Natural Resources Committee on May 14th, 2007

[Graham Campbell]

We put a map in the very last slide of the deck, Mr. Bagnell. It's slide number 22. That indicates what we think are the best locations for CO₂ capture and storage. The Toronto area is not included. There are two reasons for that. One is that the sedimentary section is very thin there. There are no deep, thick geological reservoirs that we could use. There is a spot in the extreme southwest of the province, in the Sarnia area, that opens up into the Michigan Basin. Unfortunately, that would take a lot of pipelining to get the CO₂ into a suitable geological circumstance.

What we're showing you on this map are the best locations in Canada. The very, very best location in the world that we know of for CO₂ capture and storage is the western Canada sedimentary basin, where there are not only sources, but also a thick sedimentary section in which to store it.

[Larry Bagnell, Liberal, Yukon, YT]

Thank you.

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Bagnell.

Madame DeBellefeuille.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Thank you, Mr. Chairman.

You spoke about the commitment by Canada and other countries to two research protocols on next-generation nuclear energy.

I suppose that research on nuclear energy also deals with nuclear waste management. It seems to me that you cannot develop a next-generation nuclear energy system without addressing the issue of waste management, which remains the greatest problem of nuclear energy use.

What can you tell us about the production and management of nuclear waste?

[Graham Campbell]

Thank you very much.

You are correct, the international partnerships deal with such things as nuclear energy storage and waste.

The committee will be briefed on that issue in the coming days. I would prefer letting the experts answer that question.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

How do publicly-funded capture and storage technologies help create wealth in Canada? How would wealth be created if we could export our technology to other countries? What are the estimated economic spinoffs for Canadians?

[John Marrone]

I'd like to start, perhaps, and then you can continue, Graham.

Many of the first applications of carbon dioxide capture and storage will be for use in enhanced oil recovery. What happens there is they're using the carbon dioxide to actually pressurize older wells and extract even more oil, oil they would not have been able to extract, so that is another form of wealth for the country.

Following that, we're developing technologies to extract methane out of coal seams that are not mineable. They're not accessible, and if you can pressurize that, you could actually extract natural gas, which is a very useful fossil fuel and a relatively clean fossil fuel. There are some benefits to Canada from carbon dioxide capture and storage.

[Graham Campbell]

I'll add briefly that as our companies get better experience, they basically offer the services and the knowledge to other countries that are also growing rapidly and also developing power. This match works best if the coal quality or the coal type in that country matches well with Canada's. Several countries have that characteristic, so there are some opportunities to reap in the long term as well.

[The Chair, Conservative, Lee Richardson]

Thank you very much.

Thank you, Madame DeBellefeuille.

Mr. Allen, do you want to wrap it up?

[Mike Allen, Tobique—Mactaquac, CPC]

Thank you, Mr. Chair.

Thank you for your presentations.

I've got a couple of quick questions. I want to pick up on the theme that we can't clean anything up that we have. That concerns me more than a bit.

Are you aware of the Phoenix technology? It's based on the technology that captures the emissions from the space shuttle as it takes off. It's written by NASA. We had a presentation from them, and it would seem to me that they're a long way toward reducing more than 90% of the emissions. They can also do carbon dioxide capture; they do it in a very small bolt-on to a plant. They're looking to try to test this in some smaller coal plants of 100 to 200 megawatts.

Are you guys familiar with that kind of technology?

[John Marrone]

No, we are not familiar with that technology, but we will note that and look into it.

[Mike Allen]

I'll get you the information. It just concerns me that we're throwing our arms up in the air and we can't do anything to replace it with this kind of technology out there.

Second, what are the practical limits when you look at where carbon dioxide can be stored? What is the practical limit for transporting it to any particular area?

[John Marrone]

We transport natural gas from all the way out in western Canada to eastern Canada. We're actually thinking of eventually using such an infrastructure to transport carbon dioxide, but the other way. I don't know of any limitations in terms of distance. These, of course, would have to go through.... It's just a question of money, and repressurization plants and so on, to keep it moving to the storage site.

