Environment Committee on May 15th, 2007

[The Chair, Conservative, Bob Mills]

I would like to call this meeting to order and welcome our guests.

For the members' information, we have two people on teleconference: Mr. David Keith, who is in Cambridge, England; and Professor Malcolm Wilson, who's a professor at the University of Regina. Members can address questions to them, plus those on the long list.

I should also tell members that the level of interest in this subject has been great. Many agriculture and forestry groups want to be involved in talking about carbon sequestration.

I'd like to welcome all of you and thank you for being here on short notice to talk about this very interesting subject. We will go in the order listed and begin with Climate Change Central and Mr. Simon Knight, please.

Please keep it to 10 minutes so the members have time to ask questions. With so many witnesses it gets a little tough if you go over.

[Simon Knight, Chief Executive Officer, Climate Change Central]

That's not a worry. Due to the short notice, I don't have a long presentation to make.

Climate Change Central is a not-for-profit corporation in Alberta, and its mandate is to reduce Alberta's greenhouse gas emissions. We report to a board of directors and concentrate our efforts on energy efficiency and conservation around new technology, emission offsets, and communications and outreach to the public.

In that work we have not spent much of our time concentrating on the upstream oil and gas sector. There are quite a number of players there already. We spend most of our time working on the demand side. However, in reviewing our mandate last year and our strategic position, we did an exercise where we looked at using the Socolow wedges approach that was done at Princeton to look at what Alberta's emission profile might be into the future. We determined that the emission profile coming from industry is going to be considerable in its growth in the future, especially concerning the oil sands. Our efforts on the demand side were going to be overtaken by the work that's going to happen on the production side.

In part of that review, we came to the conclusion that things like carbon sequestration, capture, and storage were going to be an essential piece of the Alberta action plan and Canada's as well. We looked at what we could do around this issue, and we've determined that we're going to help educate the public and the industry players on carbon capture and storage: the benefits, the challenges associated with it, and what we need to do to move this forward as a technology.

We recognize that there are significant challenges to large-scale CCS. However, it is one of the major answers to the concern in Alberta. We recognize there is work and research already ongoing. There's a considerable amount of effort around the world. However, we need policy direction, government support at all levels, and support from the public to make this a large-scale, viable technology into the future.

That's my opening presentation. Thank you very much. I look forward to answering your questions.

[The Chair, Conservative, Bob Mills]

Thank you very much.

I have this little box that keeps track of how you went, and you took two minutes and 24 seconds. Very good. That's probably a new record.

We will go on to NOVA Chemicals Corporation. Will Grant or Mark be presenting?

[Grant Thomson, Senior Vice-President, Olefins and Feedstocks, NOVA Chemicals Corporation]

I'll be presenting, but I am joined here by Mark Lesky, director of environmental affairs for NOVA. I'm a senior vice-president with olefins and feedstock at NOVA Chemicals.

I'm just wondering, can I have Simon's eight minutes?

[The Chair, Conservative, Bob Mills]

We can negotiate.

[Grant Thomson]

Okay, I will keep it to 10 minutes.

Anyway, I want to thank you for the opportunity to speak before the committee today. There are four areas that I'm going to cover in my comments: a short introduction to NOVA Chemicals; some general comments on the CO₂ sequestration process and how it works; some specifics on projects that NOVA Chemicals is involved in, two particular ones in Alberta; and then some thoughts on the path forward and how we can work together to progress this opportunity.

NOVA Chemicals is a company that produces plastics and chemicals that are essential to everyday life. We focus on two product chains: ethylene and polyethylene, and styrene and polystyrene. As I think most people are aware, our industry is very capital intensive and has a tendency to be very cyclical. The key determinants of profitability within our industry, as in many, are just simply supply and demand of our products and the cost of the feedstocks used to make them.

Through an aggressive technology-based effort, not just NOVA but the chemical industry as a whole has dramatically increased energy efficiency over the last number of years. We promote end-use products that have reduced CO₂ emissions, which have resulted in significant emission intensity reductions. In fact, I think the submission we put in indicates that we have reduced greenhouse gas emission intensity by 50% since 1992.

As NOVA, we've been actively working at this since 1990. In fact, we have been reporting our information publicly since 1994. As we look over the last five years, our emission intensity has been reduced by 12%, and as we forecast forward, looking at what our plans are, we expect a further 8% reduction by 2010.

NOVA Chemicals has achieved these reductions by pursuing investments where they have made the most sense, meaning the most sense to the environment, and also optimizing returns to the shareholders of NOVA Chemicals. This is a theme you will hear me talk about over the next 10 minutes, that capital investment as we go forward is a key to more efficient operations. At the end of the day, it makes good business sense.

I'll give you an example. We have a new ethylene plant. We refer to it as “E3”. It was built in the year 2000. It's one of the most energy efficient plants in the world. E3, compared to plants on the U.S. Gulf Coast, is about 40% more energy efficient. The reason is that it's larger and it's new technology. So those are the types of things that capital investment can do.

In Sarnia, we have a flexi-cracker. We invested $300 million in this in late 2005, through the middle of 2006. Again, it managed to improve the efficiency by 15%. We improved operating reliability and we expanded manufacturing capacity. All these things improve GHG emission intensity.

Let me move on to the second point and just discuss briefly CO₂ sequestration. I'm sure you'll hear a lot about the process from a number of speakers today. I'm going to focus on enhanced oil recovery, because those are the projects that NOVA is involved in, in Alberta.

