'Rule book' needed for carbon capture and storage

By Jenette Poschwatta
For Business Edge

Climate change is an energy issue. The most important greenhouse gas (GHG) is carbon dioxide (CO2). The primary source of CO2 is from fossil fuels.

The challenge for many countries is how to reduce emissions while continuing to use fossil fuels. Answering the question is of primary importance in Canada - especially in Alberta.

The province is a major energy producer and the economy is tightly linked to fossil fuels. Coal-fired power plants provide most of the electricity - and most of the emissions.

The oilsands development adds to the challenge. A barrel of oil from oilsands results in roughly three times more CO2 emissions than conventional oil. This is one reason why oil from oilsands has been called "dirty oil.”

There is currently only one strategy that has the potential to make real, significant reductions in GHG emissions while relying primarily on fossil fuels. That strategy is carbon capture and storage (CCS) technology.

Earlier this year, the International Energy Agency's chief economist stated that CCS may be the only way of keeping GHG emissions below dangerous levels. The technology is a critical component in climate change strategy around the world.

It is also critical for Canada and Alberta. The joint federal ecoEnergy Carbon Capture and Storage Task Force report says CCS could help reduce GHG emissions rapidly and on a massive scale. The technology could reduce Canada's projected emissions by 40 per cent. Alberta expects CCS to provide about 70 per cent of its emissions reductions.

CCS involves capturing CO2 at industrial facilities, and then transporting the CO2 to locations where it can be permanently stored underground in geological formations. It turns out that Alberta's geology is ideal for the storage of CO2.

The technology for CCS currently exists. In Alberta, the needed technology is used in enhanced oil recovery, acid gas disposal and gas storage. The geology is ideal and the technology exists. So why isn't CCS being used in Alberta today to reduce emissions?

The main challenge to the widespread adoption of CCS is the economic challenge, especially the cost of capturing CO2. Earlier this month, the Alberta government announced a $2-billion investment in the technology. This addresses the immediate cost challenge.

But cost is not the only challenge. Alberta needs a clear "rule book" to provide an appropriate legal and regulatory framework for CCS to give investors the clarity they need to go ahead with a project.

Policy, practice and regulation have evolved to resolve fundamental questions for the extraction of fossil fuels. Who owns the resource? How do you obtain the right to explore for the resource? What is the project approval process? What are the environmental requirements? What is the liability?

The questions for CCS are similar, but there is a fundamental difference. CCS is not extraction but insertion of a substance into a geological formation. Some of the rules and regulations in place are adequate for CCS, but many are not.

In order for industry to invest in CCS, we need to put in place a set of rules that provides industry, investors and the public with policy certainty. Key issues include ownership of geological reservoir pore space, project approval and long-term liability.

Australia has taken a leadership role in developing a legal and regulatory framework for CCS. I (along with Prof. Nigel Bankes of the University of Calgary's faculty of law) looked at Australia's proposed legislation governing the use of CCS technology, and what lessons Alberta and Canada might learn from their approach.

The Australian legislation addresses most of the major issues and concerns regarding CCS that Alberta needs to resolve in order to deploy the technology. Some of the Australian concepts might be incorporated into the existing regulatory system for oil and gas.

Australia has developed clear rules for several key questions. The legislation provides clarity on how to obtain the right to inject and store CO2. It addresses regulatory issues such as approval of site plans, site closure and liability. Finally, the Australian legislation proposes a way to deal with possible conflicts between CCS projects and petroleum exploration and production.

Alberta considers itself an energy leader. Leadership includes addressing climate change and CCS is a necessary part of the solution. The government has addressed the immediate cost challenge. Now the government needs to provide a rule book outlining the legal and regulatory framework for CCS.

(Jenette Poschwatta is a Research Associate for the Canadian Institute of Resources Law at the University of Calgary. She can be reached at jiposchw@ucalgary.ca)