A Merchant Take On The Carbon Dioxide Industry

By Sam A. Rushing

The global merchant CO2 industry supports about 22 million metric tons of consumption annually, of which the U.S. makes up over 40 percent of. Second in total tonnage is Europe, followed by Japan. It’s fair to say the merchant CO2 industry in the U.S. is slightly over 9 million tons annually. The ethanol industry accounts for the highest percentage of merchant CO2 supply—product coming from adjacent refining plants—than any other industrial source; approximately 45 percent of the roughly 110 merchant CO2 sources with liquefaction/purification plants have supply arrangements with adjacent ethanol facilities. Virtually all the CO2 from the merchant producers is liquefied and purified to a beverage-grade standard. That’s commonplace because all grades of product are well covered by beverage grade CO2. These plants generally do not include facilities that recover for enhanced oil recovery (EOR), nearby feedstock requirements via pipeline, or other modern sequestration operations that are also delivered via pipeline. However, with sequestration, things are evolving. Today, pipeline sequestration companies are looking to take CO2 from ethanol and other large (concentrated) CO2 emitters, such as anhydrous ammonia plants, and sequester into deep geologic formations. When successful, this will take some of the CO2 off the otherwise emitted total. Further, they will sometimes have pipelines directed to oilfields for EOR. Such projects are largely taking product in the Midwest where most of the CO2 sources from ethanol and ammonia are located. Traditional CO2, which recovers low-pressure product off ethanol, ammonia and reformer operations, predominantly undergoes compression, water removal, refrigeration and purification to achieve various grades of CO2, from pipeline spec to food-and-beverage grade. These are old technologies that have been around for decades.

The CO2 industry is increasingly focused on various forms of sequestration, the first being EOR—with a number of new projects under evaluation or already in development—subsidized by the enhanced tax credits precipitated by both 45Q and the Inflation Reduction Act. This represents a great opportunity to reduce airborne CO2 emissions and gain significant tax credits in doing so. However, the capital expense and project development should not be overlooked. Numerous other types of CO2 sequestration and/or utilization and transformation destinations are under consideration and in development—methanol production, for example—including the pursuit of fuels and organic solvents. Methanol can act as a precursor to the manufacture of several useful chemicals including formaldehyde, acetic acid, and tert-butylether.

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Further, there are small-scale sequestration destinations for CO2 such as using it to enhance the carbonate structure in concrete, thus strengthening the final product. Of course, applications such as using the thermal value of CO2 off an ethanol plant, along with the high-content CO2 (generally over 99 percent (v) off the fermenters) as a partial solution for CO2 usage adjacent to greenhouses is an excellent form of sequestration.

On the other hand, some 75 percent of all merchant CO2 from primarily ethanol plants (which, again, represents over 40% of all merchant CO2 source capabilities), is directed to the food and beverage sector. From that, about 50% is dedicated to food chilling, freezing and preservation. Applications are broad in the food sector alone, where IQF (individually quick frozen) product from both small and large processors use CO2, including manufacturers such as Tyson Foods and Hormel. Other food applications include using dry ice “snow” or dry ice pellets in mixing and grinding meat products for temperature reduction, or as a gas flush application to remove oxygen from packages of meat, poultry and cheese. Soft drink applications are straight forward, and the use of CO2 in craft beers and seltzer drinks has been on the rise.

During the pandemic there were widespread plant outages and operating reductions throughout the source plants serving the merchant CO2 market. With a return to a more normalized economy and typical production of commodities, ethanol among them, the CO2 merchant supply is in much better shape today.

Non-food uses for CO2 range from metallurgy to health care; plus, industrial sector usage continues to grow, with new uses frequently emerging. Ethanol is the most important source type for a good-quality, highly concentrated form of CO2 feedstock for liquefaction/purification, and it serves an impressively large and diverse marketplace.

The majority of merchant CO2 plants from ethanol are in the Midwest, as would be expected; that is consistent with the location of many food processors that consume the product. The CO2 industry transports most of the product via over-the-road transport; and about one-fourth of the product via rail. The cost of distribution is often the largest factor in the price of a delivered product. Regions of the country prone to supply shortages for the merchant sector include the Northwest, Northeast and Middle Atlantic. Today, challenges exist in these regions and adequate supply can periodically be a concern.

Within the CO2 industry there is a level of concern that merchant supplies from the large sources in places such as the Midwest, MidSouth and Southwest may be challenged by federal tax incentives including 45Q and the IRA, in particular. Prices to the merchant sector have been below $10/ton for old contracts, and up to around $30/ ton for raw feedstocks to the traditional refiners in the industry, the industrial gas companies. Further, even though extraordinary investments are required for CO2 pipelines and Class 6 wells for pure sequestration of CO2; the payback with these federal incentives can be impressive. However, out of about 200 ethanol plants domestically, around 45 have CO2 recovery, mostly for the merchant trade; and with potential plans to recover into pipeline networks being planned and developed; there remains a large number of ethanol plants that would probably continue to vent CO2 off the fermenters to the atmosphere. Therefore, the threat to the merchant CO2 sector presented by government subsidized sequestration is perhaps moderate. However, this is the ultimate question to the CO2 refiners, sellers and consumers, as well as manufacturers of food and industrial products.

Author: Sam A. Rushing President, Advanced Cryogenics Ltd. 305-852-2597 rushing@terranova.net www.carbondioxideconsultants.com