CO2 Pipelines Would Significantly Impact South Dakota Economy
The South Dakota Ethanol Producers Association worked with the Dakota Institute to analyze the potential economic impacts of two large CO2 pipeline projects. The pipelines would collect CO2 byproducts of corn-based ethanol production and transport the CO2 gas for long-term underground storage through a process known as Carbon Capture and Sequestration (CCS).
The Navigator CO2 (Navigator) pipeline will collect carbon dioxide from ethanol plants across five states, including Illinois, Iowa, Minnesota, Nebraska, and South Dakota, for storage underground at Mt. Simon sandstone formation in central Illinois. The Summit Carbon Solutions (Summit) pipeline will also collect carbon dioxide from biofuel plants in five states, including Iowa, Minnesota, Nebraska, North Dakota, and South Dakota, for deep underground storage in North Dakota.
Once completed, the Navigator and Summit pipelines will constitute the largest carbon dioxide pipeline networks in the United States. The two pipelines will stretch nearly 4,000 miles and transport carbon dioxide from 61 biorefineries across the Midwest for permanent underground storage. Nearly 361 miles of the Navigator pipeline (19% of its total length) would cross twelve South Dakota counties. The Summit pipeline will stretch 474 miles (24% of its full length) across eighteen South Dakota counties. The pipelines will provide access to CCS pipelines for 13 of South Dakota’s 16 ethanol plants.
The Navigator and Summit CCS projects could significantly alter the landscape of ethanol production across the Midwest. They will also bring significant economic impacts to the South Dakota economy if they go forward. Our report provides insights into the Navigator and Summit pipelines’ potential economic impacts and the secondary impacts that they could unlock. First, this report analyzes the economic impacts arising from the construction and operation of the pipelines. Second, this analysis estimates the economic impact of tax credits available to ethanol producers adopting CCS. Finally, this report analyzes how increased ethanol production could impact the local corn basis and the economic impacts of a strengthened corn basis on farm incomes.
We report the estimated economic impacts of the CCS projects across two phases. First, a construction phase which takes place in 2024 and 2025. Second, we analyze the first ten years of pipeline operations occurring from 2025 through 2034. Our findings, summarized by Table ES1 on the following page, indicate that the CCS projects will have a pronounced effect on South Dakota’s economy throughout the study period and beyond.
We estimate the total impact on state GDP will be $3.3 billion across both phases. The construction phase will increase state GDP by $952 million over 2024 and 2025, nearly 0.70% of state GDP each year. We further estimate the operational phase will add another $2.35 billion to state GDP from the combined impacts of pipeline operations, clean fuel and CCS tax credits, and a stronger corn basis, representing a 0.35% increase in state GDP annually.
The impacts on gross output, which is a broader measure of economic activity than GDP, are even larger. The pipelines will support an estimated $5.92 billion in gross output from 2024 through 2034. We estimate the largest impact will come during the CAPEX phase of the project, which will increase gross output in the state by an estimated $1.68 billion over the two-year construction period. The second largest impact on gross output will come from the clean fuel and CCS tax credits, which we estimate will be $1.6 billion from 2025 through 2034. We also estimate that a stronger corn basis will boost gross output by nearly $1.36 billion, and the operating activities of the pipelines will increase gross output by slightly more than $1.28 billion over the same period. Finally, we estimate the pipelines will support a total of 7,105 jobs from 2024 through 2034, including 5,353 annually during the construction phase and 1,752 annually during the operations phase.