CO₂-based enhanced oil recovery is a technique primarily for what's known as tertiary recovery of original oil that was in place from a mature oil field. Some of the oil fields that we were involved in actually were drilled as early as the late 1950s. By the 1970s they had stopped producing, by using what you would refer to as primary and secondary techniques—primary basically just being the natural pressure that's under there; secondary techniques often involve water.

A tertiary recovery would be the CO₂. We use this in what's called miscible flooding. The CO₂ is injected at high pressure into the oil reservoir and acts like a solvent. It reduces the viscosity of the oil so that the oil will flow better, and that's why you can take a field that has stopped producing and get it to a point where it can start producing economically again.

You then, out of the producing well, get a mixture of CO₂, oil, and water. You recover that, you separate it, you re-inject the CO₂ and water again and continue to use it.

As you go through this process, though, large net quantities of CO₂ are sequestered in the reservoir. Obviously these reservoirs have a long lifespan. They're reservoirs where gas has been down there for millions of years, so I think they're very efficient in terms of capturing and containing CO₂.

We've been involved in CO₂ sequestration in Alberta for 20 years, and again, for the purpose of enhanced oil recovery. What we do is strip the CO₂ out of our feedstock—our feedstock is ethane. Then we take that CO₂ and sell it to customers, to producing oil companies. They take it and pipeline it—a relatively short distance because it's very expensive to pipeline this—a short distance to the adjacent fields, basically compress it, treat it, and inject it into the field at high pressure, as I said. In total, about 150 kilotonnes of CO₂ is captured annually by these projects.

Let me give a brief description of the two projects we're involved in. The first one is with a company by the name of Penn West. We have been supplying Penn West captured CO₂ since 1984. In fact, it was the first miscible flood CO₂ project in Canada. One of the keys when we started this in 1983 and started the research was that there was government support for key technological development, and that was really critical to the success of this project. One of the things I would commend is the innovation and foresight that the Alberta government had in funding this in 1983. When you think back, that was almost 25 years ago, and it was quite remarkable. This project continues to be an outstanding success, and it probably has another 10 or 20 years of life left in it.

The second project we have is with a company by the name of Glencoe, and this is more recent. We started in 2005 and reached an agreement with Glencoe for a similar type of process where we would sell them CO₂. They would collect it, purify it, transport it, and inject it. These fields actually have the benefit. They capture CO₂, not only from NOVA's operations in Joffre but also from the Prentiss site, which is a Dow operation. So in total, they sequester about 240 kilotonnes of CO₂ annually. Simply to give you a sense, that's about the same as taking 50,000 passenger cars off Alberta's highways during the life of the project.

These are two tremendous successes, but what I'd like to do is spend a bit of time and talk about the path forward. In other words, what can we do together?

NOVA Chemicals believes that technical innovation, combined with further infrastructure development and the appropriate incentives for capital investment, can enable significant future expansion of CO₂ capture and sequestration. We commend the creation of the Carbon Capture and Storage Task Force in March 2007. We think this could have great benefit going forward.

Now, what needs to be done? There are three areas I will touch on. One is technological innovation. Yes, we're already capturing and sequestering CO₂, but there is a lot of technical work that needs to be done. This technological innovation, the investment in this, I think could have numerous benefits in developing this technology. One, the technology is transferrable to other applications, so it's not only specific to the types of things that NOVA Chemicals does. The other thing is the transferrable nature of this, meaning that it can be used in coal-fired plants, other fixed-combustion facilities. It means it can have significant benefits for all Canadians across the country. Third, I think there's an opportunity for Canada to show leadership in this area. So as we develop this technology, it's not only going to be applicable in Canada but also outside of Canada.

The second point on what needs to be done after technology is infrastructure development. I think you heard Simon refer to this a bit earlier. These are expensive projects; they're long-term projects and they have to be evaluated over a long-term timeframe. With significant initial capital requirements for pipelines and compression equipment, it can mean limited returns on some of these projects. So the necessary pipeline infrastructure linking major emitters to compression equipment, etc., needs to be put in place. So facilitating further infrastructure development is going to be a critical next step, and I think it's something the government can help with.

The third point in terms of what can be done is a suggestion around capital cost turnover. As I had indicated before, large investments are required, so continuing the theme--the importance of capital investment in this area--I think an accelerated capital cost depreciation for CO₂ sequestration projects could have a significant impact on the economic viability and growth of these projects.

In closing, I want to leave you with two key messages. One, CO₂ sequestration can work. We've already been commercially successful on a modest scale in Alberta. We've shown that it can work, and I'm sure other people today will talk about projects that are working as well.

The second key message is that the key to significantly expanding the amount of CO₂ sequestration is twofold: one, the technical innovation I talked about to economically separate CO₂ and capture it from combustion sources; and two, further infrastructure development to gather, transport, compress, and inject CO₂. But it can be done.

I appreciate your time and attention, and I look forward to questions and comments.

[The Chair, Conservative, Bob Mills]

Thank you very much.

You're just about right on, so congratulations for that too.

Next we'll go to EnCana and Dave Hassan, please.

[Dave Hassan, Former Vice-President, Weyburn Operations, EnCana Corporation]

I may steal a little extra time, because I'm talking about the Weyburn project, and it's the biggest CO₂ storage project in the world.

