Crescent Begins to Shine Bright After Rapid, But Quiet, Growth
Editor's Note: A video interview with Crescent Midstream CEO Jerry Ashcroft was added to this story.
Despite its origins dating back nearly two decades, Crescent Midstream only entered the public spotlight less than a year ago when it began touting offshore carbon capture and storage (CCS) projects and aggressive net-zero goals for a fossil fuel company.
An offshore Gulf of Mexico and Louisiana pipeline player, Crescent is rapidly growing since its 2021 emergence from parent Crimson Midstream, which was sold along with its California pipeline assets to the CorEnergy Infrastructure Trust.
Crimson founder John Grier, who started the company in 2005, joined CorEnergy with then-veteran midstream executive Jerry Ashcroft eventually taking over what is now an independent Crescent.
By the end of 2021, private equity player Carlyle Group, which first invested in Crimson in 2019, took majority ownership of Crescent just as Crescent was quickly, but quietly, growing.
Crescent acquired the Grand Isle Gathering System as part of the CorEnergy deal, and then Crescent scooped up a large minority stake in the big, Genesis Energy-operated Cameron Highway Oil Pipeline System, called CHOPS, in the Gulf.
At the time, Genesis cited the sale of the 36% stake for $418 million to an “undisclosed buyer.” CHOPS primarily delivers crude from the Green Canyon area offshore Louisiana to Texas refinery hubs.
As of late 2022, Crescent was partnered with Spanish energy giant Repsol and offshore producer Cox Operating to develop a CCS hub in the Gulf of Mexico within Cox’s existing leasehold.
Cox filed for bankruptcy protection in May, but Crescent contends the filing will not impact the offshore project.
The plan is for Crescent to build a 110-mile CO2 pipeline from refining and petrochemical plants in Geismar, Louisiana, to the coastline in Grand Isle, utilizing existing Crescent pipeline rights of way.
The U.S. Department of Energy selected the project in May—providing $8.4 million in federal funding—to help demonstrate the feasibility of offshore CCS in the Gulf. The project is expected to have a capacity of 300 million metric tons (MMmt) of CO2.
The DOE is supporting the project, officially known as the Louisiana Offshore CO2 Hub Repurposing Infrastructure to Decrease Greenhouse Emissions—intentionally creating the “Project Lochridge” acronym—through its CarbonSAFE program.
In March, Crescent teamed up with the Well Done Foundation for carbon credits to help sponsor its work for orphaned oil well plugging and site restoration in Louisiana.
Now, the aim is for Crescent to become the first known carbon-neutral midstream company by the end of 2023 with carbon credits, while factoring in only Scope I and 2 emissions.
Ashcroft is the former CEO of EQT Midstream–now Equitrans Midstream–who left to head up the Carlyle-backed Lone Star Ports projects. Then he moved over to Crescent.
Ashcroft sat down with Hart Energy for an exclusive Q&A on his company’s growth and goals.
Jordan Blum, editorial director, Hart Energy: I know Crescent dates back to 2005, but you just got the Carlyle backing a few years ago. How has the growth rapidly sped up in the last few of years?
Jerry Ashcroft, CEO, Crescent Midstream: It really started out with John Grier, our founder and chairman. John saw an opportunity in the market, like many of the MLPs did, to buy assets from the integrated oils. So John bought midstream assets both in California and in the Gulf of Mexico, and kept building and growing upon that. And then, there came a time to look for other shareholders to continue that growth engine. And that’s when Carlyle came in, in 2019. And so we’ve really had rapid growth, especially over the last three years. We’ve tripled our size, and it’s come both through organic growth in the Gulf of Mexico where we decided to focus, and it’s come from acquisitions.
JB: Can you talk about some of the acquisitions? I feel like they haven’t been really publicized that much.
JA: You’re right. So, we made a decision to sell our California assets to a REIT [real estate investment trust] called Cor. And with that we received the Grand Isle Gathering System, which is a crude oil pipeline system on the shelf, which was really complementary to the other assets we had. Plus, it fed into our main transmission line that we call Bonefish that runs from Empire to St. James [in Louisiana]. So that was kind of a bolt-on acquisition that we did. And then we also bought a 36% interest in CHOPS, which is the Genesis-owned deepwater pipeline, which really fit our strategy of trying to get farther into the Gulf.
That’s a great team with Genesis. We’ve really enjoyed working with them and watching the growth of that system.
JB: CHOPS is non-operated, but it’s such a big system. Is that stake Crescent’s biggest asset now?
JA: It’s actually our gathering systems offshore that are our largest part of our EBITDA. The next largest part is our onshore system, and then finally it’s CHOPS. But I think that by 2025, it’ll probably be half CHOPS and half our legacy business. BP’s Argos recently came online and [Murphy Oil’s] King’s Quay.
JB: And it’s just a matter of time before the Gulf of Mexico hits new production records, it seems.
JA: I think you’re absolutely right. I think that’s kind of where that energy transition piece connects with the Gulf of Mexico. It’s such a low-carbon intensity to bring oil from offshore to onshore just because of how it’s done compared to the Permian, for example. A lot more carbon intensity goes into pulling a barrel out of the Permian versus what it takes in the Gulf. That kind of goes into where we are in 2023. We’re going to be carbon neutral. I think we’re the first one in the midstream sector that can say that. We really drove our numbers down by looking at how we can run more efficient pumps and motors. How can we do vapor recovery? And then, finally, for that last part, we’ve bought offsets from the Well Done Foundation.
JB: Can you elaborate on how that offset process is going?
