A carbon crapshoot

ALBERTA - This year, the Alberta and federal governments are setting aside billions of dollars for subsidies that will go to some of the nation’s largest energy companies. The money represents a down payment on a grand experiment.

The idea is to collect carbon dioxide generated by industry before it goes up the stack into the atmosphere, and cloister it underground for eternity. It’s called carbon capture and storage (CCS).

It’s fearfully expensive, and there’s no guarantee it will work. Yet work it must. Because Canada has no Plan B for reducing the impact of its energy industry on the Earth’s climate.

Depending on whom you ask, CCS will prove central to Canada’s efforts to combat global warming or will set them back a decade or more. Much of the technology already exists, and a handful of companies have proven it can be done. But all that’s been on a minuscule scale compared to the plans now on the table. In fact, the emerging partnership between government and industry to jump-start CCS has been compared to building transnational railways in the late 19th century.

At stake is Canada’s credibility abroad. Having vowed to reduce emissions 6% below 1990 levels by 2012 under the Kyoto Protocol, the country now stands about one-third above that target — the result of economic growth coupled with a policy vacuum. Some now accuse this country of sabotaging international climate initiatives.

“Obstructionists currently predominate in most G-8 countries,” observed German newsmagazine Der Spiegel recently, singling out Russia and Canada as nations that “want to be able to sell their fossil fuels without constraints.”

If the rising carbon tide is going to be reversed, and Canada’s image rehabilitated, all hopes rest on CCS. Alberta’s provincial government claims the technology will deliver 70% of its planned reductions by 2050.

“No other technology currently has the potential to transform the environmental footprint of our energy economy within the timelines necessary and at the scale required,” one government document declared last year. Federal Environment Minister Jim Prentice’s advisers have told him that by 2050, CCS could prevent 40% of Canada’s greenhouse-gas emissions from reaching the atmosphere.

“What will drive the kind of changes we are talking about is technological change,” he told one audience recently. “One of the best illustrations of this is carbon capture and storage.… It is not a silver bullet, but it is a technology that will be extremely important.”

A year ago, Alberta allocated $2 billion for CCS development and invited companies to send proposals for projects that could be built quickly. On June 30, it announced that three finalists had been selected, and that it plans to disburse $100 million to them during this fiscal year. The projects ultimately selected for financing will have to reveal to competitors what they’ve learned, so that entire industries can benefit from the experiments. And earlier this year, the federal government awarded $140 million to eight proposed CCS projects.

The bulk of Canada’s learning will unfold in Alberta — which is not only the heart of the oil and gas industry but also harbours vast reserves of coal, which has traditionally been a cheap but dirty fuel for generating electricity. Meanwhile, companies are tripping over each other to harvest tarsands deposits in the province’s north. As the largest contributors to Canada’s rising emissions, the power generation and oilsands industries have much to lose amid gradually tightening emissions regulations, and much to gain if CCS works.

Alberta is, in many ways, the ideal laboratory for the grand CCS experiment. The province has lots of carbon-spewing projects (known as large final emitters in the genteel bureacratese of climate-change policy-makers) and ample experience with building gas pipelines. It also knows plenty about its own geology — and experts agree the province affords a host of potential storage sites.

“If you can’t make CCS work in this part of the world, says David Lewin, a man seemingly destined to be one of Canada’s CCS pioneers, “you’re going to have a heck of a time anywhere else.”

Lewin’s challenge is pretty stark. A senior vice-president at Capital Power Corp. (a spinoff of Epcor Utilities Inc.) in Edmonton, he’s an integral part of that company’s efforts to turn one of the world’s dirtiest fuels into a green one. Conventional coal-fired power plants belch volumes of CO2, sulphur dioxide and other emissions on a scale even the oilsands can’t match. No industry has more riding on CCS than his.

Capital Power’s Genesee Generating Station near Warburg, Alta., includes three coal-fired units, the newest of which entered service in 2005. If new regulations unfold as Lewin expects, the company faces a difficult choice: either reduce CO2 emissions from these facilities, or pay growing regulatory penalties each year.