Good morning, mesdames and messieurs, ladies and gentlemen. My name is Dave Hassan. I'm team lead of the Boyer-Provost property team at EnCana. Prior to this I spent five years in EnCana's Weyburn business unit, initially as group lead of development and finally as acting vice-president. I'm here today to present Weyburn as a case of a win-win scenario for enhanced oil recovery in the environment. I must remind the committee that I'll be talking about some forward-looking information today.

EnCana was formed in April 2002 by the merger of two major Canadian oil companies, PanCanadian Energy Corporation and Alberta Energy Company. We're headquartered in Calgary, and we are North America's second-largest natural gas producer and a leading oil sands integrated producer. We have strong corporate governance, including a constitution, which guides our organizational behaviour. Our people live and work in the communities where we operate, and we do our best to be a good neighbour.

We're also committed to making efficient use of resources, minimizing our environmental footprint and our emissions intensity, and increasing the energy efficiency of our operations.

EnCana believes that geological storage of CO₂ is one of the most pragmatic and technically viable near-term options to reduce greenhouse gas emissions. There are three types of carbon capture and storage. Natural carbon sinks are an integral feature of the natural carbon balance of the biosphere, and these can be augmented by human action, such as forestation projects and growing energy crops.

Enhanced product recovery includes oil recovery technology, which is well-established, gas recovery, and coal-bed methane recovery. Stand-alone waste storage is similar to enhanced product recovery, except there's no revenue stream to offset the cost of capturing, transporting, and storing the CO₂.

Carbon capture and storage presents an opportunity for society to use some of our heavier hydrocarbon resources, abundant supplies of coal, for example, in a less carbon-intensive fashion by stripping carbon from the fuel and geologically storing it. This is exactly what we do at Weyburn.

CO₂ for our enhanced oil recovery operations comes from a coal gasification facility located in Beulah, North Dakota, operated by Dakota Gasification Company. It is transported through a 325-kilometre pipeline to southeast Saskatchewan in the Weyburn field. Dakota Gas strips carbon from coal to convert it to synthetic natural gas. When burned, natural gas releases a little over half of the CO₂ per unit of energy production as coal does. By stripping carbon, DGC makes coal a less CO₂-intensive energy form.

Weyburn closes the loop on this carbon-stripping process by taking over 6,500 tonnes per day of waste CO₂ that was being vented into the atmosphere and injecting it almost a mile underground. This makes it Weyburn Canada's largest CO₂ enhanced oil recovery project and the world's largest geological CO₂ storage project. Every day that Weyburn injects CO₂, it's like taking 1,400 small to mid-sized cars off the road for a year.

The first one in this process is enhanced oil recovery. Enhanced oil recovery by CO₂ miscible flooding has been used in the U.S. for over 30 years, so it's not new technology. CO₂ is injected with alternating slugs of non-potable saline water. The CO₂ essentially acts as a solvent; it makes the oil swell, makes it less viscous and lets it flow more easily out of the nooks and crannies or pores in the rock space.

The CO₂ and water produced with the oil are recycled in a closed-loop system. CO₂ EOR makes heavy use of geologists, geophysicists, and reservoir engineers to understand and optimize enhanced oil recovery. There are also a host of other experts, ranging from operators in the field through our facility and construction specialists, to environment, health, and safety folks to ensure that our operations run smoothly, safely, and responsibly.

The payoff for this effort is demonstrated by the success of the Weyburn project. Weyburn oil field was discovered in 1954. Following primary production, a water flood was initiated in 1964 and production peaked at around 50,000 barrels a day. Then the field began a natural decline. There were a few drilling projects in the mid-eighties and mid-nineties that somewhat offset that, but then the CO₂ miscible flood began in the year 2000, reversed that continued decline, and boosted oil production to levels not seen since the early seventies. In fact, it's exceeding our forecasts right now.

Current production of about 30,000 barrels of oil per day is almost three times what EnCana predicts the field would have produced without CO₂ flooding. We project about 155 million barrels of incremental oil recovery from CO₂ miscible flooding, which will bring total oil recovery to over 40%, about 10% higher than we expect from water flooding.

The second big one in this is CO₂ storage. Really what we do at Weyburn is effectively to take those big stacks in North Dakota that were emitting CO₂, we turn them upside down, and we inject that CO₂ almost a mile underground, where it enhances oil production and will be stored for thousands or even millions of years.

From 2000 through 2004, a $40 million research effort ran parallel to our enhanced oil recovery project in order to predict and verify the ability of the oil reservoir to securely store CO₂. And I see a few people around here who have been involved with that project.

Phase one of the IEA Weyburn project was the largest full-scale, in-the-field scientific study every conducted involving CO₂ storage. It was funded by the Canadian and U.S. governments, Alberta and Saskatchewan, the European Union, and several industry partners. During the study, 24 different research organizations completed extensive monitoring and computer simulation studies. In essence, they conducted a four-year external audit of the suitability of the Weyburn site for CO₂ storage. Phase one concluded that long-term storage of CO₂ at Weyburn is viable and safe. A copy of the phase one report can be downloaded from the Petroleum Technology Research Centre website.

EnCana was a significant contributor, providing the test site funding and thousands of hours of work by EnCana employees at a rough in-kind cost of $15 million. We also opened our doors to over 200 field tours to tell the world the story of enhanced oil recovery and CO₂ storage.

Based on EnCana forecasts during phase one, the researchers concluded that about 23 million tonnes of CO₂ could be stored during enhanced oil operations and almost 55 million tonnes if injection continued post-EOR, given some other economic driver.

