Injecting carbon dioxide into the ground - including into oil-bearing reservoirs as a means of enhancing production - is an option for curbing greenhouse gas emissions, but isn't the only or best solution, says an energy industry watchdog.

A recently released study from the Pembina Institute for Appropriate Development warns that carbon capture and storage (CCS) won't be a "silver bullet" to solve Canada's greenhouse gas emission woes, although it can play a part.

"It's the whole concept of the 'saviour' mentality that we're cautioning against here," says Tom Marr-Laing, a policy adviser with the Alberta-based think tank. "I think it would be quite dangerous if, as a society, we go down this garden path believing that carbon capture and storage will solve the climate change problem, and we go on merrily about doing our daily business.

"We are prepared to say that carbon capture and storage has a role to play - it could be significant - but we've got to do it carefully ... There have to be some conditions for making it happen."

CCS is a process where CO2 emissions from large-point sources - such as coal-fired electricity power plants, oilsands facilities, cement plants, etc. - are captured, compressed and shipped by pipeline to a location where the gas is injected into underground formations for long-term storage.

The environmental organization maintains that the most effective forms to reduce greenhouse gas emissions continue to be conservation and reducing reliance on fossil fuels in favour of alternative energy sources, options that receive only minor interest from industry and governments alike, says Marr-Laing.

The oil and gas industry likes the concept of capturing CO2 and injecting it into the ground, especially if it can be applied to miscible-flood operations used to access oil left behind after conventional production methods have been exhausted.

A miscible flood is an enhanced oil recovery (EOR) technique that injects a fluid into the reservoir. When carbon dioxide is injected, it mixes with the oil and acts as a solvent to help release the oil left behind after other recovery methods, such as water injection, are no longer productive.

EnCana Corp. is involved in Canada's largest CO2 miscible-flood project in the Weyburn area in southern Saskatchewan. The $1-billion project involves injecting 5,000 tonnes per day of CO2, pipelined from North Dakota, into the Weyburn field.

The Weyburn CO2 project is expected to reach a peak production of about 30,000 barrels of oil per day by 2008 - three times more than it would be without applying the miscible flood.

Using CO2 for EOR operations is nothing new. In Texas, where it has become common practice, oil producers have been flooding fields with the compound since the early 1970s. In Canada, however, it's been slow to catch on, due mainly to the lack of a secure and cheap source of CO2 - the Lone Star State has a ready supply of naturally occurring subsurface CO2 from which to draw.

Derril Stephenson, president of Vikor Energy, a consulting firm specializing in EOR operations, says there is potential that flooding producing formations with CO2 will have a dual benefit of enhancing production while helping to meet Canada's Kyoto targets. But he cautions that it won't be a magic solution.

"It's one of the options that can return at least a part of the cost of capturing and storing ... at least some of the CO2 that would be needed to meet Kyoto obligations," Stephenson says. "It's not the total answer, but there is some potential here in Alberta.

"My sense is that there's been a significant pickup in the interest in the industry recently, I think probably a big part of it is the oil price - these projects look significantly better with high oil prices."

Stephenson says the best sources of CO2 are petrochemical plants, heavy oil upgraders and refineries. The CO2 produced from such plants is very pure; EOR project operators can afford to factor in pipeline and other infrastructure costs and their projects would still be economical.

Capturing CO2 from the flue gas produced at coal-fired power plants - the largest source - is more costly and may make an EOR project uneconomic.

The Pembina Institute, meanwhile, believes that CCS should be focused on deep saline aquifers rather than in hydrocarbon formations, which it says makes for more secure storage. However, the organization adds that it is "prepared to recognize" that EOR is a necessary step toward full implementation of CCS as a viable tool in reducing GHG emissions.

Marr-Laing says this is because EOR may lower the price barrier for establishing CCS infrastructure, such as a pipeline, and thereby facilitate subsequent storage in deep saline formations.

"If (the EOR) option means a transitional step or a necessary first step so that companies are going to get involved in storage, then we're not as happy about it, but so be it."

On the question of who will pay for the pipeline and associated infrastructure needed to get the CO2 from its source points and into the ground, Marr-Laing says while some public money will likely be needed, it ought to be the energy companies themselves that ante up most of the dough.

"There's a future risk here called management of your CO2 responsibilities, especially if you're an oilsands company ... You better be doing some smart things to minimize your future risk of CO2 liabilities. That means that if you're making an investment in infrastructure to manage your future risk, it's fair for the shareholders to bear a fair chunk of that responsibility."

Environment Minister Guy Boutilier recently said the government wants to establish a $1.5-billion carbon dioxide pipeline network in the province. The plans are preliminary and it is not known how the costs would be split among industry and the federal and provincial governments.

Meanwhile, Pembina has also released another report calling for new performance hurdles for new oilsands projects and the end of "incredibly low" royalty rates to help miti-gate increasing environmental damage.

"We think Albertans haven't received a good picture about what are the full implications of developing the oilsands," said Chris Severson-Baker, a co-author of the report.

The report warns of potential loss of habitat for boreal forest wildlife as service roads continue to be built, and a doubling or tripling of greenhouse gas emissions over 10 years.

As well, the oilsands "footprint" is expected to grow from 400 square kilometres of boreal forest in 2003 to 2,000 sq. km, including currently planned development.

The threats to water and air quality are also a concern.

The institute's report also calls for an end to Alberta's royalty regime that allows energy companies to pay a one per cent royalty until all costs of their projects are recovered, at which time the rate rises to 25 per cent of net revenues.

"We're still seeing the new projects re-investing their profits in the oilsands and finding creative ways of preserving this one per cent royalty regime because it's so incredibly low, it provides so much revenue that they can work with and it's really driving the industry forward at this breakneck pace," said Severson-Baker.

Web Watch: www.pembina.org - With files from The Canadian Press (John Ludwick can be reached at ludwick@businessedge.ca)