“I don’t think it’s a good strategy to pay the penalty or rely on the market to maintain compliance with regulations,” Lewin says. “We’d much rather look at technology.”

But it will come at a staggering cost. In a report published last year, Greenpeace, the environmental group, estimated a power plant equipped with CCS would divert between 10% and 40% of its electricity to collecting its own CO2 — hardly a palatable result in a world with an already ravenous appetite for energy, and one obsessed with efficiency.

CCS only works if a plant’s CO2 can be concentrated in a highly pure stream that can be compressed and transported. In conventional coal plants like Genesee, the flue gas created by burning coal contains relatively low concentrations of CO2 — about 12%, Lewin says.

A technique called amine scrubbing, which involves forcing flue gas through a solvent, has long been used to strip out CO2. The solvents can then be heated to release the gas, which can then be captured. “This is a technology that’s been around for 50 years or so, particularly in chemical processing plants,” says Lewin.

Capital Power isn’t keen to tinker with its existing facilities, and amine scrubbing modules currently available aren’t up to the task. So the company will have to build something from scratch. It proposed constructing a new 200-megawatt unit with back-end amine scrubbing capable of capturing between 70% and 90% of its CO2. Capital Power hoped to use the resulting lessons in retrofitting Genesee’s existing coal-fired units. But government so far hasn’t agreed to fund the project, and it has been shelved.

Fortunately, there are other options. North American coal-intensive utilities began tinkering with new methods of generating electricity decades ago. They came up with something called coal gasification. As before, coal is mined and crushed. But instead of burning it, it’s heated in an oxygen-rich atmosphere, which produces a mixture of carbon monoxide and hydrogen known as synthetic gas. The process also produces a concentrated stream of CO2 — making it ideal for CCS.

Capital Power’s proposed gasification plant is a finalist for a slice of Alberta’s $2-billion CCS fund. Not all utilities were so lucky: TransAlta Corp., another coal-intensive operation, has thus far been shut out from Alberta money. Yet even with funding seemingly in hand, Capital Power faces a great deal of uncertainty.

In 2003, former U.S. president George W. Bush announced FutureGen, a coal gasification project similar to Capital Power’s. A site was selected in Illinois, and construction was to have begun this year. But the U.S. Department of Energy revoked its funding in early 2008, citing soaring costs. Private-sector partners are now clamouring, to convince Barack Obama’s administration to restore the project.

Asked what other options Capital Power has to reduce emissions if CCS proves unviable, Lewin is blunt. “We could always turn off the lights, I suppose,” he says. “In order to continue using coal for power generation, it has to work.”

CCS already works for niche applications in the oil and gas business. The world’s first commercial-scale experiment began in 1996, when Norway’s Statoil began extracting natural gas from the Sleipner West field in the North Sea. Its gas contained more CO2 than desired by customers, so Statoil removed it on site and injected it into an aquifer a kilometer beneath the sea floor.

In 2000, EnCana Corp. began injecting CO2 into an old oilfield, in Weyburn, Sask., to increase production. The gas comes via a 330 km pipeline from a coal-fired plant in North Dakota. Using CO2 that way is known as enhanced oil recovery (EOR), and EnCana believes it could extend the oilfield’s life by decades. Implemented more broadly, it might breathe new life into Alberta’s conventional gas business.

But can CCS put a lid on the massive and growing greenhouse-gas emissions from Alberta’s oilsands? The province is banking on it.

Two finalists for subsidies from Alberta’s CCS fund are oilsands upgraders, facilities that convert mined bitumen into synthetic crude oil. Upgraders spew massive quantities of CO2 in concentrated streams.

One finalist is North West Upgrading Inc. The private Calgary-based company is building an upgrader 45 km northeast of Edmonton. It plans to use gasification to turn its waste products into hydrogen, thus creating a stream of pure CO2 that can be readily captured. North West intends to supply that gas to partner Enhance Energy Inc., a Calgary-based EOR specialist. (The upgrader’s immediate neighbour, Agrium’s Redwater fertilizer operation, will also supply CO2.)

