Texas cash-from-carbon pilot lures climate skeptics for profit

Mark Drajem (c) 2014, Bloomberg News. At an aging cement plant in San Antonio, entrepreneur Joe Jones is trying to turn fighting climate change into money-making venture.

Instead of letting carbon dioxide escape from the plant and contribute to global warming, Jones’s Skyonic Corp. is spending $128 million to convert the gas into baking soda and hydrochloric acid that can be sold to the cattle and oil industries.

“We can take something that’s waste and turn it into something that’s profit,” Jones says while giving a visitor a tour of the plant. “In a world that’s unsettled on carbon, we’re making actual progress.”

More technologies like Skyonic’s could emerge as President Barack Obama steps up his fight against global warming, such as with the regulations to cut carbon pollution from power plants the Environmental Protection Agency proposed on Monday. The company says its technology can be used to help plants comply.

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To be sure, one project under construction capturing some of the emissions from one cement factory is a far cry from solving climate change. And, some analysts question whether the Skyonic model can ramp up to serve more than a niche market.

“Where do you put all that solid material?” Michael Webber, deputy director of the Energy Institute at the University of Texas, asked in an interview. More than 6.5 billion tons of greenhouse gases are emitted in the U.S. each year and Skyonic expects to reduce emissions by 300,000 tons. “It’s hard to imagine capturing that and putting it to use,” he said.

Julio Friedmann, the deputy assistant secretary of the Energy Department, calls Skyonic’s technology “credible” though further research is needed. His department backed the pilot project with cash, giving the closely held company a $25 million grant.

Jones says his Texas project can succeed without Washington policies or new taxes, but it also shows that entrepreneurs — even in oil- and gas-rich Texas — can find a way to make money from new regulations on carbon.

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The state has more wind-power capacity than any other and the boom in natural gas is helping to push out coal-fired power. And it has pioneered using carbon dixoide to help squeeze the last drops of oil from underground reservoirs.

“Texas is an entrepreneurial state, and if we could get past our philosophies, there is a lot of money to be made” in fighting climate change, Webber said in an interview.

Skyonic already has long-term contracts for its carbon by- products, and expects to earn $50 million a year in sales once it starts running later this year.

It’s the prospect of cash from carbon that helped the 56- year-old Jones, who says fighting global warming is a personal mission, to lure employees — and primary investor Carl Berg, a California real-estate magnate — who say they are skeptical that burning fossil fuels warms the Earth.

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“It doesn’t matter if you agree or disagree with anthropogenic global warming,” said Jerel Walters, who is directing the construction of the project and says he is skeptical humans are responsible for altering the climate. “I love the idea of taking something that’s a waste and turning it into profit.”

The Austin, Texas-based Skyonic, founded in 2005 and backed by oil giants such as BP and ConocoPhillips, has two sets of patented technologies it says capture and turn carbon dioxide into a salable by-product. Both use chemistry to break down salt into its base components, which then bond with the acidic carbon dioxide to form a new substance. Here, it’s baking soda.

The first commercial installation is at the 49-year-old Zachry Capitol Cement plant in San Antonio. Choosing the plant was deliberate. Making cement is the second-largest source of industrial carbon emissions, after steel making, according to EPA data. Emissions from power plants dwarf both.

The Skyonic process, called SkyMine, runs electricity through a salt-water mixture to split the molecules, creating hydrochloric acid that can sold along with sodium hydroxide, the main ingredient in Drano. The liquid sodium hydroxide is then put into a “bubbler,” which looks like a super-sized torpedo on its end. The effervescent carbon dioxide is sent through the liquid, and each bubble of gas reacts with the acid, forming sodium bicarbonate, or baking soda.

Of the 500,000 tons of carbon dioxide the EPA says is released at the cement plant a year, 75,000 will be piped to the SkyMine, which sits on the five acres leased from Zachry. Jones says 94 percent of that will be converted to the sodium bicarbonate. By eliminating the need to mine and produce that compound, the net reduction in carbon emissions is about 300,000 tons, according to the company.

Once it starts running, sometime in October, the plant will produce an amount equal to 15 percent of the nation’s sodium bicarbonate — at a price that’s about a quarter of the cost to mine the ingredients. The hydrochloric acid, about 4 percent of the U.S. total, will be sent to nearby gas and oil fields for use in hydraulic fracturing. Five million gallons of bleach will also be made and sold.

“This is the furthest along anyone has gotten in taking CO2 and turning it into a” marketable compound, said John Thompson, director at the Clean Air Task Force, a group that helps support carbon-capture projects. “What’s significant is that they are going commercial with it, they will make money with it, and that gets them to the next stage of development.”

SkyMine’s eventual expansion is limited because the volume of sodium bicarbonate and hydrochloric acid from just a few plants would overwhelm the national market, according to Thompson.

Jones agrees and offers plans to deal with the limitations.

First, Skyonic is looking to expand to nations such as China and South Africa, where coal plants could use the sodium bicarbonate to clean up traditional pollutants such as sulfur dioxide. And so, a Skyonic unit at a China coal plant could make a product that would clean up it’s mercury and particulate pollution.

“This could be a monster company, if we can get connected in China,” Berg, who said he invested $15 million to $20 million in Skyonic, said in a telephone interview. “I look at China as being the key.”

Second, the company is testing heat as a way to turn the carbon dioxide into sand and limestone. While limestone sells for about one-tenth the cost of sodium bicarbonate, the global market is 300 times larger, according to the company. And the cement industry buys tons of limestone.

“We’re taking the carbon dioxide out of the flue and turning it into the stuff they’re using,” Jones said as he sat in a trailer that serves as a company lab at Zachry’s cement plant. “I get people’s concern that those initial markets aren’t big, but there’s a big pyramid” of demand, he said.

To be sure, scaling up any technology has risks. With the initial plant still under construction, nothing Jones is promising has been shown to work at scale. Even if it does work, it seems clear that turning carbon into minerals is just one part of the answer to climate change.

Curbing emissions “will mean a different set of technologies for each state,” said Malcolm Woolf, the author of a report for Advanced Energy Economy on 40 technologies that would help utilities meet the upcoming EPA rules to cut emissions while also upgrading the electric grid. “The most effective companies will be those that embrace the change.”

And even Jones, who tries to keep talk of government policies out of his business pitch, does say that at some point policymakers will have to impose some kind of cost on carbon in order to make the economics of his business more attractive.

“You can make advances on carbon without a market,” Jones said. “But would a carbon market help? It would.”