EnCana currently estimates that our most likely storage case during EOR is roughly 30 million tonnes. That's one tonne for every citizen of Canada, or equivalent to taking all of Montreal's vehicles off the road for two years.

EnCana is currently working with the research community to extend the project, with the primary goal of developing a protocol or cookbook that would provide practical guidance to others wanting to do CO₂ storage projects.

Unfortunately, you can't just pull CO₂ off the flue stack of power plants. Air is almost 80% by volume nitrogen. When we burn fuel with air, the resulting flue gas is only 10% to 15% CO₂. To be useful for enhanced oil recovery, CO₂ must be 95%-plus pure, thus the challenge and cost of CO₂ capture, which I'll talk about in a minute.

Once we have pure CO₂, we need to compress it to push it down a pipeline to the oil field or storage reservoir. The size of the oil pool is also a consideration in the economics of enhanced oil recovery. It's no coincidence that Weyburn is the third largest conventional oil pool in western Canada. Not every large oil pool is suitable for CO₂ flooding. That's where geologist reservoir engineers have to assess the properties of the field.

Capital investments for these projects are huge. EnCana estimates that over $1.3 billion will be invested for the CO₂ flood at Weyburn over the life....

Adding to the mix of reservoir suitability and development costs are the often-volatile price of oil and the market price of CO₂.

IEA reported in 2003 that the single biggest cost for CO₂ is capture, at about $25 to $50 per tonne. That's the process of creating a pure, concentrated CO₂ stream, as opposed to the dilute flue gas I referred to earlier. Transport will add $1 to $5 per tonne per 100 kilometres, and injection adds about $1 to $2 per tonne.

EnCana was fortunate with our CO₂ supply from North Dakota, since Dakota Gas was already producing a pure CO₂ stream as a result of the coal conversion process. However, additional CO₂ capture from traditional flue gas sources will face high costs with current technology.

In summary, EnCana and the Dakota Gasification Company captured a CO₂ waste stream that was being vented to the atmosphere and used it to bring new life to a mature oil field. EnCana hosted a world-class research project that provided an independent audit of the storage capability of the Weyburn reservoir and concluded that it could safely and reliably store CO₂. We continue to work with the research community on the final phase to study and further refine the previous work and to prepare storage protocols and guidelines.

The cost of CO₂ capture is likely to be the single biggest impediment to widespread EOR or stand-alone geological storage applications. Weyburn is a commercial and environmental win-win that provides a leading example of a possible sustainable energy future for fossil fuels that allows energy to be extracted while minimizing CO₂ emissions.

Thank you for your attention, and I will be pleased to answer questions.

[The Chair, Conservative, Bob Mills]

Thank you very much.

Now we'll go to our witnesses who are with us in voice only. I hope you've been able to hear the testimony so far.

We'll go first to David Keith, who is a professor at the University of Calgary but presently working at Cambridge in England.

Mr. Keith, I hope you're there.

[Dr. David Keith, Professor, University of Calgary, As an Individual]

I am. Can you hear me?

[The Chair, Conservative, Bob Mills]

Yes, we can hear you very well. We will limit you to ten minutes, if possible, please.

[Dr. David Keith]

Understood. Okay.

Forgive me if I am a little bit slower or less coherent than usual. I just flew in this morning and I've already done a lot of work with only an hour or two hours' sleep.

Let me say a couple of words. I guess I want to make four points. First of all, I want to argue that CO₂ capture and storage is ready for prime time, in the sense that you could implement industrial-scale projects today, with industrial performance guarantees, in the clear understanding that they would work. Now, that's not to say they wouldn't be expensive—and “expensive” is a relative term, as we can argue about how much we want to pay—but I think it's essentially a statement of fact that we are ready to do this on a full industrial scale.

I want to say what the reason for that statement is. You might say, oh, this is some university professor saying this, and what does he know? The reason is the following: the underlying technologies all exist on the industrial scale in the commercial market already.

So you might ask what happened, given that CO₂ capture and storage incentives have moved very quickly from where we stood a decade to two decades ago, when there were some first meetings at MIT and there were only a couple of academics interested, and almost no serious interest, to nowadays when we have a major global R and D budget and interest from the G-8 and the IPCC, and various projects are being announced around the world. Why did we move that quickly? Was it because there was a bunch of innovation and laboratories? The answer is no.

The reason things moved quickly, essentially, is that we're talking about using, on a full industrial scale, the components we already had in a tool box. So with coal gasification, for example, while there are certainly issues about gasifying some of the coals in western Canada, there are 60 gigawatts of thermal coal capacity worldwide. The German government, during World War II, fueled most of its aircraft fleet out of coal gasification turned into liquid fuels. Likewise, hydrogen production from natural gas is a worldwide enterprise that's more than 1% of the global energy system. Similarly, CO₂ capture in aqueous amines is widespread around the planet. CO₂ is transported at distances of up to about 1,000 kilometres. Again, none of this was developed for the purpose of managing humanity's CO₂ emissions; it was developed for other, completely separate commercial reasons.

Finally, the injection of CO₂ into deep geological formations for CO₂ storage amounts to more than 30 megatonnes a year in the U.S., or something like 0.5% of the U.S. CO₂ emissions.

So it's the combination of these components, each of which already existed, at a full commercial scale.