By 2012, Enhance also plans to build a pipeline called the Alberta Carbon Trunk Line, which will move the gas to various depleted oil wells nearby. Shell Canada Ltd. has its own CCS scheme, called Quest, which is also a finalist.

Alberta specifically identified CCS as the greatest opportunity for reduced oilsands emissions, while the federal government has announced plans that might compel oilsands upgraders built after 2012 to install CCS by 2018. It’s hoped that could help blunt growing concern over oilsands development among policy-makers in the United States.

But optimism is beginning to wane. According to talking points provided to federal ministers last year, “only limited near-term opportunities exist in the oilsands” for CCS; emissions from most facilities aren’t pure enough to be capturable.

For example, there seem to be no viable proposals to collect emissions from the sprawling tarsands mines around Fort McMurray. Many new facilities are likely to be built without CCS technology. Imperial Oil’s Kearl project is estimated to contain 4.6 billion barrels of bitumen, and the company won’t say whether it will be able to incorporate CCS.

If government can’t convince developers to use the technology, another generation of carbon-belching facilities will likely result.

Collecting CO2 is the most daunting, but by no means the only, challenge facing CCS’s pioneers. Once captured, it must be shipped to its final resting place and pumped underground. That introduces a host of new problems.

Initially, CO2 may be trucked around for pilot projects. But if CCS is to become a significant component of Alberta’s climate-change strategy, the province will need pipelines. Routes would have to be carefully planned to run near both large emitters and storage locations.

One industry group known as ICO2N (pronounced “icon”) argues that a large network should be planned from the outset, and built in phases. Facilities located off the beaten path might be tremendously disadvantaged, so routing plans could pit companies against each other.

Fortunately, CO2 is neither explosive nor flammable. And an extensive network already transports the gas in the United States — particularly in Texas, where naturally occurring CO2 has been pumped into wells to help recover oil for about 30 years. What’s more, such pipelines are not dissimilar to ones used to move other gases. The main challenge is cost.

At the end of the pipeline, more challenges await. People have discussed stuffing CO2 down abandoned oil wells, coal beds, aquifers, salt caverns or even dissolving it in the ocean. Some of that has been done before: the French, for example, have stored natural gas in aquifers for years.

Chuck Szmurlo hopes to do it in Alberta. He’s chair of the steering committee of the Alberta Saline Aquifer Project (ASAP), a consortium of 38 members. Thanks to years of drilling for oil in the Western Canadian Sedimentary Basin, the locations of Alberta’s salt-water aquifers are well-documented. At sufficient depth, the pressures and temperatures can maintain CO2 in a dense phase — that is, it begins to behave more like a liquid, and thus becomes better suited for long-term storage.

Aquifers can be remarkably capacious; some experts figure Alberta’s aquifers could store several hundred years’ worth of carbon emissions. Best of all, some lie a kilometer or more below the surface, beneath layers of impermeable rock. “They’re kind of like a double-hulled tanker, if you will,” says Szmurlo. “You don’t want to go though all the time, trouble and expense of capturing this stuff, only to have it resurface.”

ASAP spent much of last year hunting for suitable aquifers — ones with adequate capacity and porosity, and situated near both large industrial facilities and probable future pipeline routes. In March, the project announced that it had found six candidates. (Exact locations have not been disclosed, but they’re west of Edmonton, near Wabumen.) ASAP is partnered with Capital Power, and will be responsible for the injection of CO2 from the Genesee IGCC project into saline aquifers, so the project is in line for government funding.

Nature has proven it can keep gases trapped underground for millennia. But can we? Given the challenges and costs involved, even relatively small volumes of escaped CO2 might be a showstopper. Szmurlo must worry about the numerous abandoned and functioning oil wells drilled throughout Alberta. Many of them perforate the very aquifers ASAP intends to use for storage; and any one of them might become an escape valve. If the gas ever did reach the surface, it could pose a safety issue: in sufficient concentrations, you can’t breathe it. There are also fears injected CO2 might contaminate groundwater. Any storage site would likely need to be monitored for decades, even centuries.

