Natural Resources Committee on April 22nd, 2010

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

About this choice question, Mr. Whittingham, you talked about the tar sands earlier. There seemed to be some technological questions about the purity of the CO₂ coming out. There's also a cost question. I'm looking at some studies that say spillage happens from time to time as well--from the Alberta government itself, from C.D. Howe. I'm looking at downstreamtoday.com, a technology group that advises petrochemical, oil, gas companies—no left-wing radical, certainly.

They're estimating the cost somewhere between $225 and $250 per metric tonne. This was an independent report commissioned by the Government of Alberta. If you equate this out to what this means, it's about $22 per barrel of oil coming out of the tar sands. From everything we've heard from oil companies working in the patch, that would be a non-viable price of production. Why so much hope for the tar sands being able to use CCS cost-effectively? Under any pricing regime, $250 per tonne is very high, is it not?

[Ed Whittingham]

Certainly, and I've seen a variety of price estimates, let's say on the order of $200 per tonne, or at least north of $150 per tonne. Let me first state that CCS is most financially viable on things like coal-fired electricity, and certainly we have enough coal-fired electricity to apply to—

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

Just to interrupt you on that point, I'm assuming that for all these projects that we've gone out and done, these experimentations, we've chosen ideal situations in which to try them out. We didn't go into the worst situation, the most difficult carbon capture situation to try out the first round of CCS technology. I'm assuming we're locating these things in ideal geological sites, close to the source of carbon. We're not running out a thousand miles to sink it into the ground in some difficult procedure. Weyburn and places like this are good places to try this thing out.

[Ed Whittingham]

Certainly with two of the projects that received funding, like Don's project...he talked about Keephills TransAlta, Scotford Upgrader, proven technology on proven sites, where there's good storage capability. Swan Hills—in situ coal gasification capture there. I'd say it's speculative; it's more on the R and D side. And the enhanced project, the Alberta carbon trunk line, is developing infrastructure without thinking through the capture side first. I personally have some questions around that. Were I to choose to seed CCS projects, I wouldn't build in structure first; I'd build capture.

Getting back to your point about the oil sands, sure we need R and D to bring the price down. Ultimately we see it as a constraint in the oil sands; water is also a constraint, as well as regular air emissions, impacts on biodiversity. And if we can't figure out those constraints, then maybe we should think about the pace and scale of oil sands development. That is but one. At least there it's no guarantee, but there is certainly some thinking and some research going into it. Whether it's the right technology for the oil sands or something else, some other greenhouse gas abatement technology for the oil sands, I don't know, but certainly our institute says to figure that out before we go and rapidly increase development.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cullen.

Now to the government side, Mr. Anderson, for up to seven minutes.

Go ahead, please.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I find the discussion on carbon pricing to be interesting, because we've had this discussion before, and I think we all know the reality. Maybe what isn't being mentioned here is the impact on consumers. As we've heard previously in our testimony, to bring in the carbon pricing limits that some people are asking for...I think last year one of the folks from Europe was testifying and suggested that our electrical energy costs would probably triple. Petroleum costs would at least quadruple to reach the kinds of goals we need to reach.

I find it interesting that even this morning three different sets of figures are being used in our discussion. Mr. Monea talked about $15 to $50, I think. Mr. Whittingham is talking about their numbers of $40 to $100, and even in your own document you talk about $50 to $200. I think it's good we're having the whole discussion, but the reality is there's certainly no certainty to what those right numbers are. What we do know is it will have a tremendous impact on consumers because the main effect of it will be to drive up those energy prices to make the alternatives that aren't currently competitive, competitive. I think we need to keep that in the discussion while we're having it.

I want to talk a little bit about the reference plan, Mr. Monea. You said the Saskatchewan government and industry do have their share of money committed to this.

[Michael J. Monea]

Yes, they do.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I want to ask the other two gentlemen about the concept of the demonstration plant, reference plant, demo plant. Do you think that's a good idea, a place to go and take the various technologies, try them out to see how they function, and then to go from there to the next step, which I think would be Mr. Wharton's type of project whereby you're moving to commercialization? Is this a good idea to take a look at a reference plant, a demonstration plant platform?

[Ed Whittingham]

Thank you for the question.

Selectively, yes, and we have demonstration projects going. I'm most excited about projects like Keephills and that we're moving forward; the project is commercial scale. That will result in large reductions of CO₂ on the order of a megatonne per year or more. Selectively demonstrate the technology on the commercial side, let's get these projects going, and then we'll truly figure out what the cost is per tonne. As you rightly say, the estimates vary. Only by running it will we be able to nail down those costs.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Mr. Wharton.

[Don Wharton]

We would also support that in a measured fashion, to do demonstrations of technologies. As I said in my presentation, we need to prove this to see if it will really work. There is an R and D component here that needs to be understood. If Canada is to play a leading role on CCS, then we need to understand the technology development pathway.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Do you have any suggestion then as to what percentage of money should be put into R and D at this point and what percentage of money should be put into the commercialization of it? I understand you've got a bit of a vested interest here. How important is R and D and the support for that to complement what you folks are doing? I'd be interested in answers from all three of you on that.