[Graham Campbell]

The most costly part of this whole system we're talking to you about today is the capture of the CO₂. Transporting the CO₂ is conventional pipeline technology, and it's well established. Areas in the United States, for example, have been using CO₂ pipeline technology for decades to support enhanced oil recovery in their fields. It's really not seen as an impediment.

The challenge in Canada, particularly in western Canada, is that the CO₂ sources are in a particular location and the places you'd want to use it for enhanced oil recovery or for deep sinks are in other locations. We need transportation infrastructure to connect up the sources and the uses of CO₂, but that's in the area of capital investment, not in the area of technology, in terms of the challenges before us. Really, the transportation is not an issue for us.

[Mike Allen]

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, and thanks to the committee.

Before you leave, we'll have to have at least one more little speech from Monsieur Ouellet.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Mr. Allen has just asked an extremely interesting question on the rational for capturing CO2. In Quebec, there are smoke stacks that help eliminate and precipitate CO2. You are no doubt aware of those smoke stacks, because the technology received a number of awards.

Could such technology be used in traditional coal-fired plants?

[John Marrone]

If my understanding is correct, you are referring to post-combustion capture. Certain materials help absorb carbon dioxide and then release it. However, the technology you are referring to is used in the pulp and paper industry, that is on a much smaller scale than what is being studied here. Very large vessels are needed to modernize a conventional plant, such as the one in Nanticoke.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Is that question of interest to you, Mr. Chairman?

[The Chair, Conservative, Lee Richardson]

Oh, yes, that's why I came.

Thank you, Monsieur Ouellet.

I'll have to have him repeat the answer.

Thank you, gentlemen. That is the limit of our time for our discussion with the representatives of the Department of Natural Resources. So I'll thank Mr. Campbell and Mr. Marrone for their time today and for responding to the questions of the committee.

Thanks very much.

While we are waiting for the next witnesses, I am going to ask the committee about some other business that came up.

We received an invitation from the National Research Council. You'll recall that they appeared before the committee, and there was some interest from some of the committee members in looking at the gas turbine plant at the NRC. Despite that interest, it would be somewhat difficult I think to arrange this in the time we have. It involves going through the same process we'd follow if we were going to Churchill Falls, just to go to the turbine here in Ottawa. Unfortunately, that's the case with regard to moving equipment and translators and things. I just want to raise that with the committee.

Unless there's a strong demand from the committee to pursue it, I think I'm just going to thank them for the invitation and respectfully decline. I think first we just don't have the time. If individuals would like to go on a tour, I'm sure that could be arranged, but as a committee I think it would be somewhat prohibitive at this point to include it in our agenda.

I will leave it to committee members. If they want to go on a personal tour of the gas turbine lab in Ottawa, at the Montreal Road campus, I'm sure they would welcome you to attend.

Is that okay?

Now we'll carry on with the business of the day, which is the greening of electricity consumption in Canada, the use of coal, and towards a clean technology.

We have now, representing the Coal Association of Canada, Mr. George White, chairman; and from the Canadian Clean Power Coalition, David Lewin. David, thank you for attending as well.

We're going to proceed in the same manner. I'm going to ask you to try to keep your initial opening remarks to about 10 minutes. Then we'll proceed with questions until our time runs out.

Mr. White, are you prepared to begin?

All right. We'll ask George White, chairman, from the Coal Association of Canada to begin his presentation.

[George White, Chairman, Office of the President, Sherritt International Corporation, Coal Association of Canada]

Thank you, Mr. Chairman, honourable members, ladies and gentlemen.

I think maybe half of what I'm doing today is representing the Coal Association. There'll be a big dollop of Sherritt International here as well. I haven't passed out notes, because I'm speaking from speaking notes. I really wanted to take the time to talk to the committee and follow up on some of the discussion we heard from the previous people.

