clear, the GAO report should not be misconstrued as justification for scaling back further investment in climate-essential carbon management technologies. To the contrary, it validates important successes to date and highlights opportunities to augment federal policy and improve management and oversight to ensure that we develop and deploy the carbon capture projects necessary to meet midcentury climate goals.”

A full copy of the report is available on the GAO website