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Capital Power's CCUS project end - eyes turn to other Alberta projects
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# Varcoe: Major carbon capture projects in Alberta face 'serious risk'
if government-industry talks remain gridlocked
It's a pivotal moment for carbon capture developments in Alberta and
Canada
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Published May 07, 2024 • 5 minute read
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The Quest Carbon Capture and Storage project at the Shell Scotford
refinery near Fort Saskatchewan, Alta. Postmedia file
## Article content
Who should be doing more heavy lifting to ensure major carbon capture
and storage projects take off in Alberta after one high-profile
development failed to launch?
Over the past week, the blame game has kicked into overdrive after
Capital Power cancelled its planned $2.4-billion Genesee carbon
capture project in the province.
Article content
Other proposals, including the Pathways Alliance's $16.5-billion
carbon capture network and Shell Canada's Polaris project, have yet to
receive a green light from the proponents.
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Alberta Environment Minister Rebecca Schulz blames the Trudeau
government for the demise of Capital Power's project. She notes Ottawa
has failed to finalize an investment tax credit for carbon capture,
utilization and storage (CCUS) projects, or ensure that carbon
contracts for difference are available to help companies lock in
future carbon pricing.
Federal Natural Resources Minister Jonathan Wilkinson points out
Ottawa is offering far greater incentives than Alberta is providing.
Murray Edwards, executive chair of Canadian Natural Resources — the
country's largest petroleum producer and a member of the Pathways
Alliance group — said additional support will be needed.
It's a pivotal moment for carbon capture developments in Alberta and
Canada. Companies are looking for certainty to make major billion-
dollar investment decisions, while governments are trying to ensure
they reach their climate targets.
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"We have got a lot of parties trying to work together to find a deal
that will make these projects work, but I fear the dollar values are
too far apart," said Adam Legge, president of the Business Council of
Alberta.
"We've now seen a real tangible project have the plug pulled . . . It
should be a bellwether for the government to take note and say, 'If we
don't actually sharpen our pencils and get these other ones across the
finish line, every one of the big potential opportunities and dreams
for these projects in Canada are at serious risk.' "
In February, Wilkinson called out the Pathways Alliance, a group of
major oilsands producers, to make more progress on its planned carbon
capture network.
The companies said Ottawa needed to finalize its long-awaited
investment tax credit and criticized the feds' incoming emissions cap
on the oil and gas sector for creating uncertainty.
Concerns amped up last week after power generator Capital Power ended
its proposal for a carbon capture development at its Genesee
Generating Station.
The Alberta company said the technology is viable, but the project
wasn't currently economically feasible. The power producer was
reportedly previously in talks with the Canada Growth Fund about
accessing the promised federal carbon contracts for difference
(CCFDs).
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Capital Power's Genesee plant is seen near Edmonton in an Oct. 19,
2022, handout photo. An analyst says a corporate decision to mothball
Canada's largest carbon capture and storage project is likely the
result of financial uncertainty and technological risks. Photo by
Jimmy Jeong /The Canadian Press
"This was a business decision. It actually doesn't trouble me, because
I actually think each business will have different pathways through
which they can make the reductions that they need to make," Wilkinson
said in an interview.
The Trudeau government introduced legislation last year to offer up to
a 50 per cent credit for CCUS equipment. The credit is expected to be
finalized next month. The Alberta government unveiled its own CCUS
incentive program last year, offering grants of 12 per cent for
capital spent on such initiatives.
"The federal government has committed half the capital . . . The
government of Alberta, which is the resource owner in the case of oil
and gas and the operator or effectively the regulator of the
electricity system, has offered 12 per cent," Wilkinson said.
"I'm not putting the decision of Capital Power at the feet of the
Government of Alberta . . . What I am saying is when people say that
the CCUS incentives need to be more generous, it's the Government of
Canada that has actually stepped up to the plate."
In other words, don't blame us.
Energy and Natural Resources Minister Jonathan Wilkinson. Peter J.
Thompson/National Post/File
In an interview Monday, Schulz pointed out the Liberal government
still hasn't moved the necessary legislation across the finish line,
even though the tax credit was first mentioned in its budget three
years ago.
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"They are dragging their feet. They announced incentives back in
2021," Schulz said.
"In this budget, they've now reannounced it as they are plummeting in
the polls. They still haven't stepped up to work through their carbon
contracts for difference."
Minister of Environment and Protected Areas Rebecca Schulz. Gavin
Young/Postmedia
The Pathways project is much larger than Capital Power's proposal, and
involves a 400-kilometre pipeline to ship captured CO2 emissions to an
underground storage hub.
The first phase is expected to store up to 12 megatonnes of CO2
annually by 2030. The consortium, which includes Canadian Natural
Resources and Suncor Energy, filed a regulatory application for the
pipeline in March.
Suncor CEO Rich Kruger said Tuesday the project is a "key enabler" for
the integrated petroleum producer to reach net-zero emissions by 2050.
Carbon capture and storage "has enormous potential to decarbonize the
oilsands, but requires a competitive fiscal framework for the
investments, in conjunction with the federal and provincial
governments," he said during the company's annual meeting.
In an interview last week, Edwards said all levels of government and
industry must work together to get the project built.
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"In Pathways, we need to get a final conclusion with the federal
government and the Alberta government to kick that off," he said.
Canadian Natural Resources Ltd. executive chairman Murray Edwards
speaks at the annual shareholders meeting at the Telus Convention
Centre in Calgary on Thursday, May 2, 2024. Brent Calver/Postmedia
Provincial officials said Monday they have no plans to go beyond the
current level of support in its CCUS grant program.
Scott MacDougall of the Pembina Institute said Canada already has a
competitive incentive package for companies wanting to invest in
carbon capture and storage.
At this stage, the federal government needs to move forward on its
existing investment tax credit and the planned emissions cap on the
oil and gas industry, he said.
"I can't help but wonder if there's some negotiating tactics going on
here . . . but I think the incentives are there," MacDougall said.
As for Pathways, both Wilkinson and Edwards indicated they remain
hopeful, despite the ongoing complexities. The consortium involves six
companies and a carbon network that could eventually connect to more
than 20 facilities.
"Nobody has closed the door," the federal minister said. "I remain
optimistic that we're going to find a pathway to go forward."
_Chris Varcoe is a Calgary Herald columnist._
cvarcoe@postmedia.com
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