I'm not as old as I look. I think it's a lot like some of the members of this committee. None of us are as old as we look. I've been in the coal industry for 25 years. I've been working in power plants and in that part of the business for a long time. I think there is a lot to be said about how we have proceeded.

I would like to talk to you a little about clean coal. Clean coal today is not the same as clean coal was 10 years ago. I'd also like to follow up with a bit of the conventional technology, to talk to you about what's taking place using the kind of technology that we still use today. Then I want to talk about some very exciting things that Sherritt International has in place as far as the use of coal and the business strategy behind the use of coal for gasification go.

There's no doubt in my mind that we will make the transition to gasification. I think the leadership will come from industry. It will be guided, directed, and steered by regulators and governments, but the leadership will come from the industry, because there's a business case to do it. Hopefully I can go through that with you.

The kind of technology we use today to make electricity in Canada is not new. It's been around for a long time, but it's improved as time has gone on. The original concept of clean coal was coal that we could burn via combustion in a typical power plant, which didn't produce any acid gases, or reduced the amount of acid gases. Many of us can remember when sulphur dioxide and NOx and those kinds of things were real issues and something had to be done about them. Twenty years ago we started putting technology in, but not all of that technology has been implemented, so we still have acid gases. When provinces like Ontario started talking about clean coal, even in the last three or four years, the original issue was around asthma, and asthma is caused by the acid gases.

Now we've got another issue that's facing us in the industry, and that is the fact that we're also producing CO₂. The solutions for the acid gases could be the same as the ones for the CO₂. Had the problems been reversed, probably we would have a solution by now because we would have chosen a different course. The solution for the carbon dioxide is much more difficult than the one for acid gases.

The acid gases problem presented itself first, and as a result we built retro technologies on existing plants that were capable of doing a lot to improve the acid gas situation. We were able to take the existing problem, develop technology that was basically add-on--so we didn't have to build new plants or make a transition to a brand new technology--and get some success. That happened in the last 20 years, and there has been a lot of success.

Witness the fact that the people who make these power plants in North America have built very few power plants in the last 20 years, and yet most of these companies are still viable and successful. The reason for that is they've been building back-end technology for the old plants that they built a number of years ago. This could be done in Ontario, but they decided not to do it, and there are reasons for that. Nevertheless, when we looked at clean coal 20 years ago, we were looking at acid gases. When we look at clean coal today, we're looking at all the emissions from coal-fired power plants, and because there's so much carbon in coal, the big issue is carbon dioxide.

When I started in the industry, my own personal thought was that it didn't make sense to me that we should clean up the problem at the end of the process. It always seemed reasonable to me that it would be easier to work on a tonne of coal than three or four tonnes of emissions. A tonne of coal is something you can put in front of you and see; the emissions are somewhat more nebulous and difficult to deal with. When we come to the gasification process, that's really what we're talking about. We're talking about dealing with the emission problems before we use the fuel, by creating a new fuel.

We have been building the conventional plants in Canada--and there are lots of them--since 1950, as far as I know. The old Hearn station in Ontario was built in 1950. It's now shut down. Many of the less efficient plants in Canada have been shut down and have been superceded by newer plants.

Every subsequent plant that's ever been built in Canada with conventional technology has been more efficient than the previous one built. I think it goes without saying that the technology has evolved. However, there are some thermodynamic principles associated with this type of technology that make it very difficult to improve, and continue to improve, that technology over a long period of time so that we could get conventional technology to a point where it was actually 100% efficient, for example. That cannot happen, theoretically, because of losses and the thermodynamics of the situation.

I'm sure Dave Lewin will talk to you about conventional plants that have been built in Canada recently, which are 19% to 20% more efficient than the existing fleet. By seeding these new plants into the existing fleet, eventually we could get to the point where we are 20% better, if that's all we wanted to do, and just build brand new conventional plants that are ever more efficient. By doing that, we could probably get between 20% and 25% greater efficiency over the next, say, 25 years, and that would result in 25% less carbon dioxide being produced for the same amount of power. That's one strategy you could use to reduce the carbon dioxide emissions by, let's say, up to 25%.