CO₂ capture and storage is the opportunity to use these pieces of technology we have in the fossil fuel industry and assemble them in a new way—to assemble the parts in the took box in a new way—to enable us to use the benefits of fossil energy with greatly reduced emissions. Each of these things already existed. It's for that reason, with the megatonne and billion-dollar scale all around the world, that we can say for certain that if you want to build power plants with capture today, you can do it. There are many independent routes that would allow you to do it.

As a second comment, despite what I said—but not in contradiction to it—I think there still really is a need for more energy R and D in Canada. I don't think that doing more research should be an excuse for inaction. Indeed, as far as I can tell, it's the almost unanimous view now among the community of people who think about CO₂ capture and storage that at this point what we need to do is pull the trigger and get some major projects in the ground. Just doing more research without big projects won't even be an effective way of doing research, because the best way to do research is via big projects.

That said, it is still important to say that Canada's energy R and D is in many ways very, very small, as was demonstrated by the blue ribbon panel on energy R and D that reported back to NRCan and Parliament last year—which I was on. So if you see, for example, that the ratio of investment in energy R and D in Canada to the size of Canada's energy sector is one of the lowest of the major countries, you really get a sense that Canada is not aiming upstream; we're not aiming for the high-value-added clean technology, high-value jobs, that we would get if we were focused more on an R-and-D-intensive energy sector.

The energy sector as a whole invests something under 1% of revenue in R and D, which is tiny compared with the average of all the other sectors, or with the sectors that are more focused on R and D. You really have to scratch your head and say, how would the energy sector look if we did significantly more R and D?

I'm not suggesting that R and D should be done through some giant parcel of federal money going to federal labs and universities. Indeed, personally, although I am a professor, I think the opposite. I think this R and D needs to happen mostly, dominantly, in the private sector, but government policies can incent that.

I have argued, first, that it's prime time, and second, that even though it is ready for prime time, more energy R and D on this and other topics is really necessary if we're going to meet the challenge of living in a carbon-constrained world, if we're really going to do what we need to do to stabilize the climate, which is to make very deep reductions in emissions over just 50 years. The third point is that the risks of doing large-scale CO₂ storage are not zero, but they are small. There's a lot of background to understand on what those risks are, including background from the very successful Weyburn project, for example.

There are no really large-scale industrial technologies in the world that have zero risks, and this is no exception. If we really put gigatonnes of CO₂ underground, we can expect some local risks. If you're looking for a risk-free technology, you can go elsewhere--although I don't think there is an elsewhere. But a series of different lines of evidence give us real confidence that we understand these risks and that we can control them, given a suitable regulatory regime.

To harp on the regulatory regime for a minute, people often ask, almost point blank, what's the risk of geologic storage of CO₂? The correct answer to that question—and this is the answer the IPCC gave, I think quite wisely--is that essentially there is no answer. It's an engineering question. To some extent, if a politician asks me, “What's the risk?”, the answer I'll give as a project engineer is, “Tell me what level of risk you want, sir.” This is an engineering project design question.

So the risks of the upstream petroleum industry in Alberta are very small. The risks of the upstream petroleum industry in Nigeria are quite large. It's not due to some intrinsic difference in the hardware; it's due to the regulatory system in which these things are embedded. Similarly, flying commercial aircraft around Canada is very safe, whereas flying in parts of Africa is very dangerous. This has to do with the rule of law, high-quality regulatory systems, etc.

Much the same applies to CO₂ storage. If we set the guidelines appropriately, if we have a high-quality regulatory system that's adaptive, that's able to deal with new information and new techniques or managing the risks of CO₂ storage, the risks can be very small, I think quite comparable to or smaller than the risks of the current upstream petroleum industry.

Finally, I want to say a few words about policy. In that fourth set of things I want to say, I'll give a couple of my views on what needs to happen.

I think it is vital for this and any other technology that we put some kind of price on carbon. The merits of something simple...for instance, an economy ring-fenced carbon tax, which is exceedingly easy to implement. It does not require facility-based accounting systems and it puts an even price everywhere in the economy. It is hard to get away from the merits of such a system, because such a system has the government only telling the economy what we should do about releasing emissions. It gets the government out of the business of picking winners and losers, either between provinces or between sectors or within industries.

Second, I think that needs to be supplemented by something like loan guarantees that help to enable firms to buy down the risk of very large capital intensives and uncertain investments. I think that is as true for other new energy technologies as it is for CO₂ capture and storage.

Finally, I think it's time for Canada to think about what has already been implemented in British Columbia and is being now talked about quite seriously--suprisingly seriously--in the U.S. House and Senate, and that is something that comes close to, or is, a complete ban on the construction of new coal-fired power plants that do not have CO₂ capture and storage, because those are among the most carbon-intensive objects our society builds. They have very long lives, and they can mean very long emissions. Since we do have alternatives in Canada, both non-coal alternatives and the alternative of CO₂ capture and storage, I think we should think hard about whether we want to allow any more such plants to be built.

Thank you very much for giving me the time.

[The Chair, Conservative, Bob Mills]

Thank you very much, David. You kept it to nine minutes, and that's pretty good on a couple of hours' sleep. Well done.

We will carry on and go to Malcolm Wilson, a professor at the University of Regina.

[Professor Malcolm Wilson, University of Regina, As an Individual]

Thank you very much. I appreciate the opportunity to present to the committee, and I apologize for not being in Ottawa. I don't quite have David's excuse.

The advantage or disadvantage I have is being at the tail end, and certainly I concur with a lot of the statements that have been made, and I certainly concur with David and the viewpoints that he has raised.

