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Carbon capture tax credit vital, Canadian energy leaders insist
Gary Park for Petroleum News
Canada’s Big Oil - specifically the Alberta oil sands - is about to learn what shape its future will take under the national government of Prime Minister Justin Trudeau.
A long-promised federal tax credit for investments in carbon capture, utilization and storage, CCUS, is likely to be included in the next budget, along with the details of a plan to cut greenhouse gas emissions by 40%-45% below 2005 levels, Natural Resources Minister Jonathan Wilkinson told reporters.
Oil sands producers have estimated that eliminating emissions from their operations by 2050 could cost C$75 billion, mostly for CCUS projects, which may consume two-thirds of the capital supplied through government support.
The hope in Canada’s petroleum industry is that a tax credit will be introduced this year, modelled after the similar 45Q program in the United States.
Apparent lack of EOR projects But what causes unease within the fossil-fuel industry and oil-producing provinces is the Trudeau government’s apparent reluctance to include in its CCUS plan any projects targeting enhanced oil recovery, EOR.
The CCUS technology can be used across a range of industrial sectors, including fossil-fuel production, power generation and manufacturing.
In the case of EOR, captured carbon dioxide is already being injected into mature oil wells to rebuild reservoir pressures to boost output.
The International Energy Association has estimated that 16 of 21 CCUS operations around the world are already using those methods, which upsets environmental organizations, who argue that EOR will only prolong the use of oil.
In response, the governments of Alberta and Saskatchewan argue that excluding EOR will only remove the incentive for upstream companies to take advantage of CCUS to reduce their emissions.
EOR inclusion urged Cenovus Energy Chief Executive Officer Alex Pourbaix told analysts and shareholders recently that if the objective of CCUS is to sequester large volumes of carbon dioxide then Canada should copy the U.S. by including EOR in its tax credits.
Failure to “think very hard about including EOR” in a federal tax credit will only limit the volumes of carbon dioxide that can be sequestered, he said.
Alberta Energy Minister Sonya Savage was even blunter, insisting that Canada “will never get to net zero” without CCUS.
“There’s no possible path to it without carbon capture. There’s no ability to pursue projects that are in the billions of dollars without competitive support from the government,” she said.
The IEA is emphatic that CCUS is a vital link in the world’s transition to net-zero because the technology can be used to retrofit existing power and industrial plants and tackle emissions in sectors such as cement production.
Samantha McCulloch, head of the IEA’s CCUS unit, has written that “CCUS is necessary to meet national, regional and even corporate net-zero goals.”
She estimated that the world has increased its carbon capture capacity by only 3 million metric tons a year since 2010, raising the annual capacity to 40 million mt when 1.6 billion mt is needed to put the planet on a pathway to net-zero by 2050.
Global interest in CCUS gathered momentum last year with more than 100 new facilities announced and industry leaders expressing hope that pace will quicken now that there is so much worldwide focus on meeting climate-change goals.
McCulloch said that if net-zero is to remain within reach, CCUS “cannot afford to spend another decade sitting on the sidelines of climate mitigation efforts.” She prodded governments, industry and investors to ensure that “CCUS delivers” over the next 10 years.
- GARY PARK
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