Thank you, Mr. Chairman. Good morning, honourable members, and thank you for the opportunity that you've given Mr. Wishart Robson, from Nexen, and myself, to speak to the community on behalf of the ICON Group.
Since this is a complicated subject and my French isn't very good, my comments and my answers to your questions will be in English.
We've provided you in advance with a slide deck that you may want to follow through as I give my initial remarks, and you might refer to it in questions.
The ICON group is comprised of 14 companies whose names appear in slide 2 in your package. We are in the electricity generation, oil sands, industrial, and chemical sectors. These companies have a strong interest in carbon capture and storage, or CCS, as we refer to it. We're working towards creating a functioning, long-term, integrated carbon dioxide network—hence our name, ICON. That network would be able to handle large volumes of carbon dioxide at minimum overall cost.
ICON is not a single project. It is a set of policies, regulations, and ultimately private and public sector investments to make large-scale carbon capture and storage a reality.
CCS presents a tremendous opportunity for Canada, and we're here today to highlight the key considerations with respect to CCS as your committee considers modifications to the proposed Clean Air Act.
Slide 3 describes, in a very simple way, how carbon capture and storage works. Carbon dioxide from large industrial sources of any variety can be separated from the flue gas and compressed and dried for transportation. You can use a conventional high-pressure pipeline system to deliver that carbon dioxide hundreds or conceivably even thousands of kilometres. Then the carbon dioxide is injected into rock formations two to three kilometres underground where it will remain for thousands of years. We can also inject carbon dioxide into older, declining oil fields, and this technique, which would improve oil recovery and reduce the need for water injection, is called “enhanced oil recovery”, or EOR.
The IPCC from the United Nations has said, in a big report that was published in May 2006, I believe, that carbon capture and storage can be a safe, long-term, and cost-effective way to reduce carbon dioxide emissions.
CCS is very important for Canada as it's potentially the most substantive way for Canada to directly reduce greenhouse gas emissions within a five- to ten-year timeframe. This was indicated by the National Round Table on the Environment and the Economy in a report that was done last summer. Some of their analysis is shown in slide 4 of your deck.
CCS will assist with the transformation of our economy to a lower carbon energy economy. It's necessary to realize clean coal as a low environmental impact energy source, as Mr. Lewin referred to. It will allow for more sustainable growth of Canada's oil sands resources, and it will allow for the use of coal, coke, or bitumen, when gasified, to replace the limited sources of natural gas we have and to free those up for other uses in the economy.
In short, carbon capture and storage is a made-in-Canada solution. The investment will occur here, the carbon dioxide reductions will occur here, and the technology development can occur here. Canada can fulfill its potential as an energy superpower and lower its GHG emissions at the same time by deploying technologies like carbon capture and storage. Canada could become a world leader in this approach to GHG reduction.
Slide 5 shows a breakdown of the carbon dioxide emission sources in Canada. What we'd like to point out is that of the total commissioned sources in Canada, nominally half of them would have the potential to use carbon capture and storage as a technique. The other sources of emissions, which tend to be more widely distributed from residences and small commercial activities, as well as transportation, really aren't suited to carbon capture and storage. For those types of emissions, we look for energy conservation, for switching to lower carbon fuels, and other means to reduce carbon dioxide.
With carbon capture and storage, companies can achieve carbon dioxide reductions that are greater than their reasonable share of national targets, but we need a mechanism to reward and incent this behaviour. This will lessen the burdens for other sectors of the economy that don't have CCS available while ensuring that Canada can achieve meaningful reductions.
Adoption of CCS must also be balanced with Canadian competitiveness to ensure that investment remains in Canada. This is particularly true with respect to oil sands upgrading, which needs to be competitive with locations in the U.S., where this activity could alternatively take place.
The ICON study showed that there are benefits in planning a large-scale system for carbon dioxide capture and storage from the beginning and building it in phases. This is shown on slide 6. We estimate that up to 20 megatonnes, or 20 million tonnes, per year could be captured and stored by around the year 2015. This is equivalent to removing from million vehicles from the road, or about 25% of our light vehicle fleet in Canada.
ICON envisions an open access pipeline system that would connect multiple capture and storage locations. The map you see on slide 6 shows a conceptual routing--this certainly hasn't been decided--from source to end-use for the Alberta portion of the ICON network.
While carbon capture and storage will likely start in western Canada, including B.C. and Saskatchewan, we also think that our system approach is well designed to work anywhere in Canada. In particular, we believe there's potential to extend the concept to Ontario and the Maritimes, where you have similar large point-source emitters and suitable geology.
A network like this will be the key to the success of carbon capture and storage. When you compare it to individual projects, a network approach allows for economies of scale and optimized long-term efficiency, and, most importantly, it minimizes the environmental footprint of the pipelines and the other infrastructure that you would build.
However, such a scheme does require participation by various industry sectors and coordinated input from governments. Specifically, Canada's overall GHG reduction plan must work to encourage CCS.
Slide 7 talks about shared responsibility. A successful integrated system will include three elements: the large-scale capture of CO2 from industrial point sources; a pipeline system to connect those sources to end uses; and the storage infrastructure, and there are really two pieces to that. There are EOR fields that can be used as a customer base and to support some of the costs in the short term, but more importantly, direct storage that provides no revenue source to the system is going to be essential to achieving large-scale volumes of CO2 reductions.
Left to market forces, very little CCS will proceed, even with tightening CO2 emission constraints. The risk profile and economics of large-scale CCS are simply unfavourable. There's a transition role for governments to help enable this to take place in the future, and a true three-way private-public partnership with two levels of government is essential.
Slide 8 refers to some of the policies that you might want to consider as you're looking at Bill C-30. It's important that innovation be considered by both industry and governments when constructing the CCS infrastructure, and using both existing and new technology at a large scale while we wait for market mechanisms related to CO2 to develop.
The full range of policies and mechanisms should be considered to deploy this technology. Companies should retain the option to undertake CCS along with other compliant strategies. We don't want to see CCS mandated, and we don't want regulations that would discriminate based on technology sector or geography.
Companies that can embrace CCS should have no greater compliance burden than other sectors of the economy, and the policy must work to incent direct storage and CO2 capture. It's in these areas that we face significant hurdles.
Continuing on slide 9 with policy principles, companies that elect to use carbon capture and storage may be able to achieve reductions greater than their reasonable share of national targets. So a mechanism to reward and incent this behaviour is needed. Any trading or offset system that's designed needs to work to support this idea.
I'd also like to make the point that we're at the stage of deployment. Significant research has already occurred on some of this technology, and some of it is well understood. We believe any technology fund mechanisms that are proposed should be focused on large-scale deployment and not on direct research.
The government has a transitional role to help CCS right now. At these early stages, the risk is the highest and our understanding of the scale, technology, costs, and timing is the lowest.
Just in closing, then, the ICON Group has done a substantial analysis of how a carbon capture and storage network could function. We encourage the federal government to confirm CCS as a key part of Canada's environmental strategy and to make the ICON concept a priority.
I'd also like to make it clear that capture companies are willing to pay their fair share of the costs of CO2 reductions. We do not expect to profit from CCS if that is the chosen compliance mechanism for any company.
Developing an integrated CO2 network will be a transformative environmental step, one that can be most effectively taken as a private–public partnership. We would like the federal government to work with us and the provincial governments to develop the scope, size, and policy options that will enable ICON. Collaboration is essential, and the ICON companies are ready to engage the government in substantive discussions.
Thank you for your attention. I eagerly await your questions.