Abby L. Harvey
GHG Monitor
5/9/2014
PITTSBURGH, Pa.— A Mississippi state lawmaker suggested here last week that Denbury Resources grant smaller companies access to its Mississippi CO2 pipeline, suggesting that legislation might be necessary to prompt such action and renewing a debate with company representatives over pipeline usage rights. “One of the things that I think we need to do is encourage the smaller companies to go in and do some EOR in some of those lands where they hold the leases. There are some dormant wells out there that the pipeline that Denbury currently owns does not allow access to smaller companies to get that CO2 into those leased lands. That’s one of the things that I think we need to do, is find some way to encourage shared use of that pipeline, make it more public access so to speak so that some of the smaller players can get some of that oil out that will not get out otherwise because they hold the leases and Denbury owns the pipeline,” Mississippi state Senator Terry Burton (R-Newton) said at this year’s Annual CCS Conference.
Burton added, “There has to be some way there to encourage both of those folks to get together. That would be one thing we need to do, we probably need to do that legislatively. I would like for them to be able to work it out without legislation, but sometimes that just doesn’t happen.”
Denbury Vice President of Marketing and Business Development Dan Cole, though, pushed back against Burton’s comments, saying that he “created quite a stir in the Mississippi state legislature in this past session by introducing private interest legislation that would have retroactively transformed Mississippi CO2 pipeline into common carrier pipelines, resulting in the governmental taking of private property and in prohibited governmental interference in private contract between transporters or the owners of the pipeline and third parties.” Cole went on to say, “This proposed bill was the brain child of a small group of individuals who have promoted unsubstantiated EOR projects and have sought to transport CO2 for their advantage far below existing commercial rates.” Later, Cole stated that Denbury is currently working with a small company to negotiate access to the pipeline and already have a transportation agreement in place with another Mississippi based active EOR company.
Questions Over Eminent Domain Use
Denbury currently operates more than 920 miles of CO2 pipeline in the Gulf Coast region after having acquired the 183-mile NEJD C02 pipeline that runs from Jackson Dome to near Donaldsonville, Louis. in 2001 and acquiring or constructing nearly 750 miles of CO2 pipeline in the following years. Using the pipeline Denbury is able to transport large amounts of naturally occurring and anthropogenic CO2 throughout the gulf region for use in EOR.
While Burton said that there should be broader access to the pipeline given that it was built using eminent domain, Cole said the history of the pipeline showed that Denbury obtained only a small amount of land using the process. “Most of the pipeline we have in Mississippi was laid by Shell. We acquired that pipeline in 2001 from Airgas Carbonics, I can’t answer the question as to how much Shell used eminent domain, however, what you need to keep in mind is that in 1984 the Mississippi legislature had legislation passed that allowed Shell the right of eminent domain to lay these CO2 pipelines because of the economic benefit to the state of Mississippi. We determined in the two lines that we laid that there were four cases of eminent domain,” Cole stated, later noting that the amount of land Denbury acquired through eminent domain equated to less than one half of one percent of the total acreage utilized for pipeline right of way acquisition in Mississippi. He also stated that the 1984 legislation did not require pipelines to be common carriers.
Could More Oil be Recovered?
Cole also challenged a claim by Burton asserting there is 300 million barrels of crude oil that are unrecoverable due to restricted access to the Denbury’s pipeline. “This information has been repeatedly discredited by technical experts and data to this affect and will be formally reported to the energy committees of both the house and the senate of the state of Mississippi later this year. At best these are very early estimates, but we believe something well below 100 million barrels is potentially recoverable from eight-to-10 different fields,” Cole said, noting that the planned report, which will include data from independent sources, is scheduled to be released in November.
