Christopher Walsh, editor
The Alberta Government has committed $745 million of its $2 billion carbon capture and storage fund to one private company, Shell Canada, and a taxpayer watchdog is calling the grant a “big waste of money.”
“Carbon capture is a big waste of money,” said Scott Hennig, Alberta director of the Canadian Taxpayers Federation. “The whole thing is ridiculous. We’ve seen billions of taxpayer money lost on these things.”
The Shell “Quest Project” aims to capture and permanently store more than one million tonnes of CO2 per year from Shell’s Scotford upgrader near Edmonton that processes heavy oil from the Athabasca oil sands. The entire project is estimated to cost $1.35 billion, with $120 million pledged from the federal government’s Clean Energy Fund.
Other carbon capture and storage projects the province is helping to finance include $495 million for the Enhance Energy and Northwest Upgrading’s Alberta Carbon Trunk Line, $285 million for Swan Hills Synfuels for an in-situ gasification project that will ultimately use CO2 for enhanced oil recovery and another $436 million pledged but not confirmed for a TransAlta and Enbridge coal-fired plant that would capture CO2 near Edmonton.
A number of these projects will use captured CO2 for enhanced oil recovery which will ultimately be profitable for the oil companies involved, says Hennig.
“They’re giving all this money to mostly big, private companies,” he said. “I’m all for people making a lot of money, I’m all for them taking old abandoned wells that they have already flooded and have basically written off. I’m all for them going and getting more oil out of them, that’s fantastic. But why on earth are taxpayers paying to do this?”
The province is funding the projects in the form of grants that will be distributed over 15 years and tied to different targets the companies are expected to meet over the course of the projects. A spokesman with Alberta Energy says the cash given to oil companies is necessary to help make carbon capture technology …..
“[These] projects required some commitment from the carbon capture and storage development fund in order to make it economical,” said Bob McManus.
He added that a lot of the money will be made back through enhanced oil recovery.
Shell says they need the money to offset the current $15 a tonne carbon price that does not make the market currently viable.
“In order to ensure that large-scale CCS demonstration projects are established, it is essential that governments introduce short-term funding incentives,” said Shell spokesman Stephen Doolan. He added Shell is investing its money in the project because they believe the markets will be there in the future and it helps reduce their carbon emissions from oil sands production.
“While the current CCS economics are challenging, we are willing to make this investment because we believe that CCS technology could make a significant contribution to reducing CO2 emissions globally if enough projects are implemented over the next few decades.”
But Hennig says government and oil companies are using the environmental argument to bypass the 1996 Business Financial Assistance Limitation Act – legislation adopted by Alberta that prohibits new loans and guarantees from being issued without the passage of specific legislation.
“Now they’re doing it under the guise of various environmental programs,” he said.
Martin Lambert, CEO of Swan Hills Synfuels says his company’s project that will capture CO2 from a deep coal gasification process needs the province’s contribution of $285 million.
“Essentially because we are a start-up and we don’t actually have money,” he said. “This is our only project and but for this money it wouldn’t be going ahead.”
Lambert added the government money is helping to pay for only the carbon capture part of the project that will also create synthetic gas for energy. The rest of the estimated $1.5 billion cost will come from the private sector, he says.
“All of the rest we have to pay for 100 per cent ourselves,” he said. “We expect, over the long haul, that it will be a viable project.”
Robert Mansell, a professor of economics and director of the School of Public Policy at the University of Calgary, says the province needs to invest the $2 billion in carbon capture infrastructure.
“It’s Alberta looking after its own public interest,” he said. “We’re very reliant on royalties and the industry. That industry contributes one half of the total economy when you look at the direct and indirect contributions. It’s our lifeblood. If we don’t have a healthy oil and gas industry we’re in rough shape economically.
“So, we have a great incentive to spend a lot to resolve some of the CO2 issues.”
Mansell adds that industry would not do this on its own, without the government money to sweeten the pot. Forget that ‘good environmental steward’ business.
“The reality is they won’t [build the projects],” he said.
While the money made off enhanced oil recovery is tempting, it isn’t enough to fully encourage oil companies to make the investment in CO2 projects.
“That’s a nice part of the combination,” Mansell said. “That gap has to be filled to make it economic.”
He added the $2 billion is a good investment in Alberta’s future.
“Is the amount that’s been put in as a percentage of the total cost reasonable? I think it is,” he said. “When you look at it in the context of carbon as Alberta’s Achilles heel, we have huge potential.”
“If it’s a good investment, then someone will make it,” Hennig said. “When no one wants to invest in it and government does, it’s not a good investment.”
Hennig added that the government’s commitment to carbon capture projects came in 2008 when the province was looking at ways to spend their surplus, before they started running deficits.
“This wasn’t something they said this is so important we need to put this in the budget, this was ‘we have $8 billion we don’t know what to do with, why don’t we throw two of it at carbon capture and it’ll help out some companies and it’ll make us look like we’re doing something for the environment and hey, we’ll also get some extra oil out of it, so it’s a win-win all around’.”
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