In Ontario, it appears there are a lot of reasons why we shouldn't just attack the acid gases. So Ontario has decided not to put scrubbers on existing power plants, for example, and has decided to go the nuclear route. But another option would be to build brand new coal-fired power plants that are more efficient than the ones that are there. You'll get as much reduction in acid gases as the technology will allow—which is extensive nowadays—and up to 20% to 25% reduction in CO₂ for the same amount of power produced. That's a strategy that could be developed in Ontario. It's been decided not to do that.

One other point in Ontario is that the mix of existing technologies is very important. A system that is all nuclear is not going to be very easy to operate. A system that is all hydro is not possible because we've used up so many of our hydro sources. So a power or electricity system is very much like a portfolio of stocks and bonds: you don't want to have all your money in one basket. And it's important to maintain that, from the point of view of responsibility for security of supply, and even emissions, over a long period of time.

So that's what I think we can do with conventional plants.

If you look to Europe to see what the Europeans are doing, you'll find that they're not building integrated gasification, combined-cycle-type plants, but they're building conventional power plants, which are more efficient than most of the plants in their fleets and are located in the centres of cities, with lots of acid gas emission reduction. They're improving the efficiency of the plants not just by producing electricity; they're also producing hot water, for example, and they use it for heating and cooling, depending on what time of the year it is.

Now, you also have to remember that in Denmark and Germany and these places, where these things are being done, power rates sometimes are four or five times higher than they are here. So if you want to spend the money on electricity, there's a lot that can be done as far as the technology is concerned.

In Alberta, we have a confluence of circumstances that is really special in the world; there is no place in the world that has the potential for integration of the energy systems that exist in Alberta. We have heavy oil, which requires hydrogen to be upgraded into light oil. We have coal, which we use to make electricity today, but we can also take the coal and gasify it and make hydrogen. We have depleted oil wells that could use carbon dioxide to improve the output of those depleted oil wells. The gasification process and the hydrogen production process produce carbon dioxide as a byproduct, and that byproduct would go into the ground and become a commercially viable byproduct from the whole process.

I mentioned earlier that there is a business case for doing this. The technology associated with gasification is extremely important to our company and to our shareholders. We believe that if you go back and take a look at the oil business in 1910, there was lots of oil in the world, a much greater amount than what was required. As a result, oil in the ground had very little value. So shareholders didn't value companies on the basis of the oil they had in the ground; they based it on the value of the oil that was being produced and sold.

Nowadays, you have to pay $35,000, $65,000 a barrel for oil in the ground, on a yearly basis. So the value of the oil that's in the ground today is recognized by the investment community. The same is true for natural gas. And the same is true for bitumen nowadays. Bitumen in place costs a lot of money. It's not true for coal yet.

But when we demonstrate the technology to gasify coal to turn it into hydrogen, that coal that's in the ground will have value. That is the business strategy for developing gasification within these companies. If you talk to Peabody Energy in the United States—I was talking to one of their vice-presidents a couple of weeks ago—that's what their plan is. They want to make liquids.

They have to make liquids because they don't have an opportunity to make hydrogen the same way we do. We can make hydrogen and we can sell the hydrogen to the heavy oil companies. In the process, we have a business case to perfect the gasification process. By perfecting the gasification process, we can open that process up to the power business, to the electricity business, taking away the risk by working in an integrated fashion with these various different industries. All of this exists in Alberta, and it's my prediction that over the next few years you're going to see this.

Our company, Sherritt International, has taken Alberta coal, we have sent it to Europe, we have put it in a gasification process that exists in Europe, and we've demonstrated that this coal can be gasified. Right now we have a team of about 15 people working on a feasibility study that will be completed by the middle of this year, whereby we will decide whether we're going to go ahead with a commercial gasification project to produce hydrogen in Alberta. We have partners who we're talking to about that process. There are synergies between that process and not just the heavy oil business and the enhanced oil recovery business, or the coal-bed methane business, but also the electricity business.

