American Oil and Gas Reporter - September 2018 - 126

ConventionCoverage: Kansas Independent Oil & Gas Association

The newly revised Section 45Q federal
income tax credit may make a great
many potential carbon dioxide enhanced
oil recovery projects economic in Kansas,
advises Martin Dubois, principal in Improved Hydrocarbon Recovery LLC.

partly unfortunate circumstances, but also
numerous mistakes. "We decided this
story had to be told so that legislators
and citizens across the county could understand what really happened in Kansas,
and hopefully inform their efforts to
reduce taxes."
Coordinating Drones
Drones, Brock said, are merely a tool.
"We aren't doing UAS for the sake of unmanned systems. Are we going to grow
the industry?" he posed. "Sure, but it's
not about building UAS. It's about what
is delivered to the people who create jobs,
and who make and save money. There is
no benefit to building a UAS program
unless it adds value (to business)."
The Aviation Division has created a
task force composed of universities, industry partners, drone manufacturers, and
state agencies ranging from commerce,
agriculture and transportation to parks
and wildlife: "People who will benefit
from using UAS," he said.
It also has negotiated with a startup
company out of California called AirMap
to create situational awareness of drone
activity over the entire state. "We want
Kansas to have the ability to monitor
drone activity in its airspace," Brock
states. "We are the first state in the country
to do that."
But AirMap is not simply a tracker,
he went on. It is a communications device.
AirMap technology provides data to drone
owners so that they can keep safe the airspace in which they are operating as well

as communicate with air traffic controllers,
Brock indicated.
As an example, he offered, federal
law prohibits commercial UAS inside a
five-mile radius around any airport. Noting
that Kansas has 138 airports, Brock explained that AirMap could tell users
whether and what type of restrictions
might exist in a given airspace. And if
there are restrictions, he said, "It tells
you who to contact and what permission
you need."
In bringing unmanned traffic management to Kansas, Brock said he was guided
by three priorities. "The first is safety,"
he assured. "We are not going to risk
anybody's personal safety for any reason.
"The second one is privacy," Brock
continued. "Privacy and safety ride together in this program. Our approach is
to be super safe, protect privacy, and then
make money. Economic development
needs to happen, but it can't happen without privacy and safety."
How drones can be used to make the
oil and gas industry more profitable is
the purview of the people using them,
he concluded. "We really want you to
come help us," Brock told KIOGA. "I
need to know more about oil and gas,
and what matters to you so we can represent you well."
CO2 EOR
Thanks to the expansion and extension
of the Section 45Q tax credit, Dubois advised a second KIOGA audience, it appears
economically feasible to recover 10 million
barrels of incremental oil a year by injecting
4.3 million metric tons (tonnes) of CO2
into Kansas EOR projects at a cost of
$14.00 a tonne or $0.75 an Mcf.
Dubois said a study commissioned in
2009 by the Midwest Governor's Association estimated Kansas had 750 million
barrels oil technically recoverable through
CO2 EOR. Extrapolating his own knowledge of fields that have been evaluated
through a variety of studies and pilot
projects, Dubois deemed 250 million barrels a reasonable target.
Successful CO2 requires relatively
large fields and concentrated resources.
"I am saying 20 million barrels recovery,
or several fields within a small area that
add to 20 million," Dubois calculated.
"You have to have high recovery rates
per acre to keep infrastructure costs under
control. The fields I have as examples
produced 3 million-10 million barrels a
section."

126 THE AMERICAN OIL & GAS REPORTER

Safety and privacy must be the top priorities for unmanned aircraft traffic management, followed by economic development, indicates Kansas Department
of Transportation Director of Aviation
Bob Brock.

Dubois said Kansas' most likely targets
were "Lansing-Kansas City waterfloods,
Morrow, Chester, and possibly the Arbuckle."
He outlined three economic scenarios
for Kansas CO2 EOR:
* A small scale point-to-point project
that would inject around 150,000 tonnes
a year of CO2 from a local source such
as an ethanol plant into a single field;
* Building a pipeline that would deliver 4.3 million tonnes a year from 15
ethanol plants in Kansas and Nebraska
to multiple oil fields; and
* Acquiring CO 2 from a major
pipeline delivering 9.85 million tonnes a
year from 34 ethanol plants in Iowa, Nebraska and Kansas to the Permian Basin.
Tax Credit
The Section 45Q tax credit was modified by the federal budget bill enacted
by Congress in February, Dubois advised.
At present, it is worth $15.29 a tonne for
CO2 sequestered as part of an enhanced
oil recovery project and $25.70 a tonne
for straight saline storage. The amounts
increase linearly to $35.00 and $50.00 a
tonne, respectively, in 2026.
Dubois said the credits could be
claimed for 12 years from the day carbon
capture began from projects that began
construction before 2024. The credits
may be claimed only by the capture
facility, but they may be transferred to
the storage site/field operator. For an oil
operator to utilize the credit, CO2 must
be injected in a qualified EOR project

American Oil and Gas Reporter - September 2018

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