Environment Committee on May 15th, 2007

[Dave Hassan]

Weyburn compares favourably to that.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

That's interesting, because we have research here that says it's about $60 a tonne for most carbon capture and sequestration models in the world right now. Weyburn's doing it at half the cost?

[Dave Hassan]

As I think I mentioned earlier, the Weyburn project took advantage of an existing purer CO₂ stream, so we didn't have to do that capture component that's at $25 to $50 a tonne. Essentially, all we had to do was pay for compression of pipeline to bring the CO₂ from North Dakota to Weyburn.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

How much CO₂ per tonne is created through the storage process? How much are we emitting, in terms of energy intensity, to store a tonne of carbon?

[Dave Hassan]

So the extra energy involved with compressing the CO₂?

We estimate that it's about a third of the total CO₂ stored.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Then for every unit we put into the ground, another third is produced in the production process.

[Dave Hassan]

Yes. You reduce the efficiency of storage by roughly a third.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Okay. It's just important for us to know the full cost accounting, I suppose, of how much is actually being put in the ground versus how much total net is being saved from going into the atmosphere. I couldn't see those numbers in your brief, but they're important for us to understand as we talk about these policy options.

To Dr. Keith, have we any concept of what a tonne of carbon dioxide costs in this country right now--or will cost in the next few years?

[Dr. David Keith]

Lots of people have concepts. All sorts of people in downtown Calgary have their own models. I don't know very well. I think it really depends on the details of the government's plans.

I'm sorry to dodge that question. My amount of uncertainty would be pretty big.

I'll say this. If you really wanted to reduce emissions to bring them back down to current emission levels in five years, which I believe is what the government said they would do, if I recall correctly, I think the sorts of carbon prices necessary to achieve that would be very high, over $100 a tonne of carbon, $100 a tonne of CO₂, that kind of number.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Interesting.

I have two questions for Mr. Thomson in terms of the way you folks do your process.

First, when I was looking at your deck, I had some confusion. There was the ability of you folks in terms of processing the fuel, that 90% of the carbon emissions you produce are from the flue gas. That part, you're not able to capture carbon from. It's the 10% component.

[Grant Thomson]

Yes. What we capture is the CO₂ that is part of the ethane feedstock. The ethane feedstock is actually what we use to make the ethylene. So we extract the ethane out of the natural gas stream. The ethane actually naturally attracts CO ₂, so we do end up with, not a large stream, but about 4% of that stream is CO ₂. It is relatively straightforward technology to extract the CO ₂ out of the ethane. So basically the way I would put it is that we've done the easiest first.

The flue gas, which is what comes out of our actual plant production, is much more difficult, because that becomes a combination. It's probably, in round numbers, 10% CO ₂ and 80% nitrogen. There's water in there, there's oxygen in there, etc. So it's much more difficult, and that's where I'm saying I still think we need some work to figure out how to economically separate that stream.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So when you folks are looking at the economics, what do you assume the price of carbon to be this year or in the next few years? What's the price per tonne?

[Mark Lesky, Director, Environment, NOVA Chemicals Corporation]

We've been assuming the $15- to $25-per-tonne type of number, which we've been talking about. The federal government has put forward $15 to $20 to $25 a tonne. There are a number of different places where you can purchase credits in that type of range.

When we talk about sequestering, capturing the CO ₂ from the flue gas, the costs are much further north, the $50 type of number. The technology isn't clear at this point in time. So very quickly we would be looking to alternatives rather than capturing the CO ₂ from the flue gas.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you for that.

I have a policy question for Mr. Thomson. You talked about the capital-intensive nature of this exercise. I'm confused as to why the government would pay anything to assist in the creation of this system, either the pipelines or the R and D. I mean no offence by this but only bearing in mind, in the public eye—and I think Dr. Keith hit a bit on this—when I talk to my voters and say we're going to pay for elements of the carbon capture and sequestration system on behalf of the oil and gas sector, my constituents don't understand that, at $60 to $80 a barrel.

[Grant Thomson]

Understood. One of the things I did talk about in my 10-minute presentation, though, is that I think there are numerous benefits. This is not just something where you came in and chose to help NOVA Chemicals with a project. This is not something that just NOVA Chemicals benefits from, or the oil company that may be choosing to do the enhanced oil recovery. Those benefits that I talked about, and I think what you could tell your constituents, are that investing in technology like this, investing in capital and projects like this, means the technology is going to be transferable; it's going to be able to be used in many different industries. The transferable nature of this means it benefits all Canadians.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

But why subsidize that technology development if there's benefit to the industry itself to go out and sell that technology abroad?

Is it not government's job to try to assign, or incorporate, or internalize the cost of this pollution—which we're now calling pollution—into the business decisions that you folks make and the upstream sector makes, rather than subsidize it?