So that's our story. That business strategy is there. There's a reason for us doing all of this. I think the message I'd like you to take back, more important than anything else, is that the leadership will come from industry. The guidance and the steering, the regulations, will come from the regulators and from government.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. White.

We'll have an opportunity to question Mr. White following the next presentation from the Canadian Clean Power Coalition, Mr. David Lewin, chairman.

Mr. Lewin.

[Dr. David Lewin, Chairman, Canadian Clean Power Coalition]

Thank you very much for the opportunity to speak to you today.

I have quite a number of slides, so I'll do a quick page flip and try to stay within the time limit of 10 minutes.

There is a presentation outline on page 2. The topic is the current status of clean coal technologies. First of all, I'll give an overview of the CCPC and discuss some results of our early phases one and two, as we call them, provide some insight into projects that were borne out of earlier CCPC work, and then briefly cover off the next step, the phase three plans.

Page 3 indicates that it is no surprise to anyone that Canada has substantial fossil fuel reserves. Coal is by far the significant portion of these reserves, and these reserves will last for many centuries.

Page 4 talks about the Canadian Clean Power Coalition, which was formed in 2000. It's an association of predominantly Canadian, but also U.S., coal and coal-fired electricity producers. There are also participating coal miners. It's also an industry-government partnership, both federal and provincial. The objective is to demonstrate that coal-fired electricity generation can effectively manage all the environmental issues of concern. When I speak of that, there are usually five emissions of concern, and that's NOx, SO₂, particulates, mercury, and also CO₂. An additional requirement was to demonstrate flexible fuel capability, given the range of carbon-based fuels we have across the nation, and our website is there for anyone who wishes to go to it.

On page 5 there's a list of the coalition participants.

Page 6 indicates that government participation to date has been through Natural Resources Canada. I might at this point add my thanks to Natural Resources Canada for funding in the past, and hopefully funding in the future for some of our continued efforts. There's also the Alberta Energy Research Institute, which is the funding arm of the Alberta government, and Saskatchewan Industry and Resources, the funding arm of the Government of Saskatchewan, which has also participated to date.

Some of our early results are shown on page 7. It's a fairly complicated slide, but suffice it to say that we've looked to date at a range of coal types--lignite, which is the lower end of the quality of coal, sub-bituminous, the mid-ranked coal, and bituminous coal--and applying different technologies sort of across those different types of coal: conventional pulverized coal technology as well as coal gasification. The inclusion of CO₂ capture with those technologies increases the cost of electricity significantly in that work and certainly above that of conventional coal without CO₂ capture. However, the results show that both capital costs and costs of electricity are reduced by moving from conventional PC technology to technologies like coal gasification with CO₂ capture included. In all of these cases, we've also included the reduction of NOx, SO₂, particulates, and mercury, reducing those by up to 90% compared with the current pulverized coal technology.

On page 8 there's an idea, in a sense, of the CO₂ storage and utilization options, particularly in the western Canadian sedimentary basin. Of course, capturing CO₂ from these processes requires a pipeline infrastructure and the ability to store CO₂ in depleted reservoirs, all for use preferably in enhanced oil recovery. Both EOR and storage capabilities are available in Saskatchewan and Alberta, and maybe a little bit in Ontario, as we've heard, certainly in the U.S., and perhaps offshore Nova Scotia.

So that's where we got to with respect to our phase one work that we completed in 2003.

Page 9 shows that phase two continued, and, as with all studies, the technology knowledge gaps were identified, requiring further investigation. So phase two of our work began with the objective of answering these knowledge gap questions with a focus on low-ranked coals, particularly lignite and sub-bituminous, which occur in western Canada, and using coal, looking at coal gasification, oxy-fuel combustion, and post-combustion pulverized coal emissions cleanup.

In addition, we've also looked at the merits of what's called polygeneration. I know someone asked the question about FutureGen. FutureGen is an example of a polygen project, which basically is a simultaneous production of not just power or electricity but also other chemical products, like hydrogen, substitute natural gas, diesel, and so forth.

