Alberta carbon capture plans flounder

Petroleum News

The financially strapped Alberta government has cancelled C$285 million in funding for a carbon capture and storage project, leaving the industrial partner clinging to hopes of being able to rescue the venture without public backing.

The pullout adds to doubts hanging over the province’s goal of developing a commercial answer to reduce its carbon dioxide emissions and is a far cry from the upbeat days in 2008 when then-premier Ed Stelmach committed C$2 billion over 15 years for carbon capture and storage, or CCS, which he touted as Alberta’s chance to become a world leader in CCS.

Only two of four projects that had originally been approved for funding are still afloat, while the government has slashed its contributions to C$1.3 billion.

Although the province officially remains dedicated to CCS experiments, it has conceded the business case to manufacture synthetic gas from coal has been undermined by low natural gas prices.

Martin Lambert, chief executive officer of Swan Hills Synfuels, is adamant that the project has been deferred, not scrapped, although he said no further efforts to obtain government funding are planned.

Swan Hills was designed to turn unmineable coal into clean synthetic gas from which CO2 would be used to rebuild reservoir pressures for enhanced oil recovery in Alberta. The plans also included a 300 megawatt power plant.

Swan Hills President Douglas Shaigec said the company needed sustained gas prices of $5 per million British thermal units before it could seriously think about reviving the project.

Gary Leach, president of the Explorers and Producers Association of Canada, said Swan Hills was clearly unable to compete with the “new long-term realities of abundant and cheap North American natural gas.”

Almost a year ago, a TransAlta, Enbridge and Capital Power partnership shelved Project Pioneer, designed to capture and store 1 million metric tons a year of CO2 from a power plant west of Edmonton, backed by C$779 million in funding commitments from the Alberta and Canadian governments.

Even with the subsidy, TransAlta said it was unable to make the economics work and attract firm buyers for the CO2.

Still alive are plans for an Alberta Carbon Trunk Line to capture CO2 from a bitumen upgrader/refinery that is under construction by North West Upgrading sand Canadian Natural Resources, while Shell’s Quest project is intended to capture CO2 from the company’s Scotford bitumen upgrading and refining complex near Edmonton.

The Alberta government said those two projects are expected to reduce greenhouse gas emissions by 2.7 million metric tons a year by 2016.

Energy Minister Ken Hughes said the remaining government commitment of C$1.3 billion “speaks to how serious we are about climate change and reducing our impact.”

—Gary Park