Big DOE Carbon Capture Winners (APD, VLO, ADM, LUK, DNR)

Betting on carbon capture has been hard to do, and it still may be a stretch for some investors who may have preferred to see smaller companies.  Today came the announcement from the Department of Energy that it is awarding some $612 million for carbon capture projects to continue testing large-scale carbon capture and storage from industrial sources.  We have found the three groups which are beneficiaries announced today…. Air Products & Chemicals, Inc. (NYSE: APD) and Valero Energy Corporation (NYSE: VLO) are one, Archer Daniels Midland Corporation (NYSE: ADM) is a second, and Leucadia National Corp. (NYSE: LUK) and Denbury Resources Inc. (NYSE: DNR) is a third (Denbury is a winner in two of these actually).  Unfortunately, these projects are going to require patience for the next phases…

Air Products & Chemicals, Inc. (NYSE: APD) is one beneficiary with the DOE share listed at $253 million, although Valero Energy Corporation (NYSE: VLO) is involved as well.  This one also includes Denbury Resources Inc. (NYSE: DNR).  Air Products will partner with Denbury Onshore LLC to capture and sequester 1 million tons of CO2 per year from existing steam-methane reformers in Port Arthur, Texas, starting in November 2012. As stated… “The CO2 will be delivered via a 12-mile connector pipeline to an existing Denbury interstate CO2 pipeline and sequestered via use for enhanced oil recovery in the West Hastings oilfield. The project team includes Air Products & Chemicals, Denbury Onshore LLC, the University of Texas Bureau of Economic Geology, and Valero Energy Corporation.”

Archer Daniels Midland Corporation (NYSE: ADM) was the second beneficiary, although this is smaller with a DOE share listed as $99 million.  The project will capture and sequester 1 million tons of CO2 per year from an existing ethanol plant in Illinois, starting in August 2012. As stated, “The CO2 will be sequestered in the Mt. Simon Sandstone, a well-characterized saline reservoir located about one mile from the plant. The project team includes Archer Daniels Midland, Schlumberger Carbon Services, and the Illinois State Geological Survey.” Schlumberger Ltd. (NYSE: SLB) is just too large to make note of for the size of this.

Leucadia National Corp. (NYSE: LUK) and Denbury Resources Inc. (NYSE: DNR) are listed as the third winners via Leucadia Energy, LLC and Denbury Onshore LLC with the DOE share being listed as $260 million.  It and Denbury Onshore LLC will capture and sequester 4.5 million tons of CO2 per year from a new methanol plant in Lake Charles, La.  As stated, “The CO2 will be delivered via a 12-mile connector pipeline to an existing Denbury interstate CO2 pipeline and sequestered via use for enhanced oil recovery in the West Hastings oilfield, starting in April 2014. The project team includes Leucadia Energy, Denbury, General Electric, Haldor Topsoe, Black & Veatch, Turner Industries, and The University of Texas Bureau of Economic Geology.”  General Electric Co. (NYSE: GE) is in this but is too large to make note of for this type of award.  Leucadia’s 2009 annual report noted regarding the Lake Charles project, “We have applied for U.S. Department of Energy (DOE) grants that will assist us with
working out a means to sequester the carbon dioxide (CO2) produced by the plant. We are in active negotiations with multiple parties for the sale of the plant’s output.”

Keep in mind that this is out to 2012 and is a continuation of smaller and previous pacts in what may total a $1.4 billion effort in total.

The full DOE report is here.

JON C. OGG