I would like to make a few, if you like, clarifying comments here with regard to what we're looking at. The first of those comments is that enhanced oil recovery is extremely important, and, as Mr. Hassan said, it does provide a mechanism whereby there can be some return on investment. It should be noted, though, that enhanced oil recovery and probably many of the others, whether it's enhanced gas recovery or enhanced coal-bed methane, will be limited opportunities, and they certainly will not represent the major opportunity and certainly the major means of preventing carbon dioxide from reaching the atmosphere. So we have to be looking very hard at using what we learn from the enhanced oil recovery community to take us down the road of geological storage in saline aquifers, as is being practised currently in the North Sea, and in In Salah, with BP, in Algeria. This will be the large opportunity, and this does mean that there will be a cost to the consumer and to industry to implement that.

The second point I'd like to make is that it's not just an economic cost that we need to be looking at. Moving to carbon dioxide capture and storage will have a significant impact on the rate at which we use fossil fuels. If I look at the current SaskPower proposal, and SaskPower, the provincial utility here in Saskatchewan, is proposing to build what will amount to possibly the first fully integrated plant with CO₂ capture built from the ground up, the increase in coal consumption will be about 50%. So as Dave Hassan commented, in order to turn the stack from going up into the atmosphere and moving that CO₂ down into the ground, it will require a very significant increase in the size and fuel consumption of the power plant in order to maintain an electrical output, in this case of about 300 megawatts.

So I think these are points that we need to bear in mind as we move forward.

Having said that, the SaskPower project is extremely exciting, in that, as David Keith said, we have a very definite need to move from research and from pilot-scale, small-scale storage operations into the arena of full commercial demonstration. Without the demonstration, we're certainly not in a position to do the research that industry needs to drive down the costs further. I do believe there is an opportunity to drive down the costs further, but we need this demonstration. We need to see this actively in the field.

A few months ago there was a meeting held in Kananaskis bringing industry leaders together to talk about the opportunities and to talk about the challenges to the development of these commercial large-scale opportunities. There are certainly lots of opportunities in Canada, particularly in Alberta and Saskatchewan in western Canada. Many of those opportunities go south of the border.

One of the points that came out of that meeting was a need to look more broadly. Again, as David raised this, we're looking at a global issue. These opportunities are not restricted to Canada, and we need to have our policies, programs, and research programs in place to try to build off the opportunities that exist on both sides of the border, and indeed elsewhere in the world.

Again, sort of promoting from a university perspective, one of the issues in the future is that while we have significant intellectual capacity in Canada at the moment, and certainly there are companies—such as EnCana, Penn West, Apache, and others—to look at and undertake these projects, we will be facing a shortage of qualified people very rapidly, if we move out into the broader-scale adoption and implementation of these technologies. One of the areas we need to build is getting qualified people and having universities train people to meet the upcoming industry requirements for this.

I don't want to belabour any of the points that have been very eloquently made up to this point. Government certainly has a key role to play in providing the right direction and policy, and again I agree with David in terms of helping out in the private sector to drive the research agenda.

One of the points that came out very much from the industry people attending the Kananaskis meeting was that we should take lessons from the garbage disposal industry. At each step of the way, there have to be incentives to capture, transport, and store the CO₂.

As we look at the opportunities, and particularly as the federal government starts to look at the opportunities, challenges, and how we move forward, I urge you to look at a number of models that take into account the costs and make sure that the appropriate incentive is there to allow us to develop this industry at scale.

It's a recognition of the increased fossil fuel consumption and the overall impacts of this. The enhanced oil recovery is a learning opportunity, and we should use it as such. We need some firm policy direction, as David was saying, and we need the people in order to implement these technologies out into the future.

Finally, there are opportunities that cross borders, and we should make sure that the policies and programs are in place to allow us to take advantage of those cross-border opportunities.

With that, I thank you.

[The Chair, Conservative, Bob Mills]

Thank you very much, Malcolm. We appreciate your comments.

Now we'll go to Carolyn Preston, who has the main presentation for your group.

Then, Mark, if you have something to add after that, we'll go in that direction.

[Dr. Carolyn Preston, Project Integrator, CANMET Energy Technology Centre, Devon, Alberta, Department of Natural Resources]

Good morning.

I am the project integrator for the final phase of IEA GHG Weyburn-Midale CO₂ Monitoring and Storage Project. I work at the CANMET Energy Technology Centre of Natural Resources in Devon, Alberta.

This morning I'm going to make a brief presentation about carbon capture and storage in the Canadian context. I'll be pleased to answer any questions on the material covered in my deck during this meeting.

The first slide gives a brief summary of the need to store CO₂ over the long term. As we've all heard, the recent IPCC summary reports made it abundantly clear that we are having a real and measurable influence on the earth's climate by emitting CO₂ during fossil fuel combustion. In order to slow or reverse that impact we must decrease the emissions associated with human activities.

CCS, or carbon capture and storage, is just one in the basket of options we must employ to reduce CO₂ emissions that are accumulating in the atmosphere. Other options include energy efficiency, alternative and renewable fuels, non-emitting sources of electricity, and terrestrial sequestration. CCS offers us the opportunity to maintain economic growth while reducing emissions, and we are well on the road to its widespread deployment.

CO₂ can be captured from large stationary sources of either the flue gas stack or through modified combustion technologies. CO₂ capture, as we've heard, is the most expensive step in capture, transport, and geological storage.

