Oil sands producers set sights on sequestration

Pathways Alliance, a consortium made up of six Alberta oil sands producers, has applied to the provincial government to store carbon dioxide underground from oil sands projects, as part of a proposed $12-billion carbon capture and storage (CCS) project.

This ambitious initiative will take advantage of geological “pore space” near Cold Lake in northeastern Alberta to create a pipeline and carbon hub that would be one of the largest of its kind in the world. The Alberta government is expected to issue a decision in October.

The project is to help the federal government meet its target to reduce greenhouse gas emissions by 40 to 45 per cent from 2005 levels by 2030, as committed to in the Paris Agreement on climate change.

The Pathways Alliance combined three existing groups, the Oil Sands Pathways to Net Zero Alliance, Canada’s Oil Sands Innovation Alliance, and the Oil Sands Community Alliance. Its members – Canadian Natural, Cenovus Energy Inc., ConocoPhillips Canada, Imperial Oil Limited, Meg Energy Corp., and Suncor Energy Inc. – operate about 95 per cent of Canada’s oilsands production.

“In terms of achieving [the 2030 target], we actually don’t have any time to lose,” Kendall Dilling, Pathways’ newly appointed president, told Research Money. “If you just look at the time to engineer this thing, get it approved, get it constructed and operated, you’re basically at 2030.”

The hub initially would store about 11 million tonnes per year of CO₂ captured from an initial 11 oil sands plants in the Fort McMurray, Christina Lake and Cold Lake areas. The CO₂ would be transported to the Cold Lake area via a 400-kilometre pipeline.

Volumes of CO₂ would increase over the next 20 years with an increase to 20 oil sands plants. If approved, by late 2026, the hub could begin injecting and storing the first CO₂ from oil sands operations in a saline aquifer more than a kilometre deep.

Western Canada’s favourable geology provides huge CO₂ storage capacity with its deep aquifers and caprock which prevents leakage, said Dilling.  “If you never cracked the nut on anything else, CCS alone can get you to net zero, the capacity is that big.”

Crews are out in the field this summer collecting environmental data for the project. Pathways Alliance expects to submit a project application to the Alberta Energy Regulator towards the end of 2023.

The pipeline will be developed mainly on Crown land, with consultation to begin in earnest this fall. It will include a significant Indigenous component as the pipeline will cross the traditional territories of 20-plus Indigenous groups, said Dilling. “We’ll be working in those communities to make sure that they’re on-side with the project and that they share the benefits of the project.”

With a two-year construction period, Pathways Alliance is looking at a 2028-29 timeframe, with the first phase up and running by 2030. Additional oil sands projects, along with other industries, are expected to use the infrastructure after 2030 as the open access model will enable any company to come in and do so on a competitive basis.

Dilling acknowledged that carbon capture — separating and capturing waste industrial gases — is an expensive process, and R&D efforts focus on reducing those costs. “But we do have a plan that’s deployable right now — Game Day ready with current technology.”

More government funding needed for CCS project, companies say

To encourage private investment in carbon capture, storage and utilization projects, the federal government has committed to increase the price of carbon to $170 per tonne of carbon by 2030, from the current $50 per tonne.

Between now and 2030, companies also will be able to claim a federal investment tax credit of 37.5 percent for eligible transportation and storage equipment, along with a 50 percent credit for eligible capture equipment. This would drop to 18.5 per cent and 25 per cent respectively from 2031 to 2040. Equipment used in a direct air capture project (capturing CO₂ directly from ambient air) would attract credits of 60 per cent (2022 to 2030) and 30 per cent (2031 to 2040).

However, oil sands companies have argued that while they are making major investments in CCS, it is an expensive process and more government funding will be needed.

So why should taxpayers help pay for the oil sands industry’s CO₂ pipeline when oilsands companies are making record profits? According to Dilling, it’s a matter of obtaining comparable funding to remain competitive with other jurisdictions, such as the United States and Norway where governments are investing in climate change.

“We need to be competitive to attract the billions and billions of dollars in investment that will be required to make this transition,” he said.

“And the value proposition is pretty simple,” said Dilling. “If we need to address greenhouse gas emissions from oil and gas production, and if we do so, then we think Canadian energy could be the preferred supplier of energy to the world for decades to come as long as oil and gas is needed.”

Alberta Premier Jason Kenney’s office did not respond to whether it would consider provincial funding for the project.

CCS projects typically capture and store about 90 per cent of emissions. Pathways Alliance’s CCS pipeline project is the first stage in getting to net-zero. In the second stage (2030-2040), the Alliance will be looking at innovative ways to increase the efficiency of oil sands operations to further reduce emissions. This includes substituting steam in bitumen extraction or using less steam by utilizing light hydrocarbons such as propane or butane to mobilize heavy oil with lower energy.

Beyond 2040, the focus will be on emerging technologies, including the use of small modular nuclear reactors and direct air capture.

In the meantime, the federal government has released a discussion paper targeting a 42-per-cent reduction in overall oil and gas sector emissions by 2030. The two options are a cap-and-trade system that sets regulated limits on emissions from the sector, and modifying the carbon pricing benchmark requirements for heavy emitters to create price-driven incentives to reduce emissions to levels corresponding to the cap.

Pathways Alliance members, though, have pushed back on that target. Tim McKay, president of Canadian Natural Resources Limited, suggested that it’s  “overly ambitious” and that an earlier announced commitment to a 30-per-cent reduction in emissions intensity by that date is more achievable.

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