Alberta will give the oil and gas industry royalty tax breaks and other financial incentives to permanently store greenhouse gas underground, as part of the province’s plan to reduce the emissions.
The provincial government says its new program – aimed at kick-starting a technology called carbon dioxide sequestration – was in the works before Ottawa unveiled its updated plan to reduce global-warming emissions under the Kyoto accord.
Using carbon dioxide (CO2) sequestration to lower emissions is a key strategy in the “made-in-Alberta” alternative to Ottawa’s plan to ratify the international climate change treaty.
Alberta Environment Minister Lorne Taylor compared the federal Kyoto plan released last week to “putting lipstick on a pig.”
“It’s a little better dressed than its predecessors, but it is still woefully inadequate,” added Premier Ralph Klein.
“The federal government will not be allowed to hurt this province, or any province, in order to meet some rigid, illogical goal,” Klein told the Alberta legislature last Thursday.
Relying on CO2 sequestration as one alternative will be extremely expensive, however, according to a new study. Moreover, the emissions that the technology can reduce will fall far short of Kyoto levels by the treaty’s 2008-2012 compliance timeframe.
Nevertheless, Alberta Energy says it plans to announce the new royalty relief program and other incentives by year’s end to spur the technology. Projects that pump carbon dioxide underground to recover more oil, while storing the greenhouse gas in the rock formations, are expected to start early next year, says Alberta Energy spokeswoman Lynn Hutchings-Mah.
“They’re preparing an order-in-Council right now for our minister to introduce the royalty credit program,” she said.
“They’re also looking at recommending changes to our ongoing enhanced oil recovery program, to (encourage) carbon dioxide use.”
Studies compiled by Alberta Energy show there is potential to store between 35 million and 200 million tonnes of carbon dioxide in Alberta’s oil and gas reservoirs, while using the gas to push out more oil from the tight rock formations and to the surface.
Alberta’s geologic storage capacity would be more than sufficient to meet the province’s obligations under the Kyoto accord.
The problem is that CO2 sequestration, using current methods to capture and purify the gas at industrial facilities – such as fertilizer plants, pulp mills and coal-fired power plants – is extremely expensive.
It would cost about $100 million a year to permanently store just four million tonnes annually of the greenhouse gas, according to a new study by the Calgary-based Canadian Energy Research Institute (CERI).
Four million tonnes is a tiny fraction of the up to 100 million tonnes that Alberta – Canada’s biggest greenhouse gas emitter – would have to cut to achieve the Kyoto target.
“With current technologies and any lack of incentives, costs are very high” for CO2 sequestration, said Trevor Sloan, a CERI economist and an author of the new study. “It would be a longer-term, large-scale option.”
The main technological challenge is that most of the carbon dioxide produced by Alberta industries isn’t in a pure stream of the gas, but is entrapped in a mixture of industrial gases.
Only about four million tonnes of the CO2 available in Western Canada consists of relatively pure streams that could be captured for about $25 a tonne, the CERI study found.
Costs escalate to uneconomic levels – at least $75 a tonne – for impure CO2 streams that would have to be separated and purified, such as those produced by Alberta’s coal-fired power plants.
Added to these costs is the expense of drying and compressing the CO2 for shipping via pipeline, transportation and infrastructure, and permanent storage and monitoring in underground reservoirs.
Alberta’s technology-reliant climate change plan includes making energy efficiency upgrades and developing other technologies, such as “clean coal” and cleaner crude from oilsands operations.
But, like many of the emerging technologies on which the province is depending, CO2 sequestration is in its infancy and much more needs to be known about its benefits and risks, says Mary Griffiths, an analyst with the Pembina Institute, an Alberta-based environmental policy group.
“We need more pilot projects which are carefully monitored to see how well the CO2 does stay underground,” she said. “We can’t see this as the be-all and end-all of getting rid of our CO2 emissions.”
The Pembina Institute doesn’t support giving oil and gas companies royalty breaks to develop a yet-unproven technology, Griffiths noted.
Any financial incentives should go toward increasing renewable energy technologies, such as wind, solar and small-scale hydroelectric power, which are affordable and proven to permanently reduce greenhouse gases, she said.
Alberta has also introduced its own climate change legislation, saying it will “reinforce” the province’s ownership of its natural resources.
The Climate Change and Emissions Management Act bill introduced last week legislates an overall emission target for Alberta – the reduction of emission levels relative to gross domestic product (GDP) by 50 per cent of 1990 levels by 2021. Also proposed are targets for specific sectors of the economy, to be established through negotiated and regulated agreements.
The provincial government says emissions such as carbon dioxide and methane are “natural resources” that are linked with management of its other natural resources, and insists its own targets are the only ones in effect in Alberta.