[Don Wharton]

As I mentioned, a measured amount should be in R and D. We believe the real focus needs to be on commercialization of these technologies. In the electricity sector globally, much of the technology development is done by large firms, larger than the companies that deploy them like ours and SaskPower. These are international firms--General Electric, Alstom, Hitachi--and they will carry this because they think a business case can ultimately be made for CCS technology. I don't see Canada developing a massive R and D effort around this, but it is important to test these technologies. I believe that's the concept SaskPower is proposing.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

A central location you think would be.... Is that a good idea then?

[Don Wharton]

Yes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Do either of the other two have...?

[Ed Whittingham]

I would agree with Don, and perhaps even less on the R and D side, in that coming back to my opening comments, injecting gas into the ground is something we've been doing for 30 years very safely. If you look at Weyburn, Sleipner, or Norway, different projects, we have a tremendous track record of safety. So if we need R and D to prove it's safe, we've done that. We really need to prove what the economics are around it. Is it viable? To do that, you need to run commercial-scale projects. So certainly we'd like to see the vast majority of funding going to commercial-scale projects and reducing significant amounts of greenhouse gas emissions.

[Michael J. Monea]

I'll make one comment. The reason I brought up this demonstration project is that Boundary Dam 3 evaluated three technologies, and that's pretty rare. A lot of companies pick one technology and run with it. The Basin Electric Power Cooperative, for example, did that and had to modify it because there were some issues with their first technology. We're not doing this for R and D; we're doing this to find out what the next technology will be at SaskPower.

We want to partner, and I don't want you to think that Saskatchewan is not partnering with Alberta or any other player in Canada. We are partnering up. We're doing it ourselves. We will form information consortiums so that we can all learn. If the chilled ammonia process that TransAlta is using is more effective than the post-combustion amine that I'm using, I'm going to use an Alstom system on my next plant. But if we don't pool our knowledge, we won't get the economics to where we need them to be to make this a viable option, and that's what we're really looking for in joining our forces together.

The demonstration facility is a way to look at, for example, three different technologies that can then be taken to a commercial project. So we think the demonstration facility will actually help commercialize other products faster so that other power utilities can say, “This one fits our portfolio. We'll commercialize this process.” We're not doing it to keep information in SaskPower. It is exactly the opposite: we want to share this with the rest of the world.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Do I have a couple of minutes?

[The Chair, Conservative, Leon Benoit]

You still have a minute, Mr. Anderson.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I want to come back to landowner issues. I think Mr. Whittingham mentioned them earlier. What are the landowner issues you have identified in this? In western Canada these are becoming bigger issues in a number of areas, such as pipelines and those kinds of things—and at SaskPower actually I think one of the parts of the project that has been suggested is a pipeline into the States. I'm just wondering what landowner issues you're seeing.

This typically is done into a deep reservoir that's already been used for something else, but I'd be interested in the landowner issues.

[Ed Whittingham]

As I said, the risks of any kind of leak, and ultimately of any kind of threat to human health from putting the CO₂ back into the atmosphere is very low. Still, as with any known conventional gas project, you need to figure out the various forms of liability. So in the unlikely event a leak occurred, there is a liability there for remediation or any kind of environmental impact. Landowners, of course, need to feel comfortable with CO₂ pipelines either crossing their ground or going into an oil and gas reservoir, a saline aquifer, beneath their ground.

I don't want to run roughshod over landowners and their rights, but from what I've seen, they're a lot more worried about sour gas and what the sour gas well next to their land is going to do than about CO₂.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Anderson.

We are out of time for this panel.

I thank you very much, Mr. Whittingham, Mr. Wharton, and Mr. Monea. Thank you all very much. The information you've given us on this topic is very helpful, and we're looking forward to combining it with the second panel's.

I will suspend for three minutes while we change panels. We'll be back in three minutes.

[The Chair, Conservative, Leon Benoit]

We will resume the meeting with our second panel for today.

Welcome, gentlemen. I look forward to your presentations and to the questions to follow.

We have, from Capital Power Corporation, Brian Vaasjo, president and chief executive officer. Welcome. From HTC Pure Energy Incorporated, we have John Osborne, business development and strategic alliances. Welcome, Mr. Osborne. And from Integrated CO₂Networks, we have Stephen Kaufman, chairman.

We will hear the presentations in the order on the agenda, starting with Capital Power Corporation. Go ahead, please, Mr. Vaasjo.

[Brian Vaasjo, President and Chief Executive Officer, Capital Power Corporation]

Thank you.

Good morning to committee members and staff. I am pleased to be here with you today to provide my perspective on recent efforts by Capital Power on our front end engineering and design study related to integrated gasification combined cycle and carbon capture and storage project. Before I do that, I'd like to give you a little bit of information about Capital Power, as it is a new name in Canada.