Prime Minister Stephen Harper has hoped aloud that CO2 can be locked underground “for eternity.” Initial research suggests that’s possible: according to the International Energy Agency, a Paris-based intergovernmental body with 28 member countries, including Canada, proper carbon dumps won’t leak.

“The fraction retained in appropriately selected and managed geological reservoirs is very likely to exceed 99% over 100 years and is likely to exceed 99% over 1,000 years.”

But what if it escapes? That’s just one of the sticky liability issues that needs to be resolved before the age of CCS can begin. The current regulatory environment can’t answer such questions. Nor does it spell out who owns the rights to dispose of CO2 in a given underground formation.

Szmurlo knows selling CCS to the public will be tough. In his day job, at Enbridge, he’s president of the company’s windpower division. “I’ve come to appreciate that there are people who don’t want windpower in their neighbourhood,” he says. “There’s a good chance there are people who are not going to want this in their neighborhood, either.”

The central appeal of CCS is that it might allow Canada to have its cake and eat it too. In other words, it might permit unbridled industrial greenhouse-gas emissions yet still allow the country to combat climate change. In principle, CCS has lots of supporters in government, business think-tanks, international organizations and even environmental groups.

But companies aren’t yet voting with their wallets. The message from most industry bodies is that without significant subsidies — usually couched as “partnerships” or “risk sharing” — CCS simply won’t happen.

“Government incentives are likely required in the early days to encourage uptake” — that’s how industry-driven ICO2N puts it. “Industry investment alone will not produce a robust, sustainable CCS system.” Companies such as TransAlta, whose proposals for Alberta government funding have thus far been rejected, are in a huff.

And no wonder.

McKinsey & Co. prepared a study last year that attempted to predict the costs of implementing the technology at new coal-fired power plants in Europe. The prominent consultancy concluded that early demonstration projects could cost up to €90 (or a little less than $150) for each ton of CO2 abated. Given that Albertan companies can pay $15 per excess ton emitted into the province’s technology fund, CCS still looks wildly expensive.

Consider Capital Power’s dilemma. Lewin estimates that its proposed IGCC project will cost $6,000 per kilowatt, compared with $3,500 per kilowatt for a conventional project. The pilot could cost $2 billion. At today’s electricity prices, “you couldn’t justify building one of these plants,” he says. “We couldn’t go to the marketplace and raise the capital. That’s why we’re very interested in this CCS fund the province has established.”

How long the subsidies must continue is anyone’s guess. According to the Alberta CCS Development Council, “costs are expected to rise in the early stages as attempts to demonstrate the technology suffer setbacks, and require redesign or further development work.” McKinsey’s study predicted that as operating experience grows, costs will fall: early full-scale projects could run €35 to €50 per ton, and those costs could fall to €30 to €45 by 2030.

That’s still very pricey, and suggests that if CCS catches on, everyone will pay more for energy.

But there’s hope. Experience suggests industry is not always honest about how much pollution-abatement costs. The U.S. Environmental Protection Agency learned that in the 1990s, when it launched a campaign against acid rain.

Power generators complained that installing scrubbers to remove sulphur dioxide (a key contributor to acid rain) would be prohibitively expensive, and even the EPA expected costs might run as high as US$1,500 for every ton abated. Nevertheless, in 1993 the EPA began auctioning off rights to emit sulfur dioxide. Surprisingly, the price of emitting a ton of sulfur quickly dropped well below US$100 a ton — and even at that price, most companies installed scrubbers.

CCS’s largest risks pertain not to wasted money, but rather squandered time. If carbon capture proves to be unviable, Alberta’s and Ottawa’s latest raft of emissions targets will be as meaningless as their predecessors’. And it would prove perhaps the most costly diversion yet in the arduous struggle against climate change.


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