History has shown us that research and development, and experience through doing, will bring down the cost as we develop new and innovative capture technologies. We have plenty of experience in North America with transporting CO₂ from source with a considerable existing infrastructure in the United States and a pipeline being proposed in Alberta. We are confident from past experience and pilot and commercial operations that we can store CO₂ in deep geological formations for a very long time.

In Canada we have identified a large total storage capacity in sedimentary basins. We have enough capacity to last hundreds of years. To put that in perspective, in 2003 Canada's large emitters vented just over 400 million tonnes of CO₂ into the atmosphere.

CO₂ can be stored in partially depleted oil reservoirs through enhanced oil recovery, depleted oil and gas reservoirs, deep unminable coal seams, and deep saline formations. The estimated volumes of storage capacity in Canada are shown in the figure on the slide labelled 3. Note from this graphic that storage will take place mainly at depths exceeding one kilometre below the ground surface.

A sedimentary basin not only offers pore space for storage, but provides several impervious regional trapping seals or layers of rock between the storage reservoir and the surface. This assures us that CO₂ will remain underground.

The slide of a map of the western Canadian sedimentary basin shows we have an ideal geology in western Canada for the storage of CO₂ underground. More than 50% of Canada's stationary CO₂ emissions are in close proximity to these storage locations. The western Canadian sedimentary basin extends from northeastern B.C. to southwestern Manitoba. There is also some storage potential in sedimentary basins in other provinces outside western Canada, namely in Ontario and Nova Scotia, but they offer considerably less than western Canada. The pipeline proposed for Alberta will consist of a network and backbone infrastructure linking sources to storage sites, initially connecting relatively pure CO₂ sources with nearby EOR fields.

Straight CO₂ storage without production of an economic resource such as oil is currently facing high-cost and technical uncertainty, making it prohibitive for industry to pursue this alone at large scale. I say “technical uncertainty” because we only have a few instances of large-scale CO₂ storage in deep saline formations to draw experience from. Statoil's Sleipner gas operation in the North Sea comes to mind as an exception. It's a fairly large-scale operation and has been running for about 10 years.

Provincial regulations exist for transport and injection of CO₂ into geological formations. Research and development is under way to further increase our confidence in the long-term safety, reliability, measurement, and validation of the storage of CO₂. We will likely find we need to enhance existing regulatory frameworks to account for the long-term nature of this activity.

Public acceptance of carbon capture and storage is key to widespread deployment. We must engage the public now rather than being perceived as holding back or hiding information.

We are a global leader in carbon capture and storage, as has been clearly shown by the previous speakers. We have a large number of nationally and internationally engaged technical and policy experts from governments, industry, universities, and NGOs. An example of our leadership is the Weyburn-Midale CO₂ monitoring and storage project, in which, as Dave Hassan has covered, we're taking CO₂ by dedicated pipeline from North Dakota and storing it in an EOR field. The associated international monitoring project has shown that the natural geological setting for that particular field is sound.

Canada is well positioned for widespread deployment of carbon capture and storage with the recent completion of NRCan's CCS technology road map and a number of key demonstrations and commercial operations at various scales. We anxiously await the findings and recommendations of the recently established Alberta-Canada Task Force on Carbon Capture and Storage concerning impediments to near-term widespread deployment.

In conclusion, all experts agree that fossil fuels will continue to be the dominant source of energy for many decades to come. Carbon capture and storage is one of the best ways to address both our growing need for energy and our environmental goals. Over time, technology and innovation will help to improve the efficiency and economics of CO₂ capture and storage systems.

Thank you.

[The Chair, Conservative, Bob Mills]

Thank you very much.

Mr. Tushingham, you have a deck, I believe.

[Mark Tushingham, Senior Engineering Advisor, Department of the Environment]

I have a small deck.

I'm Mark Tushingham. I'm with the oil, gas, and alternative energy division of Environment Canada.

Our deck goes over some of the positives and negatives of carbon capture and storage.

Carbon capture and storage is a very promising technology to reduce CO₂ emissions, particularly in western Canada, where there are favourable geological formations for storage. The storage potential will be more than 20 megatonnes per year in a decade or so, and the long-term potential is huge for this technology.

CO₂ capture and storage reduces the net CO₂ emissions by more than 80%. CO₂ at a plant does go up because of increased energy requirements of the capture and storage system, but the increased CO₂ is then captured.

Carbon capture and storage is likely the only way many facilities can significantly reduce their CO₂ emissions. Storage sites, however, need to be monitored for decades to ensure no CO₂ leakage.

There are some negative environmental implications of carbon capture and storage, but they can be managed. The extra energy needed to capture, transport, and store the CO₂ will cause emissions of other pollutants, such as nitrous oxides and sulphur dioxide. The International Panel on Climate Change found that the capture systems would result in increased emissions. They looked at particularly advanced, fairly low-emitting power plants and found an 11% to 31% increase in NOx and up to an 18% increase in SO₂ unless SO₂-removal equipment was installed, which is required by some capture technologies to work.

These emission increases are still well below the emissions from typical coal-fired plants found in Canada. These increased emissions can be managed through the installation of various emission control technologies and appropriate practices.

Under the clean air regulatory agenda, sectoral emission caps are being established for both nitrous oxide and sulphur dioxide for key industrial sectors, including those in the oil and gas sector and the electricity sector, which are two sectors liable to use CCS.

