The start of a three-phase research and demonstration effort among major utilities and the oil and gas industry was unanimously approved Friday by California regulators. It promises to perfect a method of using refinery petroleum waste products in an integrated gasification combined-cycle (IGCC) process with carbon capture and storage (CCS). The process would create hydrogen power that could back out natural gas-fueled power generation.

Southern California Edison Co. (SCE) brought the request for $30 million in initial funding to the California Public Utilities Commission (CPUC). The CPUC denied the utility’s request for immediate recovery of the project costs in rates. It instead required SCE to make a formal application for the rate increase. The state regulators directed Edison to fund the first phase to assure that there is no momentum lost in what the regulators consider a “break-through” project in the national push for commercial-scale carbon sequestration programs.

The project includes BP, Occidental Petroleum and mining giant Rio Tinto, with SCE. CPUC President Michael Peevey urged the state’s other two major private-sector electric utilities and public-sector utilities to join Edison in the project.

The CPUC action kicks off an evaluation of an IGCC plant that would use petroleum coke residue from 12 of the state’s oil refineries that is now shipped to the Asian market where it is burned and emits greenhouse gases. Thus, Peevey touted the project as removing “California’s dirty little secret” of exporting a coal-equivalent fuel that could support up to 1,500 MW of clean electric generation when transformed.

Peevey said it is well known that about 20% of the state’s power supplies comes from coal-fired generation located in other western states, but few are aware of the refinery byproduct.

“Most people don’t know that we make a lot of ‘coal’ in California,” Peevey said. “We make it in a dozen of our oil refineries. “Petroleum coke, or ‘petco’, is California’s home-made coal, the residue from producing gasoline and other products. In the industry, it is called the ‘bottom of the barrel’ and it is the chemical equivalent of coal.”

Aside from some supplies of petco that are used in cement plants in California, 90% of the refinery residue is sold to Asian markets. Instead of shipping those supplies, the research project seeks to prove the feasibility for keeping the supplies in the state, gasifying them, and using the hydrogen produced in the process to power an electric generation plant, while capturing and storing the bulk of the carbon emissions.

Called the Hydrogen Energy California (HECA) study, the project’s costs will be collected in a special account by SCE for the time being, pending the outcome of a rate case Edison will file to eventually put the charges in its retail power rates.

“This is a win-win-win outcome,” said Peevey, referring to the clean-burning hydrogen power generation and the CCS process for most of the remaining carbon dioxide in some of California’s oil fields where it can be used in enhanced oil recovery activities. “In this project, we can dispose of the petco from our oil refineries at home in an environmentally sensitive manner while also reducing our need for natural gas.”

Peevey said the total supplies in this project could produce up to 1,500 MW of new power supplies that would not have to be produced with natural gas. Longer term, the process also could be helpful in developing carbon capture storage in the state’s fleet of natural gas-fired power plants. Finally, Peevey said the project eventually could reduce foreign oil imports and boost state revenues in these troubled economic times when the state budget is in shambles.

Targeted for the oil/gas and agriculture-dominated San Joaquin Valley in the state’s midsection, the HECA project has applied for, and is expected to get, up to $300 million of funding from the federal government, Peevey said.

“We are eventually going to have to deploy CCS on a large scale in California — not just in plants using petroleum coke, but also in gas-burning power plants,” he said. “We use a lot of gas in our power plants.”

All of the CPUC commissioners praised the project, but at least two were critical of the Edison utility’s use of the advice letter process to try to fund the project, rather than making a formal application for which evidentiary hearings would be held. John Bohn said the project “stands a real chance to be a major breakthrough.”

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