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Here’s why Kinder Morgan leased space at the Houston Ship Channel

April 19, 2024

Houston-based Kinder Morgan Inc. (NYSE: KMI) is developing a carbon sequestration project near the Houston Ship Channel, joining several other carbon sequestration projects taking advantage of Houston’s vast amount of industrial emissions.

Kinder Morgan and TGS Cedar Port Partners LP, which is leasing 10,800 acres of pore space to Kinder Morgan, told the Houston Business Journal that pipelines will be developed at the massive industrial park to transport carbon dioxide to the sequestration site directly under Cedar Port in Baytown.

The pore space has the capacity to store 300 million tonnes of carbon dioxide from nearby industrial sources of emissions.

“This is a big regional effort to provide alternatives for the energy market in the region,” Matt Fleming, vice president of business development at TGS, told the HBJ.

Cedar Port is billed as the largest master planned, rail-and-barge-served industrial park in the United States, spanning about 15,000 acres. Craig Cavalier acted as General Counsel for TGS in the deal.

Fleming said there is lots of interest from emissions sources on the project, although the project is still in its early stages so offtake agreements aren’t quite in the works yet.

While Kinder Morgan is known for its natural gas infrastructure, transporting just under 50% of feed gas to U.S. LNG projects, it has the capacity to transport 1.5 billion cubic feet per day of carbon dioxide. The company also considers carbon dioxide one of its three primary commodities.

Fleming added that “Kinder Morgan is expert in the market handling CO2,” and is well suited to evaluate and utilize the geological area underneath the industrial park.

The Houston area is a hotspot for carbon capture projects in the works due to its massive amount of industrial emissions that could be captured and stored underground. According to a fact sheet Exxon Mobil Corp. published when proposing a monumental carbon capture hub in the region, the region is near industrial emissions sources and geologic formations in the Gulf of Mexico that could store large amounts of carbon dioxide permanently.

Permit applications for carbon dioxide sequestration in the U.S. have increased by 500% since 2021, and some big names in oil and gas are part of that growth, the Houston Business Journal previously reported. However, commercial and regulatory structures are still coming together to make projects work for both customers and suppliers of carbon capture and sequestration, Chevron Corp. (NYSE: CVX) CEO Mike Wirth said at CERAWeek by S&P Global in Houston on March 19.

Kinder Morgan said it will require the drilling of Class VI wells to develop the pore space, one of the technologies that is facing slow permitting times through the U.S. Environmental Protection Agency. Wirth said at the conference that he would like to see Texas gain regulatory authority over Class VI wells, which are designed specifically to permanently inject and store carbon dioxide underground.

Kinder Morgan added that while the company is focused on the transportation and sequestration of the carbon dioxide for the Cedar Port project, it is open to exploring the capture side of the equation as well if the right project or source presents itself.

By Naomi Klinge, Houston Business Journal