Denbury recognizes that climate change is a continuing global concern for governments, businesses, and society. The reduction of carbon emissions is important, and we take the responsibility of protecting our environment seriously. Part of our obligation is to report greenhouse gas (“GHG”) emissions and develop procedures and methods to collect data critical for calculating these emissions. In addition, our operating strategy, which focuses on CO2 EOR and CCUS, has measurable environmental benefits. We are committed to utilizing emerging technologies, where feasible, to capture or reduce emissions and to improve our carbon efficiency.
We are committed to engaging with stakeholders, policy makers, regulators, and our industry on climate change issues and to addressing our impact on the environment. As the world demands energy to fuel tomorrow’s economy and provide a better quality of life, we must meet the demand with a focus on reducing atmospheric CO2 emissions. We are uniquely positioned to leverage our experience and existing CO2 infrastructure to lead in the evolving CCUS industry and facilitate a meaningful reduction in CO2 emissions. We have set a target to fully offset our emissions, including Scope 3 emissions associated with the refining and combustion of our produced hydrocarbons, within this decade. We continuously strive to find innovative, efficient, and cost-effective ways to reduce emissions, effluents and waste in our operations as it is our responsibility to take part in the shared effort to protect and preserve our environment.
With our focus on CO2 EOR, we offer environmental benefits not generally associated with oil and gas operations. Perhaps most significantly, CO2 EOR can reduce carbon emissions. We inject CO2 captured from industrial sources into depleting oil reservoirs in order to increase oil recovery, and as a result, CO2 is stored underground. We have been utilizing CO2 from industrial sources since 2012, totaling nearly 21.5 million metric tons at year-end 2020. Between 2019 and 2020 we utilized an average of over 2.8 million metric tons of CO2 per year from industrial sources for our CO2 EOR operations that could have otherwise been released into the atmosphere. This amount equals the annual greenhouse gas emissions from over 600,000 passenger vehicles. Our CO2 EOR process provides an economical and technically feasible method to develop otherwise stranded oil reserves with the added benefit of incidental CO2 storage. Putting CO2 to work as a commodity, rather than as a waste, is integral to Denbury’s operations.
Denbury is advancing our program of CO2 pipeline development to expand our CO2 transportation network capability to reach our oil fields and other storage locations. Denbury’s business model is an excellent example of how to combine technology, economics and science to take a proven, safe process to a new level. We believe our investments, experience and acquired knowledge give us a strategic and competitive advantage.
On October 30, 2009, the EPA finalized the regulation to report GHGs from various sources covered under several industrial sectors. This rule is published in 40 CFR (the Code of Federal Regulations) under Part 98 and is referred to as the Greenhouse Gas Reporting Program (“GHGRP”). The threshold to report GHGs is 25,000 metric tons of CO2 equivalent (CO2e). Denbury has been utilizing applicability determinations, definitions, calculation methodologies, exemptions and monitoring methods that are listed under applicable subparts of GHGRP for reporting purposes. The data reported by Denbury is available to the public via the EPA’s website. Under this program, we report data under Subparts PP (CO2 produced), UU (CO2 injected) and W (CO2 emitted).
An effective corporate climate change strategy requires a detailed understanding of a company's GHG emissions. Denbury reports direct GHG emissions resulting from its operations as well as indirect GHG emissions associated with the consumption of electricity.
As illustrated by the charts below, in 2019 and 2020, the associated storage of industrially-sourced CO2 used in our EOR operations more than offsets Denbury's entire Scope 1 and Scope 2 emissions.
Denbury installed a natural gas liquids extraction plant at our Delhi Field in Louisiana, which came into service during the second half of 2016. Recovered methane is used to power a turbine to generate electricity for the operation of the gas plant and our other field operations. In addition, the improved purity of CO2 used for re-injection results in increased CO2 utilization efficiency.
As part of our commitment to increasing energy efficiency, we evaluate our operations on an ongoing basis to ensure we are using the most efficient feasible technology. Denbury implements updates and changes throughout our operations to reduce our carbon footprint and increase our efficiency. Increasing energy efficiency benefits both our economic results as well as our environmental efforts.
Denbury’s initiative to update the technology and processes we use in our facilities and operations has aided in the continued control and monitoring of our carbon emissions. For example, many of our recent EOR facilities have been designed to capture low-pressure gases from our tanks and other processes by incorporating vapor recovery units which prevent the ventilation of those gases into the atmosphere and reduce our CO2 emissions to de minimus levels. As a result, all of our EOR facilities capture nearly all of the pressurized CO2 returning from our producing wells by separating the CO2 from produced liquids. The separated CO2 is then re-injected into the oil-bearing reservoir, continuing the repeatable process of enhanced oil recovery and increasing overall production. This control technology is now standard in all of Denbury’s EOR facility designs.
We also evaluate and monitor all of our operations for methane emissions and, where possible, control technologies are utilized to minimize the amount of methane being emitted into the atmosphere. We deploy both capture and combustion systems to limit our methane emissions. In addition, we have implemented an in-house emissions leak detection process to monitor equipment for fugitive emissions.
Denbury is uniquely positioned to leverage our experience and existing CO2 infrastructure to lead in the evolving CCUS industry, deliver value to our stakeholders and facilitate a meaningful reduction in CO2 emissions. In 2020, we accelerated our progress on the course toward realizing our vision of leading the industry in CCUS by forming the Denbury Carbon Solutions team. The Denbury Carbon Solutions team is headed by our Senior Vice President – CCUS who reports directly to our Chief Executive Officer. Also part of the Denbury Carbon Solutions team are our Vice President – CCUS Business Development and Vice President – CCUS Commercial Development and Governmental Relations who report to our Senior Vice President – CCUS. The Denbury Carbon Solutions team is tasked with accelerating progress toward realizing our CCUS goal and taking initial steps towards implementing that plan.
Denbury has a long, successful history of safely managing and injecting large-scale volumes of CO2 in conjunction with our EOR operations, utilizing our industry-leading CO2 infrastructure position in the Gulf Coast and Rocky Mountain regions. Our team is building on this strong foundation to capitalize on the rapidly increasing demand for CCUS solutions, which are essential to meeting the challenge of providing affordable, reliable energy while addressing the risks of climate change.
We have identified five key strategic priorities for Denbury Carbon Solutions to accelerate the expansion of our CCUS business. First, generate new cash flow streams through agreements with existing and new build industrial emitters for the transport and storage of captured CO2. Second, add significant permanent CO2 storage capacity through development of a geographically diverse portfolio of subsurface storage sites providing scale, reliability and flexibility. Third, increase our proportion of carbon-negative blue oil production by seeking to replace the use of naturally sourced CO2 in our EOR operations with captured industrial sourced CO2. Fourth, evaluate and prepare for a capital efficient expansion of up to two to three times Denbury’s existing green pipeline capacity to meet expected rapid growth in demand. And finally, pursue strategic partnerships along the entire CCUS value chain.
Our Gulf Coast system has the ability to provide a high capacity highly reliable, flexible, CO2 transportation and storage system with significant scale and expandability. Denbury has the only significant CO2 infrastructure in the Gulf Coast today and through our EOR operations, we are the only company of scale in the Gulf Coast that is actively engaged in CCUS.
Where we use industrial sourced CO2 in our EOR fields, we inject more CO2 into the ground to recover oil than the production of that oil will ever emit, even when including Scope 3 emissions. Today, around 25% of our total production is blue oil and we expect that proportion to increase over time on our path to completely offsetting our Scope 3 emissions by the end of this decade.