TransAlta figures it’s cheaper to pollute and pay at Keephills 3.
Seldom are Internet error messages so symbolic. When Alberta announced its latest strategy to control industrial greenhouse gas emissions several years ago, it anticipated carbon capture and storage (CCS) would deliver 70% of planned reductions. The province launched a website called Solutions Start Here to explain and promote the technology. But recently visitors were greeted with a “server not found” warning. It was oddly appropriate; recent cancellations of flagship projects suggest Alberta may have to return to the drawing board. Because it’s the largest emitting province, this constitutes a major setback for Canada’s emissions strategy.
CCS involves capturing industrial carbon-dioxide emissions and sequestering them permanently in underground geological formations. It’s been demonstrated in several pilot projects and features prominently in many international climate-change mitigation schemes. What’s more, Alberta has the right geology and expertise in drilling. The biggest problem has always been the technology’s cost. Hoping to spur development, in 2008 Alberta provided $2 billion in subsidies for what turned out to be four major projects. The government wanted them to be operating by 2015, and to store a combined five million tonnes of CO2 annually.
Two expectations underpinned Alberta’s approach, the first being that CCS’s costs would decline sharply as industry gained experience. The second was that new regulations would introduce per-tonne costs for emitting CO2, thus encouraging companies to invest in mitigation. “At some point, the cost of capture intersects with the cost of carbon, and all of a sudden you don’t have to subsidize industry to do it,” explains Rob Savage, director of Alberta Environment’s Climate Change Secretariat. “That’s the theory behind what we’re doing.”
Cracks have since appeared in both assumptions, however. In 2008, Canada and the U.S. seemed to be moving to introduce cap-and-trade schemes that would have imposed a price for carbon emissions. Both countries subsequently backed down as attention turned to the economy. This leaves Alberta as a rare example of a North American jurisdiction with any regulatory system for emissions, whereby industrial polluters pay a modest $15 levy for every tonne of CO2 they release. Meanwhile, the builders of some CCS pilot projects have pulled the plug.
In April, sponsors TransAlta Corp., Capital Power and Enbridge cancelled the $1.4-billion Project Pioneer, despite nearly $800 million in provincial and federal subsidies. The project would have stripped CO2 from a new coal-fired power plant west of Edmonton and injected it into nearby oil wells, with the added benefit of increasing their output. In the fi nal analysis, the $15-a-tonne saving didn’t justify the operating cost.
The Heartland Area Redwater Project, too, was suspended indefinitely last fall. William Sawchuk, manager of joint ventures at partner ARC Resources, says uncertainty surrounding Alberta’s evolving CCS rules contributed to its shelving. Asked what ARC learned about the technology’s economics, Sawchuk replied: “There are no economics. Anything a company does around the CCS comes at a cost, whether it’s building the infrastructure, injecting the actual CO2, or the cost to monitor the progression of the CO2 plume within the reservoir.”
Three other CCS initiatives are still on. Enhance Energy expects to be the first to inject CO2 underground, in 2014. “We’re going to see some equipment showing up here late this year so that we can begin construction next year,” says Enhance CEO Susan Cole. Alberta can meet its stated emissions targets “if we continue on the path we’re on now,” she affirms. “People get a lot of comfort once they see that one project has been successful.”
Another cancellation, though, would accomplish the reverse. Alberta’s policy-makers are now considering the possibility CCS may not deliver everything they’d hoped. Fresh from re-election in April, the government of Premier Alison Redford signalled funding freed up by Pioneer’s demise may be redirected to alternative technologies. And Savage says he and other officials within Alberta Environment have been asked to prepare more research in anticipation of talks to consider changes to the province’s climate strategy. “A lot’s happened since 2008,” Savage says. “We have to look at a whole suite of policy options.”
This will come as a relief to critics who advocated a broader approach. “We think the portfolio was too narrowly focused on one technology anyway, so that’s probably a good thing,” says Chris Severson-Baker, managing director with the Pembina Institute, an environmental NGO. The lost time, however, is not.