JA: Basically, we were looking for ways to buy carbon credits in our own backyard. We talked with Ducks Unlimited and they’ve got a number of projects going on, and we’ve done work with them in the past. But a lot of times those credits were further out in the future. The Well Done Foundation is plugging old abandoned wells that have methane releases. We were able to convince them to come to Louisiana and do that. It’s really a great fit for us that we can continue to be a steward of our environment there in Louisiana.
JB: So the objective is to be—by year-end—the first carbon-neutral midstream company?
JA: That’s correct. Yeah, I’m really excited about it.
JB: As a private company, why is it so important to have that carbon-neutral and ESG focus?
JA: We kind of look at it from our own strategy of being a safe, reliable, compliant business. We look at this as, “we’re going beyond compliance.” Sometimes that comes in the form of the charity that we do, but in this case, it was for us to actually be better stewards of the environment, too. I will say that what we have seen is, we’re more welcomed as a partner when it comes to getting insurance for our facilities and our pipelines. We’re more welcomed as a partner when we go to banks to get debt. But I don’t know whether there’s a real dollar value that I could point to.
JB: Is there more of a business case longer-term with that focus?
JA: Absolutely. I just think that it’s where society is going in general, right? I think we see it all the time, whether it’s your own electricity bill at home and they’re saying, “Well, would you like green energy?” Or whether it’s recycling programs in neighborhoods. So, when we look at our own business what we can do to lower the carbon intensity, it’s just the right thing.
JB: In that vein, can you talk about everything you’re doing with the carbon capture focus?
JA: We’ve got so much momentum with what we’re doing. We’ve got a management team and personnel with the capabilities to run safe and reliable pipelines. And we also have the strategic footprint. You’ve got a lot of emitters from Louisiana all along the Mississippi River. So, we’re making that natural industrial logic link between the emitter and the sink. We think we really have a first-mover advantage because we already have a license to operate pipelines there in Louisiana.
JB: And, apart from you and the Chevron-Talos Energy partnership, you don’t hear a lot about offshore CCS yet.
JA: There’s a great consortium called Carbon Zero that we support. You’ve got Cox Oil, and Repsol was brought in. They’ve got a lot of downhole knowledge from the geology standpoint, and Europe has really been a leader in decarbonization. Plus, we’re linked up with LSU and Southern University and the University of Texas to develop this plan, and we’re lucky to receive funding from the DOE CarbonSAFE [Initiative] grant plan.
JB: I know it’s relatively early goings, but how do you see the timeline playing out?
JA: That’s a great question. We’ve been working with the DOE hand-in-hand saying this would be great to have as a pilot project. I think a lot of the emitters are looking to hit goals at that 2030 stage. I think that some of the earlier projects may come in as soon as 2027. I’m thinking that you see this surge of projects between 2027 and 2030.
Cox already has the oil and gas extraction leases. The conversation with the DOE is using those for sequestration, especially since you’ve already got the surety bonds and legal documents done. It makes sense to me.
But we’re really the one linking the emitter to the sink. When you’re looking to move 2 million [metric tons] a year to offshore, you’re most likely going to build new pipelines. We have the synergy of the personnel and the rights of way. So, we’ve got the corridors that we’re able to repurpose for CO2 pipelines.
JB: Are you seeing a lot of customer interest or is it early stages?
JA: I think it’s really been very collaborative. When you talk to the refineries, the petchems, the power plants, it’s something that’s on everyone’s radar screen. So, it’s pretty open door coming in to talk about your project and how it may fit. I think once there’s a better structure on what that permitting looks like offshore, I think that it would take off then.
JB: And can you elaborate on just how important some of the recent federal legislation has been the last couple years?
JA: The IRA [U.S. Inflation Reduction Act] was really a positive for pushing these projects forward. The $85 [per metric ton of CO2] for 45Q has allowed a lot of projects that just weren’t going to be able to make it economically, now to be in play. And so, now it’s kind of taking those appraisals stages into better-defined stages to understand how much will the technology cost, the pipeline cost and the sequestration cost.
JB: So what are the next steps at this point?
JA: The next steps on CCS are, we’ll continue to work with DOE on the CarbonSAFE study with them. We’re getting a better feel for the geology, and also spending more time creating the least-disruptive right of way for the pipeline to go offshore. And then, finally coming to an agreement with an emitter for how many tonnes a year they plan to capture. And, what do those connection agreements look like?
JB: How does Crescent’s growth strategy look overall?
JA: We’ve really had this hyper-growth mode, which we’re excited about from the organic growth and the acquisitions. We want to really take that same momentum into energy transition. I think there’s a couple of ways for us to do that. One is our becoming carbon neutral. I think that bodes well for us when we’re seeking partners in CCS. And that’s really the part two of it. We feel as though that we’ve got the capabilities to run CO2 pipelines and the personnel to do that and the resources in Louisiana. We are blessed enough with the strategic footprint that actually already connects the emitters to the offshore sink. We’re already in that corridor, except we’re kind of reversing the flow a little bit. This is a new product that we’ll be needing to safely transport.
JB: Can I get you to compare and contrast the benefits of CCS offshore versus onshore?
JA: I think the benefit onshore is that there’s already a permitting process. The EPA has done a really good job in their technical reviews on being thoughtful to that. But you’re more limited from a spacing standpoint, right? You’ve got a lot more things to take into consideration. I think offshore ends up being kind of that longer-term opportunity just because of the amount of geography that you have out there, and the lack of encumbrances that are out there on continuing to grow those saline beds for sequestration. But there isn’t a process yet on how to do that offshore. So, I think that’s kind of where you are. I really see onshore as possibly being step one, and offshore being step two, and that being really the growth for the Gulf Coast. If you’re in the Dakotas, it may be a different point of view.
