Natural Resources Committee on April 22nd, 2010

[Ed Whittingham]

Thank you.

To your first point, I think Canada absolutely needs a strict regulatory system to manage its greenhouse gas emissions. I think we've been close. Waiting for the United States to make up its mind could be a lengthy process, whereas I feel that we could move forward very quickly. We're pretty aware of the solutions we need, including some form of carbon pricing. Frankly, I'm agnostic whether it's through cap and trade or some form of carbon tax. We need carbon pricing and we need it soon.

As to your question of fairness across the provinces, I'll speak from my perspective in Alberta. CO₂ knows no boundaries. I agree that the polluter pays principle should apply. I think you would find that my colleagues, perhaps presenters here coming next, will agree. From what I've seen from my perspective, people all agreed that eventually the cost should be transferred to industry through the right regulatory signal, through the right carbon price, and part of that cost should also be borne by the consumer. Let's not kid ourselves. We need to pay more for our energy in a carbon-constrained universe.

What that means for Alberta and Quebec...we just want Canada to move ahead on reducing its greenhouse gas emissions through a portfolio approach.

Thank you.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you.

What I found interesting about your presentation, Mr. Wharton, is the wide range of power plants you own. In addition, most of your holdings are wind-powered facilities.

Why keep coal-fired power plants at all? Should we not be thinking instead about eliminating them altogether, given how much they pollute?

In your presentation, you stated that Pioneer is the largest integrated system, and that the quantity of CO₂ will be reduced by 1 million tonnes per year, which is one third of the total emissions. What will happen with the remaining two thirds?

[Don Wharton]

Thank you very much. That's an excellent question.

In terms of the scenario, if you like, of reducing coal from the fuel mix entirely as a solution to climate change, we actually think that strategically would not be a wise move. From a Canadian point of view, given the size of the resource that we have in Canada--a large known cost, easily accessible, low-value fuel that is excellent for power generation--coal is a wise fuel to maintain in the fuel mix. We believe that diversity of Canada's fuel mix is important. Secondly, there are places in Canada, particularly places like Alberta and Saskatchewan, where alternatives for large-scale generation are not many. There might possibly be a massive nuclear build, but not hydro as in Quebec. In fact, if we can solve the emissions problem associated with coal, then we can turn a potential liability into a massive competitive advantage for Canada. I believe this is exactly what we should be doing with CCS.

To the second part of your question around capturing one third of the emissions from our pioneer project, I wanted to emphasize that this is a prototype project. In fact, we fully intend to capture 100% of the emissions from that project, but this is a pre-commercial-scale demonstration project to prove the technology. We believe that once we do that and drive the costs down to where they need to be, we will apply carbon capture to 100% of our emissions stream, not just from one plant but from all our plants.

[The Chair, Conservative, Leon Benoit]

You have 30 seconds.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

That is far too much time, Mr. Chair.

Mr. Monea, you say that your project will enable you to capture 90% of the CO₂ released. Your goal is rather ambitious, but I see that as a good thing. Where do you intend to store all that CO₂? Do you plan on storing it in geological formations or old mines? I would like to know what kind of risks that would entail. There is a lot of talk about water tables and the importance of storing CO₂ fully below the surface because of the risks involved for the surrounding populations. Could you tell me a little more about this?

[Michael J. Monea]

Thank you very much for your question.

We are taking 90% of the CO₂ from Boundary Dam 3. We will be selling it to the oil industry, which will use it for enhanced oil recovery in a reservoir.

The reservoir is very similar to those of the Weyburn projects. We have an analog or a template or a case study. That project probably has been the most studied rock per CO₂ injection in the world. What has come out of the Weyburn project, which I used to manage at one time, is that you can safely store CO₂ in an oil reservoir. The reason for this is that if you have a reservoir that can trap oil and does not leak to the surface, it's going to trap CO₂. With the core analysis, all the scientific data really validates that you can use CO₂ for EOR, but you can also store the CO₂ for thousands of years and it will not leak to the surface.

Now, the only caveat is that if there is a place where there is a problem, it is the actual oil wells that we ourselves have drilled.

I used to have an oil company. I never found much oil, so I'm very good at plugging oil wells. If you had a leak, and we could detect it in parts per million, you could just go in and fix that well. So there are remediation/mitigation processes that can make this a very safe process. And we can just go back to the Weyburn field and build on that case study. But that's where our CO₂ will be going, into similar types of reservoirs.

