As a reporter, my job is to report what people tell me. I am grateful that Taylorsville’s Bo Eaton has brought me up to speed on an issue that affects a lot of money and a lot of Mississippians.
The issue is the Freestate Pipeline, a carbon dioxide pipeline that transports CO2 from Mississippi to Texas where the CO2 is used to extract oil.
The Jackson Dome is one of the top five U.S. natural underground reservoirs of CO2. Some readers may remember a few years ago drilling rigs were in the Barnett Reservoir. Those rigs were extracting CO2.
Like everything in life, drilling for oil is a bit more complicated below the surface, pardon the pun. The simple days of tapping into huge shallow pools of oil that gush up, well, those were the good old days.
The late great John McGowan built a prosperous Northside company coaxing trapped oil to the surface using water. But CO2 works even better. Pump the CO2 down the well, up comes extra oil. This makes large volumes of CO2 valuable.
Bo Eaton’s beef, which is held by numerous Mississippians, is that the Jackson Dome CO2 is being piped to Texas where it helps the Texas economy. Why isn't CO2 being used to help the Mississippi economy?
This is especially true given that the pipeline was built using eminent domain laws. Eminent domain laws allow the government to take your land, presumably at a fair price, and use it for public good. But in this case, Eaton argues, the pipeline is being used for private gain. Mississippi landowners and companies aren’t allowed to tap into it.
The issue of eminent domain laws being used for private projects has been a hot button issue for years, involving U.S. Supreme Court decisions and Mississippi legislation to curtail the practice. Yet Denbury, now owned by Exxon, is somehow getting around the public good part.
I know Bo Eaton through my wife Ginny Knight. The Eatons and the Knights were close families in Taylorsville and Smith County. Bo brings us a Smith County watermelon every summer.
Bo Eaton is not a newcomer to statewide public policy issues. Back in the day, before the Republican Party dominated state government, Bo was a real mover and shaker in the state legislature. He got defeated in a highly publicized election result that was contested all the way to the federal Fifth Circuit Court of Appeals in New Orleans. His defeat paved the way for the Republican takeover of the state legislature.
Bo Eaton suggested I call Mark Worthy, a former vice president of Denbury, who is championing the effort to get the state legislature to designate the Freestate Pipeline as a common carrier pipeline. As a common carrier pipeline, Mississippians could access and buy the Jackson Dome CO2. The result would be the recovery of $14.7 billion worth Mississippi oil.
The Global Energy Monitor website provides some history:
“James Waggoner and JWW Oil and Gas Exploration argued in the federal case Waggoner v. Denbury Onshore, L.L.C. that Denbury’s vertically integrated business model amounted to a monopoly. In 2015, the U.S. Court of Appeals for the Fifth Circuit ruled that no monopoly existed, even if the arrangement created an “alleged injury of decreased royalty payments due to a conspiracy among oil companies.”
“Prior to that ruling, a legislative effort in the Mississippi Legislature also failed for two consecutive sessions in 2014 and 2015. The bills would have mandated common carrier status for Denbury's CO2 pipelines in the state which utilize eminent domain as part of their land use authority.
“The company also pays no severance tax in drilling for CO2 at the Jackson Dome and a legislative effort attempted to change that to a rate of 6%, but failed. The author of the bill, Rep. Gary Staples, (R-Laurel), said not having a severance tax on CO2 drilling costs the state $20 million in tax revenue per year. ‘Denbury Resources is sending 500 million cubic feet of CO2 a day to Texas, and we’re not making a dime on it,’ Staples told a local publication at the time. ‘The people in this state are not for giving away our natural resources, and they need to be aware that it’s happening.’”
Worthy says that not only are Mississippians not able to access the CO2, but the rates paid to the landowners for CO2 royalties are substantially below rates received elsewhere in the nation.
Worthy emailed me an 18-page PowerPoint on this issue. It states, “210 million barrels of oil will NEVER be produced in Jones, Jasper, Smith, Clarke, & Wayne Counties, resulting in:
— $14.7 billion in lost value
($70/bbl)
— $441 million lost
severance tax to MS
over 25 years ($70/bbl)
— $4.2 billion of lost capital
investment ($20/bbl)
— 200+ direct jobs never
produced
— $2.94 billion in lost royalty
payments (20% royalty)
— $30 million in annual direct
payroll
Worthy blamed the failure of the state legislature to take action on political donations to state leaders.
The Mississippi Secretary of State’s website tracks campaign donations, but it’s horrible. I searched to find names of statewide leaders and got nothing. The website’s language explains why, “ The Secretary of State is without the legal authority or obligation to verify the data or investigate its accuracy.”
I then searched using the word “Denbury” and got a couple of pages of results. Most reported donations were in the low thousands of dollars to a variety of well-known statewide leaders.
By far the most donations listed were to Governor Tate Reeves, $27,000.
In 2023, Exxon bought Denbury for $4.9 billion. Presumably, Denbury’s private CO2 pipeline was a big factor in that acquisition.
