Mr. Grant Thomson at the Environment and Sustainable Development Committee

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.