And then if we need it, there's one other storage, which is below. We have three separate horizons below that that are deep, deep reservoirs that can handle and hold much more CO₂. Right now we are putting other saline chemicals in from potash very safely. So Saskatchewan and Alberta have great analogs on which to base our safety.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Brunelle.

We'll go now to the New Democratic Party, to Mr. Cullen for up to seven minutes.

Go ahead, please.

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

Thank you, Mr. Chair.

Thank you, gentlemen, for your presentation.

Mr. Monea, just to start with, do you live in Saskatchewan?

[Michael J. Monea]

Yes, sir.

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

If you were to land back in Saskatchewan and you were to find out that, magically, Canada had a price on carbon of $30 to $40 per tonne, in terms of the projects you're working on right now, how viable would they be under this type of regime?

[Michael J. Monea]

They would be very viable.

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

And by viable, you mean they could self-sustain, they could find the cash, they could find buyers in order to finance both the actual application and the research that's needed to keep advancing the project. Is that what you mean?

[Michael J. Monea]

That's correct.

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

In the absence of that price on carbon, in a sense, it's an unfortunate situation--I don't want to portray this wrongly--because you have to come to government for support. You made a pitch earlier saying that without government support, this project doesn't happen.

[Michael J. Monea]

Correct.

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

This is strange for Canadians. I assume that everybody on the panel believes in the concept of polluter pay. If you are the polluter, then you ought to pick up the tab for the pollution. Am I fair in that? I don't want to put words in your mouth.

Mr. Wharton?

[Don Wharton]

Indeed.

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

Great. Good.

So here we have a situation where, because there's no price on carbon, the polluter isn't paying the full cost, certainly, on carbon capture. Because the government refuses to put a price on carbon, the taxpayer is then on the hook for the research and implementation of the sequestering of that pollutant.

Now, it seems to me that when government is making choices...and the government has made a choice. In its recent billion-dollar fund going out the door, 80% of it landed in this particular research field.

To you, Mr. Whittingham, would it not have been more intelligent, prudent, and acceptable to the taxpayers of Canada to have had a price on carbon rather than having to subsidize this entire scheme?

[Ed Whittingham]

Thank you for your question.

I think if we had a price on carbon of $40 a tonne by next year, 2011, and that were to increase, in a phased way, to $100 per tonne by 2020, our own economic modelling shows the government could reach its greenhouse gas reduction targets. And in fact if we put a higher price on carbon, and again graduate that up, we can actually meet a reduction level that would have us in line with what science tells us we need to do to reduce emissions in order to avoid dangerous climate change.

So, yes, as colleagues have said, start with 40 bucks a tonne on the low end and you're going to see it jump-start to different CCS projects.

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

Mr. Wharton, to you, under a price regime, one would assume that the cost to your company would then be included in the price of electricity generation if there was carbon included. Is that right?

[Don Wharton]

That's absolutely right. We produce a public good. Any cost that we incur in terms of carbon compliance cost would be part of the cost of our product.

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

As an electricity generator, Mr. Monea, this is true for you as well, that if carbon runs out on some price.... You produce electricity two different ways at SaskPower: one of them through a wind turbine, one of them through a coal-fired plant. A coal-fired plant produces so much CO₂, which either you have to pay for in a cap system, one would imagine, or you sequester it, and there's a cost in that electricity embedded in that megawatt. Is that right?

[Michael J. Monea]

That's correct. But we have it all. We have hydro, we have wind, we have bio. If it generates power, we probably do it.

Realistically, my point was earlier that the Boundary Dam project has to stand on its own. We cannot have a high rate increase go to our customers, so it's very important for us to have initial federal funding in order to prove and validate these new technologies. It can't be done unless the government assists us.

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

Can you give us, and Canadians, a sense of the timing of when it's going to be mature? We've seen projects going from a decade or more around the world. I guess there would be some apprehension, if I were talking to the folks paying the bills for this, who are the general taxpayers, as to when we're going to see the industry go out on its own, so to speak. I assume you're going to say it's connected to the fact that there needs to be a market for carbon. Can this ever be a mature and viable industry without government support, without that CO₂ pricing?

[Michael J. Monea]

For SaskPower, an oil and gas company, a big component of that CO₂ pricing is what somebody will pay us for the CO₂. We have that being defined. We are making an assumption on what a potential credit may be. Now that may be dangerous, but we will have this plant up and running at the end of 2013, and we firmly believe that our government will show leadership, or the Government of Canada will show some leadership, and define what a supplementary credit or a price on carbon may be.