There is a remote health risk, if there is a rapid leak of CO₂; however, this can be carefully managed with the appropriate selection of storage site and through thorough monitoring.

There are also land disturbance issues regarding CO₂ pipelines. These will be managed through environmental assessment processes.

CO₂ storage in the open ocean was once considered; however, there are significant issues around the threat to ocean life. Amendments to the London Protocol on Ocean Dumping allow parties to issue permits for geological storage only; that is, not in the column water or on the ocean floor. This is not to be confused with storage of CO₂ in sub-sea geological formations. Amendments to the London Protocol allowed this option, but there are issues that remain to be settled internationally. These include the long-term monitoring of leaks, defining the purity of the CO₂ stream, export for disposal when it crosses international boundaries, and the liability issue. Storage in the sub-sea geological formation might be a possibility for facilities in Atlantic Canada.

Thank you.

[The Chair, Conservative, Bob Mills]

Thank you very much.

Now we will go to questions. The first round will give members 10 minutes; then we'll go to a five-minute round with whatever time we have left.

Just for the panel's information, you'd be interested that in a week to 10 days' time, at the G-8 plus 5, one of the main parts of the agenda is CO₂ capture and storage. Some of the lead questions that will be asked are from China and India, for which, with 800-megawatt power plants coming on stream every week, it's pretty critical that they capture their CO₂ and do something with it. So I think I can report that the interest in CO₂ capture and storage globally is very high at this time, and that's good for all of us.

We'll go to the first questions.

Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, Mr. Chair.

Thank you all, witnesses, for joining us, and those on the telephone, thank you for listening and being there.

My first questions revolve around the deck put out by Dr. Preston from NRCan. Page 5 in the deck talks about remaining challenges.

Dr. Preston, you rightly repeat that CCS projects face very high costs, and you go on to say that industry is unlikely to absorb this risk alone.

When I read that, because you follow that comment up with “Inadequate Incentive for Technology Investment” presently in place, it reminds me of the accelerated capital cost allowance measure announced in the budget, which is seeking to phase out ACCA for oil sands investments in eight years—not two years, not three, four, five, six, or seven years, but eight years—which had a lot of people asking why it couldn't have been phased out earlier and, for example, made available for CCS.

You also talk about higher-cost penalties required for emitting, to create the necessary incentive for widespread deployment. That actually fits very nicely with the IPCC report released in Bangkok just a week or 10 days ago. In response to that report, the head of the Climate Change Secretariat in the UN, having examined Canada's new plan, said that our cost of carbon was not going to be anywhere near where it needed to be under the plan to, for example, deploy this very technology.

Can you comment a little bit on...or perhaps even some of the front-line economic vested interests in this technology? Help me understand. What's required here? How fast do you need this to make this economic?

[Dr. Carolyn Preston]

I can begin by saying that in the first statement I made I was referring to pure CO₂ capture and storage, not CO₂ capture and storage with an economic product at the end. That is storage in deep saline formations, where it's straight disposal, and there are no incentives for actually doing that right now.

I defer any of the economic discussion to those from the commercial entities that are present.

[David McGuinty, Liberal, Ottawa South, ON]

Can anybody from the front-line businesses here help us understand, help Canadians understand? What do you need to see in terms of ecological fiscal reform at the federal level to accelerate and to accentuate this investment?

Dr. Keith assures us that this technology is all shrink-wrapped. It's on the shelf. It's a question of just simply going into the tool box and putting it together.

What do you need to see, and how fast do you need to see it?

[Dave Hassan]

Maybe I could comment. I think Malcolm Wilson raised a very good point about the SaskPower project. EnCana has some discussion with SaskPower, looking at their project as a potential CO₂ supply for Weyburn and other enhanced oil recovery operations.

As Malcolm points out, that plant has about a 50% reduction in efficiency. So, basically, SaskPower has to build a 600-megawatt power plant to output 300 megawatts of power to consumers. Right there, the cost of power will double to consumers. That doesn't include the extra pots and pans, the equipment required in the plant to actually capture the CO₂. That's only the reduction in efficiency for the use of coal.

As I pointed out, the IEA estimates the cost of capture at about $25 to $50 a tonne. That's the kind of cost you're probably seeing on that SaskPower project. I think if there's one area that EnCana feels requires some dedicated research effort, it's in reducing the cost of CO₂ capture.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Chair, this might be a tough question to answer.

I take it, then, nobody is really in a position to speak specifically to what measures you'd like to see and when you'd like to see them, to facilitate investment in this technology. Do I have that right? Is anybody in that position?

Let me move on to a second question, if I could, Mr. Chair, then, and that is to Dr. Keith.

Professor Keith, I think I heard you say over the phone that no new coal-burning electrical plants should be built until CCS is in place. Did I get that right?

[Dr. David Keith]

Yes.

First of all, I must be very careful here. I am on the national task force, but I am speaking as an individual, not giving the opinions of the task force. My personal opinion is, first of all—just an opinion, not even a policy—that we shouldn't build any more coal plants without capture, period.

Now, should you make that a policy, there are obviously issues about making a hard policy, because, as we know, there are some places where costs are higher and some are lower, so economists will argue, quite sensibly, that sometimes these hard command-and-control measures aren't as efficient as others. But given what I know about the kinds of coal plants people are talking about building in Canada and where they're building them, I think it makes sense for the Government of Canada to take seriously the idea of an absolute ban on any more coal plants without capture.