There’s a fascinating, not-so-widely known success story in public policy originating in the mid-1980s and continuing today in Mississippi. In 1984, the Legislature declared the development of enhanced oil recovery (EOR) to be in the public interest of Mississippi. This process, where carbon dioxide is injected into old oil fields to repressurize the field and revitalize production. is a story unique to Mississippi and the rare event in public policy where expectations were exceeded.
For historical perspective, Mississippi oil production peaked in 1970 at about 65 million barrels per year. From then until 2003, in-state production steadily fell to 17 million barrels. After a 30-year fall, enhanced oil recovery reversed the trend. By 2015, production had climbed back to 25 million barrels per year with enhanced oil recovery accounting for about half that total. While production has declined again since the oil market collapse in late 2014, CO2-based production remains a cornerstone of Mississippi’s oil sector, producing roughly half of all oil in our state today.
The collective economic impact has been tremendous, well into the billions of dollars. Oil severance taxes paid to the state and counties, dollars spent with local vendors, land leases and production royalties paid to landowners, local high-paying jobs in CO2 pipeline construction and oil production sites, the use of local professional service firms, and so on. Effectively, Mississippi’s oil producing sector was significantly larger in recent years than it would have been otherwise without that original action in 1984.
At that time, Shell was the company planning to invest in the first pipeline to transport carbon dioxide mined in Rankin County out of an ancient volcanic formation down and through south Mississippi. When plans didn’t come to fruition due to low oil prices, those assets were eventually sold to a small Texas-based company, Denbury, around the turn of the century. Denbury invested billions of dollars in expanding the pipeline system to reach new areas for production. Notably, Tinsley oil field in Yazoo County, an old field that began production during World War II, was revitalized into the largest producing field in the state and continues to produce today.
Just two years ago, Exxon acquired Denbury and is the current owner of the pipeline system and the associated oil and CO2 production. Having such a well-resourced corporate citizen is a major plus for Mississippi. Looking ahead, there may be opportunities in leveraging these carbon dioxide assets to help attract more investment in Mississippi as companies seek ways to reduce carbon emissions. When or whether these horizon opportunities will develop is unknown, but Mississippi remains in a unique position in an area where there is active interest in finding new solutions.
Carbon dioxide pipelines only exist in a few small parts of the U.S., so whether for oil production or for emissions reductions efforts, the pipeline network should continue paying dividends in Mississippi. If the past 40 years is any indicator of economic potential ahead, it could exceed expectations.
Patrick Sullivan is President of Mississippi Energy Institute.
