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When completed, a “green pipeline” that will carry carbon dioxide more than 300 miles from Donaldsonville to southeast Texas will have employed nearly 800 construction workers and cost about $750 million.

Officials with Denbury Resources, a Plano, Texas-based oil and gas company, say most of that investment will be made in Louisiana. Perhaps more important, the project could lead to more domestic oil production and a partial solution to a growing environmental dilemma.

“This is a first-of-its-kind project here in Louisiana, and it ties together two critical areas for our state—economic development and energy exploration,” says Gov. Bobby Jindal, who touted the project in late May along with U.S. Rep. Bill Cassidy and Denbury officials.

The pipeline will transport natural and manmade CO2 from the end of another pipeline in Donaldsonville to Hastings Field, an oil field south of Houston. The CO2, considered a “greenhouse gas” and therefore a pollutant, will be injected into oil reservoirs to recover additional crude from depleted fields. The CO2 then can be stored underground indefinitely rather than released into the atmosphere. Officials say the project is a classic win-win: produce more oil, and bury a gas that we’d like to get rid of anyway.

The process isn’t new, but a higher price for crude oil and better technology make it more feasible now than 20 or 30 years ago, says Larry Wall, a spokesman for the Louisiana Mid-Continent Oil and Gas Association.

“This is a pretty massive pipeline being built,” he says, “and it does put the state on the leading edge of advanced recovery.”

The Department of Natural Resources estimates 15.7 billion barrels of oil is stranded in Louisiana fields. Perhaps six billion of those barrels are recoverable through CO2 injection, DNR says. A Department of Energy study says between 45 billion and 85 billion barrels can be recovered from existing U.S. oilfields.

David Dismukes, the associate executive director of LSU’s Center for Energy Studies, says about 40% to 50% of the oil is left behind in a typical reserve, but CO2 injection can help recover about half of what’s left over. He says there are other companies with similar projects, particularly in east Texas and the Rocky Mountain region, adding that some of the big players like ExxonMobil are looking at using the technology.

“Denbury is probably the biggest player in terms of bringing the most capital and resources,” he says. “Their whole corporate focus is on these types of applications almost exclusively.”

The company already is studying the possibility of an even bigger pipeline that would traverse 500 to 700 miles, connecting Louisiana and Mississippi with the Midwest and costing $1 billion. Denbury has agreements with proposed coal gasification plants in Indiana and Illinois that might be served by the project. The company says it expects to get the study’s results before the end of the year.

How big of an impact wider use of the process could have on domestic production will depend on how much is actually found in various reserves, and whether the price of oil stays high enough to justify going after that leftover crude. But Dismukes says Mississippi is the only place in the country where crude production is increasing, and Denbury’s work in the state [where it owns a large reserve of CO2] is a big reason why.

Denbury has agreements to buy carbon dioxide from several planned “coal to liquid” plants that would convert coal or petroleum coke into other products. Those plants will produce massive quantities of CO2 as a byproduct, and would connect to the pipeline. Only one of those facilities, however, the Faustina Hydrogen Products ammonia plant near Donaldsonville, has announced construction. Other projects are on hold in hopes that capital markets will loosen up.

“We’re confident that we will get back on track soon,” says Gareth Roberts, the co-chairman of Denbury’s board of directors.

Roberts points out Louisiana has plenty of plants and refineries that emit CO2. Those emissions are likely to become more costly once the federal government passes climate change legislation that will [most likely] tax carbon. Under the “cap and trade” regime that has already passed the U.S. House of Representatives, plants would be allowed pollution allowances that could be sold to other plants. Theoretically, a plant with an arrangement with a company like Denbury would have a competitive advantage; it could capture and dispose of its carbon safely and have extra allowances it could sell off.

Dismukes says CO2 capture—the ability to grab it from a smokestack and pump it into a pipeline—remains experimental and rather expensive, and so probably a ways off from common usage. The economics, however, could change with the increased attention on climate change from Congress.

For the project to remain viable, crude oil probably needs to stay above $50 a barrel at the absolute minimum. Above $60 would be better, while the “sweet spot” is somewhere above $70. Overall, he says the project is a big deal for the state and the industry.

“It’s a beneficial use of what would otherwise be thought of as a harmful pollutant or a waste product at best,” Dismukes says. “Many people think of it as a win-win application and opportunity.”

PIPE DREAM

Facts about Denbury’s green pipeline:

Size: 24-inch diameter pipeline

Length: 320 miles [200 in Louisiana, 120 in Texas]

Cost: $750 million

Volume: Designed to transport as much as 800 million cubic feet of carbon dioxide per day

Completion date: Donaldsonville to Galveston Bay, Texas, by late 2009; Galveston Bay to Hastings Field, Texas, in 2010