A 19th-century energy solution might be needed to crack a 21st-century energy conundrum, although some say it could ultimately create environmental problems for generations to come.

Gas from so-called "clean" coal could be the key to unlocking Alberta's oilsands potential without relying on high-priced natural gas, says Jim Dinning, chairman of the Western Financial Group and front-running contender to replace Alberta Premier Ralph Klein.

"I've been an advocate for supporting industry's efforts to find ways to reduce their dependence on natural gas ...”

to get better economic value, the former Alberta government minister said during a recent speech in Calgary. "And the answer is coal and coke and bitumen, all of which are plentiful throughout Alberta."

Larry MacDougal, Business Edge
Former cabinet minister Jim Dinning says coal would help oil production.

However, the Pembina Institute, an environmental policy research organization, says that until proven technologies are in place to reduce or eliminate carbon dioxide emissions to the atmosphere, coal as feedstock for oilsands development remains an unlikely option.

Dan Woynillowicz, an environmental policy analyst specializing in oilsands issues for the institute, says the concept of clean coal has largely focused on addressing nitrogen oxide and sulphur dioxide issues, in addition to mercury. But in the long run industry must find a way to figure out how to handle the carbon, he says.

"There are different grades of coal, but regardless of the grade it's still a relatively dirty substance relative to other fossil fuels, such as natural gas," he says. "If you're putting more of a carbon-intensive fuel in, you're getting more carbon out as a byproduct."

He adds that, as yet, carbon capture and storage - also known as carbon sequestration - remains an unproven technology.

"Our perspective on the research today is that we're still quite a distance away from saying the carbon is sequestered; that's going to take decades of monitoring to bring a level of comfort where we think it is actually permanently removed."

But Dinning sees it differently.

He wants industry to focus on the technology and to eventually construct a multi-billion-dollar gasification facility near oilsands-central Fort McMurray. Gasification creates synthetic gas by combining coal, coke or bitumen with steam and oxygen and pressurizing it.

While no large-scale coal gasification project is in the offing, the technology exists, he says. General Electric, Shell Global Solutions (a division of Royal Dutch Shell) and ConocoPhillips have all developed coal gasification technologies.

The Canadian Clean Power Coalition - a group whose member companies represent most of Canada's coal-fired electricity generation capacity, and of which Dinning is a former chairman - is trying to determine which ones could be best applied to Alberta's coal resource.

"Coal is inexpensive; coal is predictably inexpensive. Gas ... is volatile, and these days it is high priced," Dinning noted.

Onno DeVries, manager of oilsands and oil markets for the Canadian Association of Petroleum Producers (CAPP), says as producers face rising natural gas prices - one of the inputs into production of steam-assisted gravity drainage (SAGD) - they are looking at other feedstock alternatives that are more competitively priced, including gasification.

"We have producers examining and exploring this as a potential," says DeVries. "Technology in each project is different because of the economics, not only with the gasification but the reserves itself, so it really is a project'-specific assessment that producers are doing."

Among the tarsands projects looking to gasification technology, Nexen Inc.'s and OPTI Canada Inc.'s Long Lake project - which aims to produce 70,000 barrels of oil per day (b/d) from SAGD technology - plans to gasify its bitumen and thereby eliminate reliance on natural gas.

Suncor Inc. recently announced its plans to build a gasifier to turn coke into synthetic gas, or "syngas," to reduce its reliance on natural gas for fuel, while Petrobank Energy and Resources Ltd.'s Whitesands project at Conklin will rely solely on coke to fuel its bitumen extraction and upgrading process.

DeVries also dispelled the notion that oilsands producers will rely on gas from the Mackenzie gas project or other frontier supplies. He noted there is enough Alberta production to give oilsands companies competitive access if needed.

"If you're a (gas) producer, and keep in mind the producer tends to pay to get the gas to market, then as a producer ... if you're faced with selling your gas to someone who's in Alberta or having to move your gas all the way to California or Chicago, your first choice would probably be to sell it here in Alberta," says DeVries.

However, finding an economic alternative to natural gas to fuel energy-intensive oilsands production will be vital to ensuring the long-term viability of the resource, Dinning notes.

"Conservative estimates put the number of barrels of reserves in Alberta's oilsands at 178 billion," Dinning told the delegates attending an Association of American Petroleum Geologists annual meeting and conference. "And with improved extraction technology, the estimate goes up to 300 billion barrels, which would make Alberta the richest petroleum field in the world."

But moving away too quickly from natural gas has some in the environmental community worried, says Pembina's Woynillowicz.

The fact that oilsands producers have mostly opted for natural gas to fuel their operations has historically been viewed as environmentally beneficial, because it represents "the cleanest fossil fuel for such an energy-intensive industry," he said.

"So any potential move away from that right now toward other fossil fuels, be it coal, the coke byproduct, bitumen, diesel or what have you, has quite significant implications unless we move toward carbon capture and storage as a complementary technology."

(John Ludwick can be reached at ludwick@businessedge.ca)