The Alberta government is gearing up to take applications from companies that want to build a nuclear reactor in the oilsands.

But some environmental groups and researchers across the country are warning it's too soon to consider such an approach, and are calling on the federal and provincial governments to invest in renewable energy technologies and cap industrial greenhouse gas emissions.

The Alberta Energy Research Institute - the energy-technology arm of the provincial government - is working with industry to design a request for proposals to build a nuclear reactor in the Fort McMurray region.

Calgary-based Energy Alberta Corp., which is working with Atomic Energy of Canada Ltd. (AECL), wants to see a 750-megawatt Candu reactor - costing about $3 billion - up and running in the oilsands by 2014.

Wayne Henuset

"The biggest benefit is that the oilsands industry would have a stable cost base," says director Wayne Henuset.

Instead of relying on natural gas for fuel at volatile world market prices, oilsands projects could count on a steady price for nuclear power for the next 50 years, he says.

But some environmentalists and university experts argue a mandatory cut in greenhouse gas emissions in the energy industry and other sectors - while supporting technology to bury greenhouse gases underground - is a better way for government to proceed.

At stake is the type of future oilsands development that will be allowed, or even possible, in Alberta, given the forecast huge increase in greenhouse gas emissions from the industry and international pressure on Canada to cut emissions in response to climate change.

Emissions from all existing and proposed oilsands projects are expected to increase to 135-165 million tonnes per year by 2018, compared with less than 30 million tonnes in 2001, according to a study by an energy research group at Uppsala University in Sweden. "Are the Canadians willing to create an environmental disaster in Alberta in order to provide the world market with oil?" they say in their study.

But while critics allow nuclear reactors don't emit greenhouse gases, they say nuclear technology has survived only due to some 40 years of public subsidies.

"I don't believe that financially it will make sense for oilsands, without big subsidies," says Marlo Raynolds, executive director of the Pembina Institute, an Alberta-based environmental policy research group. "I don't think Albertans are ready for nuclear power in the province."

Greg Stringham, vice-president of markets and fiscal policy for the Canadian Association of Petroleum Producers (CAPP), says oilsands plants would be able to use both the electricity and the steam produced by a nuclear reactor.

Pressurized steam is pumped underground in steam-assisted gravity drainage (SAGD) operations to loosen the tarry bitumen so it flows into production wells.

However, the large type of reactor proposed by Energy Alberta would be able to pipe steam only about 15 kilometres before it condensed into hot water, which is of no use to oilsands plants that are all within a radius of about 150 kilometres, Stringham says.

Nuclear power proponents need to come up with a smaller reactor that can be built onsite to serve individual oilsands operations, he adds.

David Keith, a climate change policy expert with the University of Calgary's Institute for Sustainable Energy, Environment and Economy (ISEEE), says for nuclear power to be a viable option in Alberta's energy future, it would make sense to build a few reactors - but not necessarily in the Athabasca oilsands region.

Coal-fired power plants near Wabamun west of Edmonton currently emit about twice the amount of greenhouse gas emissions as Alberta's existing oilsands facilities, Keith notes. "It would be much more cost-effective to use nuclear for electricity replacing the coal-fired power plants than it would be to use nuclear reactors in the oilsands."

The idea of a nuclear reactor for the oilsands has some powerful supporters in the energy industry. Hank Swartout, founder, chairman and CEO of Precision Drilling, is an investor in Energy Alberta, Henuset says.

The federal government would also like to get going on nuclear for the oilsands as soon as possible, Henuset adds. That's because if carbon dioxide and other greenhouse gas emissions are regulated in Canada, the U.S. or elsewhere, "then Alberta is dead" in terms of maintaining its current globally competitive advantage in energy production, Henuset says.

Keith, who also holds the Canada Research Chair in Energy and Environment at the U of C's Schulich School of Engineering, says the Alberta and Canadian governments need to act now to regulate CO2 emissions before the U.S. does so first - which he and other experts believe is likely within the next five years.

If Alberta and Canada have to play catch-up, he warns, "We will have less flexibility with respect to industrial policy when we do our regulation, which could really cause a lot of economic pain here."

Keith says implementing a tax on carbon emitted to the atmosphere or a mandatory cap on CO2 emissions would not only be the best way to tackle "the biggest single environmental problem," it would also help slow the overheated pace of oilsands expansion.

But CAPP says that a carbon tax or emissions cap would only drive investment and oil and gas development out of Canada to other countries that don't have such restrictions. "The market is the best determiner of how fast the pace should go. And we're already seeing the market slow down some of these (oilsands) projects," Stringham says.

It's generally agreed that carbon capture and sequestration (CCS) should and will play a key role in reducing greenhouse gas emissions from the oilsands industry.

The technology involves capturing CO2 at the source of emissions and pipelining it to depleted oil reservoirs where it's pumped underground and permanently stored or sequestered. At the same time, the gas can be used in enhanced oil recovery operations to "sweep out" more oil from aging reservoirs.

"I think that's something that's very, very doable, and what's necessary is a regulatory push," Keith says. "We should charge people for using the atmosphere as a free garbage can."

In a study reviewed by industry and academics, the Pembina Institute concluded that the oilsands industry could use CCS to cut emissions by 60 to 70 per cent by 2020, at a cost ranging from less than US $2 per barrel of oil to about US $13 per barrel.

Even if oil prices hovering around $55 per barrel dipped to $35, companies would still be able to afford CCS technology and earn a good profit, Raynolds says.

The oilsands industry could in fact become "carbon-neutral," with no net increase emissions by 2020, by offsetting its remaining CO2 emissions through buying emission-reduction credits on the Canadian or international market, he says. "At least then, the industry is part of the solution and not always part of the problem."

CAPP's Stringham agrees that carbon capture and storage, already being used at EnCana Corp.'s aging Weyburn field in southeast Saskatchewan and at petrochemical plants in Joffre northeast of Red Deer, Alta., "certainly is a very promising technology."

Many oilsands companies are looking at switching from natural gas to fuel made through gasification of petroleum coke waste or to burning bitumen. That would produce a concentrated CO2 stream, making it economic to capture and use the gas in CCS projects, Stringham says.

However, instead of buying international credits to offset the remaining emissions, as Pembina suggests, CAPP favours allowing the oil and gas industry to invest the same money to develop new technology in Alberta and Canada. "You would then have a win-win that you could export to other countries," Stringham says.

CO2 concentrations in the atmosphere are the highest they've been in 25 million years, and the consequences of global warming will only get worse if action isn't taken now to start reducing emissions, Keith says.

"We can't sit around saying that we hope somebody else will do it first when we're one of the richest parts of the world with one of the fastest-growing rates of emissions."

(Mark Lowey is managing editor of EnviroLine, a business publication for the environmental industry, and is also the communications director for the Institute for Sustainable Energy, Environment and Economy at the University of Calgary.)