Nowhere in your bottom line is there any factor for CO ₂ right now, and EnCana would be the same. There's nowhere to look at the spreadsheets and find out what it's costing the companies right now, because there is no cost to it in Canada.

Maybe I'll direct my question to Dr. Keith and come back to you in a second.

With intensity-based targets, I'm trying to understand how it is that companies are going to make those capital investments not knowing what the cost of business is. Can you explain why companies are going to shell out hundreds of millions of dollars if they don't know what a tonne of CO ₂ actually costs?

[Dr. David Keith]

There are a couple of answers. First, we certainly have to have technology pull and push. The pull is provided by a market price on carbon, a disincentive to emit carbon to the atmosphere, which is an incentive to spend money to reduce emissions. But we also need to provide some kind of R and D push to move things along.

Yes, one of the reasons I'm in favour of a tax is that it's less uncertain what the tax rate is. If you look at the European cap and trade system, one of the issues with it has been the extreme volatility of the cap and trade market, which is introduced by the politics of different countries adjusting where they set their set points. That uncertainty has made the European system remarkably ineffective in incenting major capital investments.

That said, that's maybe the economist side of me speaking, saying put on a tax and let industry do everything.

Let me say something different. Canada is a small country. To compete successfully in this big world I think we need to make some choices. We cannot do everything. There was real leadership in Canada in CO₂ capture and storage, and with all respect to Carolyn Preston, I don't believe we have it any more. You look at the projects that are being announced around the world. I wish I could say we do, but I don't think that's a correct statement of where the current lie of the land is.

I think Canada cannot do everything. We can't do tidal and wind and nuclear power and various advanced efficiency things and win them all. And we will have to make some choices about what we're going to do, which are beyond the level of a single company.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I have a quick question around the monitoring acts, and this is for Mr. Reynen. I'm looking at an IEA report. What is the length of time required in terms of monitoring to be certain this is a viable system? They talk about 7,000 years. This is not exactly a left-wing organization. These folks are pretty conservative in their outlook on energy.

If they're saying that an acceptable level to limit risk is that we need to monitor some thousands of years into the future, if we monitor for 50 years and then it starts leaking and we've gone away and gone on to something else and it leaks for the next little while.... The scale and scope you folks have been talking about is absolutely enormous. Are we not running the risk of putting all our eggs in one basket if we're not willing to monitor nearly in perpetuity?

[Bill Reynen]

It's a huge question that comes up time and time again as to the long-term liability of storage of CO₂, and how long is long enough.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Whose liability would it be?

[Bill Reynen]

The general consensus is that it would be the long-term responsibility of governments because governments endure and industry comes and goes.

In Alberta, for instance, an orphan fund has been established for abandonment of oil and gas wells. And something similar has been suggested for any sort of CO₂ storage project, that there would be a certain cost per tonne stored that governments would maintain for use in long-term monitoring and mitigation of any potential leaks.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

By long-term, do you mean perpetuity? I wonder what you mean by that.

[Bill Reynen]

No. This comes to the question of how long is long enough.

Right now we're facing a climate change challenge because of the higher degree of CO₂ going into the atmosphere. Let's say in 200 or 300 years we've established technologies that provide a balance between our CO₂ emissions and what the earth can absorb, and our CO₂ levels decrease in the atmosphere. There's nothing wrong with the CO₂ we're putting away now leaking in the future. It's just that we have to be in balance in nature with our CO₂ emissions and what the earth can take on.

Some people have suggested that, yes, we have to monitor this for 10,000 years. Our civilizations haven't even lasted that long, so far. I think the more common thinking is perhaps 500 to 600 years when we are more in balance with our CO₂ levels within the atmosphere.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

To stop it.

[Bill Reynen]

Yes.

Also, most of the media we're talking about into which we inject CO₂...a lot of it is depleted oil and gas reservoirs or saline aquifers. In the case of oil and gas reservoirs, this is rock. This has contained oil and gas for periods of 50 million to 200 million years. So the idea of it leaking.... I think a lot of people visualize oil and gas being in pools. This oil and gas is ingrained in rock, so the idea of having a catastrophic leak or the idea of it coming out very suddenly or in large quantities is fairly remote. That's not to say there are no risks, but we also have the technology to mitigate any of these emissions, so it's a fairly safe enterprise.

And in terms of the period and the extent of monitoring, that's a matter of discussion. It might require intense monitoring in the short term. There are tools in place to see where the CO₂ is going, and once we get to a comfort level that the CO₂ is staying where we expect it to stay, then the monitoring intervals can decrease until such time as you can put passive monitoring in place in the long term and have comfort with that.