A first-of-its-kind methanol production facility proposed for Lake Charles, LA, able to capture carbon that would be used to enhance oilfield production in Texas, has been conditionally guaranteed up to $2 billion in federal loans to advance the novel project, the Department of Energy said Wednesday.

The conditional loan commitment to Lake Charles Methanol LLC would allow the facility to capture carbon, which in turn would be deployed in Texas for enhanced oil recovery (EOR) operations. The unit overall expects to spend $3.8 billion for infrastructure investment.

DOE’s support would represent the first loan guarantee under its Advanced Fossil Energy Project solicitation issued by the Loan Programs Office (LPO).

“This conditional commitment represents a major milestone in the department’s efforts to scale up carbon capture utilization and sequestration and continue American leadership in advanced fossil energy technologies,” said Energy Secretary Ernest Moniz. The LPO “has received more than 70 applications to its current solicitations for almost $50 billion in loans and loan guarantees, which can allow projects to leverage additional private dollars for major infrastructure projects that will create thousands of good-paying American jobs and generate cleaner energy in the future.”

If constructed, the project would not only capture carbon but also be the first to manufacture industrial products from petroleum coke (petcoke) using gasification in the United States. Petcoke is a byproduct from oil refining.

The proposed plant would produce methanol, hydrogen and other industrial gases and chemical products. The CO2 captured from the petcoke gasification plant would be compressed for commercial pipeline transport and piped to oilfields in Texas for EOR, resulting in sequestration of an estimated 4.2 million metric tons/year of CO2. By using petcoke as the feedstock and employing carbon capture at the project, the proposed project is expected to reduce carbon dioxide (CO2) emissions that otherwise would be released.

Leucadia Energy LLC launched plans for the facility in 2012, initially only for petcoke production, but it was canceled in 2014. All contracts, financing, leases and government programs related to the project were terminated at that time.

Lake Charles Methanol was formed in 2015 and is headed by Don Maley, who was formerly an employee of Leucadia. The Lake Charles Methanol team developed an entirely new project on the same site as the prior Leucadia development, with new contracts, new leases, new engineering and a new application for financing from the LPO.

The conditional loan approval now moves the project forward. When the proposal was unveiled four years ago, Leucadia said it had secured commercial offtake contracts with BP Products North America Inc. for the methanol and with Air Products and Chemicals Inc. for other industrial gases. Denbury Onshore LLC, a unit of one of the biggest EOR operators in the country, also contracted to purchase all of the captured CO2, which would be transported via the 320-mile Green Pipeline for use in EOR operations in Texas.

According to DOE, the project should reduce greenhouse gas emissions by 36% versus “typical” methanol facilities. Overall, the project is designed to capture more than three-quarters (77%) of all CO2 that would be produced by the facility.

Lake Charles Methanol expects the project to create 1,000 construction jobs and 200 permanent jobs for Louisiana. It also would support around 300 jobs in Texas for EOR activities.

“DOE’s decision to issue a conditional commitment of up to $2 billion to Lake Charles Methanol proves that Louisiana is a great place to do business and that Louisiana has a promising future in clean energy projects,” Gov. John Bel Edwards said. “This project demonstrates how government and private enterprise can work together to support energy technologies that improve the environment while creating new jobs and economic development.”

Several methanol projects are in the works across the United States as the petrochemical industry takes advantage of low natural gas prices and surging production. Many of the big petrochemical newbuilds and expansions are along the Gulf Coast, with Syngas Energy Holdings LLC last year announcing it would build a methanol plant in St. James Parish, LA, while G2X Energy Inc. is eyeing a site in Lake Charles. Castleton Commodities International in late 2014 said it planned to spend $1.2 billion to develop a methanol manufacturing plant in Plaquemines Parish, LA, whileYuhuang Chemical Inc. also in 2014 said it would commit $2.85 billion for a methanol complex in St. James Parish.

Methanol projects also planned in other parts of the country, including one by US Methanol Corp. for West Virginia, and two planned at Port of Tacoma, WA, by Northwest Innovation Works.

DOE plans to monitor Lake Charles Methanol’s development and “work to reach final agreement before closing the loan guarantee.” The LPO supports a diverse portfolio of more than $30 billion in loans, loan guarantees and commitments, supporting more than 30 closed and committed projects. Among the projects LPO said it has supported are one of the world’s largest wind farms; several of the world’s largest solar generation and thermal energy storage systems; and more than a dozen new or retooled auto manufacturing plants across the country.