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Carbon capture plan canceled Push to showcase Alberta’s bid to curb greenhouse gas emissions through carbon capture and storage delayed by lack of buyers Gary Park For Petroleum News
The Alberta government’s grand dream of cleaning up its global image by capturing greenhouse gas emissions for enhanced oil recovery and selling its technology internationally has been dealt a major blow.
Calgary-based utility company TransAlta, along with partners Enbridge and Capital Power Corp., have dumped their planned carbon capture and storage CCS project, saying they were unable to secure enough buyers for the carbon dioxide to justify proceeding with the C$1.4 billion venture.
As a result, TransAlta has decided it is better off paying Alberta’s penalties of C$15 per metric ton for excess emissions from its Keephills 3 coal-fired plant near Edmonton rather than curbing them.
Project Pioneer was to have received C$779 million in Alberta and Canadian government funding over 15 years and become the showcase of Alberta’s offer of C$2 billion in funding for its attempt to overcome widespread doubts that CCS could be profitable.
Alberta still committed to targets
Alberta Environment and Water Minister Diana McQueen said her government will try to figure out why Pioneer failed, including the role carbon pricing had in the decision to shelve a venture that has cost C$30 million so far, with two-thirds coming from the governments.
She said Alberta remains determined to meet its carbon emissions targets, insisting Project Pioneer was only one of four efforts to make the economics work.
Project Pioneer was designed to capture and store 1 million metric tons a year of CO2 from Keephills 3 to rebuild reservoir pressures in enhanced oil recovery schemes in central Alberta.
But TransAlta said in a statement that it had been unable to secure firm buyers for the CO2, while Canadian and Alberta governments had made no moves towards a cap-and-trade system that would allow the partnership to sell emission-reduction credits.
TransAlta said the partners “determined that although the technology works and capital costs are in line with expectations, the revenue from carbon sales and the price of emissions reductions are insufficient to allow the project to proceed at this time.”
Regulatory uncertainty Don Wharton, TransAlta’s vice president, policy and sustainability, said there was too much uncertainty over regulatory frameworks that have yet to be developed, although his company believes there is still a future for CCS.
He said about C$30 million had been spent on initial engineering and design, two-thirds of that from governments.
Enhance Energy, which had Alberta financial support to build a CO2 pipeline from Project Pioneer, reported agreement with only one oil producer, Fairborne Energy, to buy CO2 for a small oil field.
Bruce Peachey, an Edmonton-based consulting engineer and EOR advocate, told a Calgary conference that the estimated rate of return is not economic for CCs projects.
“It has to be more economic than anything else that shareholders’ money can be invested in,” he said.
Higher penalties required Industry observers have estimated that penalties of US$30-US$80 per metric ton would have to be imposed on CO2 emitters to make CCS economical.
Peachey said CO2 EOR reserve estimates “must be based on economic reality, not wishful thinking” and not the Alberta government’s primary goal of CO2 disposal.
He also said the CO2 supply outlook in Alberta is dramatically lower than was expected two years ago.
EOR operators want high-purity CO2, while emissions from coal-fired power plants contain more nitrogen than CO2, making the cost of separating out the CO2 prohibitively expensive.
The only large-scale CO2 EOR venture in Canada is a Cenovus Energy project at Weyburn, Saskatchewan, which has been operating for 11 years.
Chris Severson-Baker, a spokesman for Alberta-based Pembina Institute, said the cancelation is a “big setback,” reflecting the Canadian government’s failure to implement a climate change policy that would serve as an incentive for Project Pioneer.
Canada’s Natural Resources Minister Joe Oliver was “disappointed” with the partners’ decision.
“Our government continues to invest in a number of (CCS) projects that are advancing across Canada and we will continue research and development with governments, industry and academia.”
However, Alberta Premier Alison Redford, who inherited the CCS committed from her predecessor Ed Stelmach, indicated a loss of hope last November when she suggested Project Pioneer might not go ahead and C$400 million in Alberta taxpayers’ money might be better used on other “initiatives and opportunities.”
Danielle Smith, leader of the Wildrose party in the Alberta election, had pledged to stop all Alberta financing for the experiment. She is now positioned to wage that fight from the opposition seats in the Alberta legislature.
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