TC Energy Corporation TRP, a Calgary, Alberta-based oil and gas storage and transportation company, has withdrawn from Project Tundra, a crucial $2 billion initiative aimed at capturing CO2 emissions from the Milton R. Young Station coal-fired power plant. According to Politico, this decision marks a significant shift for North Dakota’s ambitious carbon capture project and is expected to delay the final construction decision. This move presents new challenges for the project’s future. It has sparked reactions from both energy and environmental sectors, raising concerns about the long-term feasibility and financial support for carbon capture technologies in the state.
Overview of TRP’s Project Tundra: Key Goals and Objectives
Project Tundra, led by Minnkota Power Cooperative, has been in development for nearly a decade with the primary goal of capturing planet-warming CO2 emissions from the Milton R. Young Station, located in Center, North Dakota. This project is a key component in the state's strategy to address climate change while continuing to rely on coal-based power. Initially, the project was designed to capture emissions from one of the station's two coal units. This should contribute significantly to the reduction of the plant's carbon footprint.
The carbon capture project was seen as an essential step toward enhancing the environmental sustainability of coal power in the region, providing a potential model for similar initiatives in other parts of the country. However, the withdrawal of TRP has now cast a shadow over the project’s future.
Withdrawal of TC Energy: Key Insights
TRP’s departure from the project was confirmed in a statement issued by the company, highlighting that it would no longer be part of the ongoing development. The company expressed its continued support for Minnkota’s efforts but indicated a preference for focusing on projects that align more closely with TRP’s commercial interests. While TRP did not disclose the specific reasons behind its exit or the financial commitment the company had made to the project, this move highlights the increasing complexity of financing large-scale carbon capture projects in a rapidly changing regulatory environment.
Minnkota, in response, remains optimistic about the future of Project Tundra but acknowledges the significant challenges ahead, particularly in securing sufficient capital to proceed with construction. According to Ben Fladhammer, Minnkota’s spokesman, the project’s progression depends heavily on funding and the resolution of various economic and regulatory hurdles.
Impact of Federal Regulations on Carbon Capture Projects
The project's timeline has already been significantly impacted by growing federal regulations. In June, Minnkota announced that new federal rules requiring coal-fired power plants to capture 90% of its CO2 emissions by 2032 had increased both the financial burden and regulatory uncertainty surrounding this project. These regulations, which also apply to new natural gas plants, have created a ripple effect throughout the energy sector, with many utilities reassessing their plans for carbon capture systems.
For Project Tundra, the regulations raised the total cost from an estimated $1.4 billion to $2 billion. These rules, if enforced as originally written, would require the shutdown of coal plants that fail to meet the stringent emission reduction targets. This has placed additional pressure on Minnkota to determine how best to meet compliance without sacrificing the economic viability of the plant. With carbon capture technology consuming a significant portion of a plant’s electricity output, such investments come with substantial trade-offs, including the increased cost of electricity production.
Financial Support and Subsidies for Project Tundra
Despite the challenges, Project Tundra has garnered substantial federal financial support, including a $48.6 million grant from the Department of Energy, as well as an additional $350 million grant announced in late 2023. These funds are intended to help with the engineering, feasibility studies and eventual implementation of the project. Alongside these federal grants, North Dakota's state government is providing $250 million in loans to support the initiative, signaling strong state-level backing for carbon capture technology.
However, these financial resources will only be fully accessible once a final construction decision is made which is further delaying the project’s potential to begin operation. As of now, only a fraction of these funds has been utilized, primarily for engineering studies, while the bulk of the grants remains on hold.
Broader Implications for the Carbon Capture Industry
TRP’s withdrawal raises important questions about the viability of carbon capture and storage (“CCS”) technology in the United States, particularly in coal-heavy regions like North Dakota. While CCS has long been touted as a solution to mitigate the environmental impact of fossil fuel-based energy production, its high cost and uncertain regulatory future have led to increasing skepticism among industry leaders.
In North Dakota, state officials have been some of the most vocal advocates for carbon capture technology, but the challenges faced by Project Tundra highlight the broader difficulties of scaling CCS solutions. As energy companies explore alternatives, including renewables and natural gas, the future of coal-based power generation with carbon capture remains uncertain.
Overall, TRP's exit leaves the future of Project Tundra reliant on Minnkota Power Cooperative's ability to secure funding and navigate regulatory and economic challenges. Despite significant federal and state support, the project’s high costs and shifting energy policies may require a reevaluation of its viability.
TRP’s Zacks Rank & Key Picks
Currently, TRP has a Zacks Rank of #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like Petrofac Limited POFCY, Targa Resources Corp. TRGP and TechnipFMC plc FTI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Petrofac is valued at $65.26 million. This oil and gas equipment and services company operates across four segments including Onshore Engineering & Construction, Offshore Projects & Operations, Engineering & Consulting Services and Integrated Energy Services.
Targa Resources is valued at $13.35 billion. In the past year, its shares have risen 117.8%. TRGP is a leading provider of midstream energy infrastructure services in the United States. It offers a wide range of services, including gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids.
TechnipFMC is valued at $13.35 billion. This company currently pays a dividend of 20 cents per share, or 0.64%, on an annual basis. FTI is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