Capital Power was launched last July through a $500 million IPO. The company was created when EPCOR Utilities of Edmonton spun off its generation business. Today our assets are approximately $5 billion. Capital Power and its affiliates develop, acquire, and operate power generation from a wide range of energy sources, including coal, natural gas, waste heat, hydro, biomass, and wind. The company has 3,500 megawatts of capacity and interests in 31 facilities across three provinces and five states. Our company was the first to reintroduce supercritical coal combustion technology to North America, and it operates the cleanest coal-fired plant in Canada.

Finally, we have been a leader in Canada's effort to commercialize near-zero emissions coal-powered technology. As we look to the future, we see that North America's population will continue to grow, and so will our economy. We also know that aging infrastructure will need to be replaced to meet the growing demand for reliable, affordable, environmentally responsible electricity across North America and worldwide. We believe the best way to meet this demand is to provide power from a mix of fuel sources, including coal.

Consider these facts. Approximately one-fifth of Canada's energy is generated from coal. Not only is coal the most abundant and cheapest energy source in Canada, with reserves that will last hundreds of years, it's also stable and a low-cost source of energy. Internationally, coal is even more prominent. The United States and China are the world's largest coal producers, with 60% and 80% respectively of their electricity generation from coal. Coal will continue to be a very significant energy source in Canada and on a worldwide basis. With new technologies and carbon capture and storage being developed by a worldwide effort, overall greenhouse gas emissions from the power generation industry will be reduced while enabling Canada's vast coal reserves to continue as a viable and efficient option for power generation for many years to come.

One of those technologies that make CCS possible in Canada and the United States is coal gasification. Coal gasification combines heat and pressure to break coal down into its chemical components, creating a synthesis gas that is mainly hydrogen. This gas is then burned cleanly in a gas turbine to create electricity. With the help of a few chemical processes, a pure stream of carbon dioxide is also produced, and this can be captured and stored in saline aquifers. This CO₂ can also be beneficially used for an enhanced oil recovery, a process by which the CO₂ is injected into oil wells. This allows more oil to be recovered and provides revenue generation opportunities.

Combining an integrated gasification combined cycle plant, or IGCC, with a carbon capture facility that would capture CO₂ results in reductions in CO₂ emissions by 85% to 90%. This is approximately one-third of what is emitted from natural gas combined cycle. Compared to supercritical coal facilities, IGCC technology has the potential to further reduce nitrogen oxide, particulate matter, and sulphur dioxide, by over 99%, and mercury by almost 70%. CCS and gasification technologies do exist. The science is sound. What we need to do is demonstrate these two technologies together on a commercial scale.

Over the past four years, a great deal of work has been done toward achieving this important goal. Following on the work of the Canadian Clean Power Coalition, Capital Power has undertaken the detailed design of a 235-megawatt IGCC facility with carbon capture and sequestration.

With an investment of $33 million in equal parts from Capital Power, the Government of Canada, and the Government of Alberta, the front-end engineering and design, or FEED, study will be finalized over the next few weeks. This project was specifically designed for operation at the Genesee generating station in Alberta. As this is a site-specific design, the specific details cannot be utilized on a generic basis; however, the learnings and the validation of technology can.

While we can confidently say the technology is solid and the facility could operate at the availability and efficiency levels we predicted, the business case is not there for an independent power producer in Alberta to go it alone at this time. In our environment of low power prices and capital-intensive technology, industry would need significant help from government to make the first-of-a-kind facility commercially viable in Alberta. We expect the economics of building and operating such a facility to become more attractive as recent technology breakthroughs become more widely available and as newer technologies advance. For example, we're already seeing significant strides in the development of lower-cost technologies, such as membranes for air separation. This means that a plant like this could become economically feasible without subsidy within the next 10 to 15 years.

What is important is that industry and government continue to explore options together so we can make intelligent, well-informed decisions as we move forward on a path to a smaller carbon footprint. What we have today, as a result of this study, is critical information and a major step forward for a relatively small investment over a four-year period. We can soon provide decision-makers with a true understanding of the costs of this technology and comfort that it will actually work, as we now have a benchmark against which to compare other technologies to in order to help us determine which ones make the most sense to pursue.

In conclusion, the commercialization of technology solutions, including CCS and synthetic gas technology, will ensure that we can count on a long-term source of near-zero-emission baseload power for the future. Future policies need to balance the need for investment in the critical power generation infrastructure with the requirement for targeted environmental regulations to transition Canada to a lower carbon future. In addition, because of our industry's long capital life cycles, policies must recognize the costs of investments made in generation infrastructure by ratepayers and investors. Great progress is being made towards the commercialization of these new technologies, and while much remains to be done, I'm confident we can get there through a combination of good public policy, technological investment, and industry and government working together towards the goals for our common future.

I look forward to your questions.