Page 10--the preliminary indications of the phase two work--shows that the phase two work is nearing completion. Preliminary results indicate, though, that through design integration we can improve the efficiency of coal gasification, IGCC, with CO₂ capture, certainly using low-ranked coals, significantly compared to our initial phase one work, and of course that efficiency improves the overall economics.

With reference to the next slide, and the recent cost escalations in terms of steel, concrete, labour, we're actually reworking our numbers on those costs. So those numbers shown on the next slide--page 11--are not available today, but I can make them available when we've completed the work.

It's a relative comparison, and clearly sub-bituminous coal in Alberta, and particularly with CO₂ capture, begins to improve the economics of IGCC and coal gasification, particularly where there's a saleable product, such as CO₂ for enhanced oil recovery.

With lignite coal, IGCC may not be the best current solution. As Saskatchewan Power have decided, they're pursuing oxy-fuel as a solution to their lower-ranked lignite coal.

On page 12, we did actually look at the supercritical plant burning a variety of coals and capturing CO₂ through an oxy-fuel process or amine scrubbing, which is a post-combustion cleanup process.

On page 13, that's the legend with respect to the previous slide.

On page 14, you can see there are significant improvements that can be made in terms, certainly, of CO₂ capture with all of the technologies--oxy-fuel, amine scrubbing, and IGCC, coal gasification.

On page 15, our work to date has really concluded that all emissions of concern--NOx, SO₂, particulates, mercury, and CO₂--can be reduced significantly for coal-fired electricity generation, simply using technology or developing the technology for use.

So what are the next steps towards commercializing clean coal technology? On page 16 I will highlight two spinoff projects that are now under development: first, the SaskPower project; and secondly, the EPCOR project.

The SaskPower project will use supercritical pulverized coal technology and an oxy-fuel, oxygen-rich process. Capacity is about 300 megawatts. It includes CO₂ capture. The fuel is lignite fuel, so a low-ranked coal. The pre-engineering work is nearing completion, and a decision to proceed towards construction is expected this year. The planned in-service date, I understand, is 2012.

The CCPC/EPCOR IGCC project--and by the way, I'm an employee of EPCOR--is a $33 million, three-year, front-end engineering design project. We are now looking at probably around a 500-megawatt coal gasification plant. This is page 18, by the way. It includes CO₂ capture and storage.

The funding is one-third industry, one-third Alberta government, and--we're hoping--we're working with the NRCan people with respect to one-third funding from the federal government.

The fuel is from Genesee in Alberta, sub-bituminous coal. The project commenced in October 2006 because we had enough funding in place to commence the project. The first phase is the technology selection process, as we call it, which is expected to be completed this year. We're looking at four or five different coal gasification technologies at the moment. The idea is to select one, and then we'll base the front-end engineering design on that particular chosen technology. The FEED, the front-end engineering design, is planned for completion in 2009, by which time we would then be in a position to make a decision on construction of that plant.

As indicated on page 19, phase three plans of CCPC are to assess technology improvements on an ongoing basis; evaluate new and emerging technologies; participate with other organizations, either nationally or internationally, on clean coal technology initiatives; and develop an information database to really capture all the learning we have accrued to date.

Those are my comments, Mr. Chairman. I hope I've stayed within the 10 minutes.

[The Chair, Conservative, Lee Richardson]

Well done. Thank you. That's a lot of information to absorb, and I appreciate both of you providing it. It will generate some questions.

Could I just ask a general question first? It's something that keeps coming up at the committee, and we get asked various ways. That is, it seems that there is a general consensus that there's too much emitted today from the burning of coal and there is a direction to reduce those emissions. There are now in place emission standards, and intensity standards as well. Can you give me a general answer as to how the industry is approaching that, and how it proposes to deal with the gap in the meantime between what is proposed to meet these reduction levels and where you are today?

[Dr. David Lewin]

Certainly, I'll try to do that, remembering that this is a work in progress.