Natural Resources Committee on April 22nd, 2010

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Vaasjo, for your presentation.

We will go now to Mr. Osborne from HTC Purenergy Inc.

Go ahead with your presentation, please, Mr. Osborne.

[John Osborne, Business Development and Strategic Alliances, HTC Purenergy Inc.]

Thank you.

My name is John Osborne. I'm filling in for Jessie Inman, who is normally based in Calgary but he is caught up in volcanic ash at the moment.

I'm going to give a very quick overview of HTC and our business, and then lead into tar sands and a proposal that we believe is the way to move forward on CO₂ capture at those sorts of operations.

HTC is a little different from our competitors in the CCS business. First of all, we are Canadian and we're based in Regina, Saskatchewan. We're in Regina because of our very important partner--our legal and commercial and technical partner, the University of Regina. We collaborate completely on all CCS matters.

We're also totally devoted to CCS. I would add another letter to the CCS, which is for “utilization”. We do not actually believe that CO₂ is a waste product. Obviously there are going to be move-and-supply situations, but we believe in the long term that CO₂ can be converted into useful products.

We're not like a big engineering or oil or chemical company with a small division looking at carbon capture. We look at the whole integrated business--capturing the CO₂, transporting it, and then utilizing it either in storage or converting it to something useful--because we are in the business. I work internationally to develop these sorts of projects around the world as the business starts to develop.

I'd like to say one other thing. I notice from the previous speakers that I think only one has actually mentioned China. From our experience, China is way ahead. They're already marketing their clean coal technologies in the United States, for the simple reason that they're going to make money out of it. Then they're going to return to China, as they are right now, to start developing some very interesting carbon capture and storage and utilization projects.

I mentioned the University of Regina.

We are also different because we have a fundamental science capability. We have a full R and D centre in Regina. We have a one-tonne-a-day capture plant, where we do all of our modelling and testing and whatever.

When we have something useful, we go down to the Boundary Dam ignite coal-fired plant that SaskPower mentioned earlier on. It operates for four months, two days. We operate it by taking a slipstream of one of the units of the coal-fired plants, scrubbing it to take out the SO₂, and then we capture the CO₂. There we test not only the solvents we design, but also new processes. This is about a five-tonne-a-day unit. If it works there, we reckon it will work anywhere.

We are also working on an 11-year-old CO₂ capture plant, a commercial plant, on a coal-fired power plant in the United States. It's 200 tonnes a day. It's capturing the CO₂ from a coal-fired plant, and currently the CO₂ is being sold to Coca-Cola.

We're actually planning to scale up. This CO₂ will be linked to the new shale gas play in the Pennsylvania area, where we expect to be able to use the CO₂ to fracture the horizontal wells. That eliminates the use of water, which is a major environmental issue.

Secondly, and more importantly to us, because it's going to make money, is that we're going to be using the CO₂ and testing it for enhanced gas recovery to increase the amount of gas produced and also extend the life of the horizontal wells. We think this is a major, major event.

We're also working on a plant that is 31 years old, in southern California--Death Valley. It's 800 tonnes a day. They capture CO₂ from a coal-fired plant, but they utilize the CO₂ to create soda ash. They bubble it through their brine and go through a heating process and produce this soda ash, which they sell. We have been working on this plant for well over a year. We've completely modelled it, and we'are ready to upgrade it to hopefully as much as 1,200 tonnes a day, which would make it the world's largest commercial operating CO₂ capture plant.

Our process is very straightforward. If you look at any large gas plant you're going to see units there--an absorber and a stripper--that look exactly the same as in our plant. That's about where the similarities end. Inside you must have solvents that do not break down in the presence of contaminants. You also need a special design in order to reduce the operating costs. The operating costs are based on the amount of steam you need to regenerate the solvent.

I'll give you some projects we've worked on worldwide. A couple of years ago we slugged it out in Norway for the European TCM Mongstad project. This is a test site where there will be a new amine plant. We beat out all the competition, except for the local Norwegian company, which was eventually awarded the contract, which was no surprise to us.

On another example of a project we didn't get, last year we put together a $600 million project in Michigan with Detroit Edison. We made our submission to the DOE and lost out to American Electric Power and a couple of other companies. This was going to be--it's still on the books--a 2,000-tonne-a-day capture plant on a coal-fired plant, with a 70-mile pipeline and injection for EOR. The oil field is sitting on top of a massive saline aquifer, which could also be used to store the CO₂. So that didn't come through.

We did come through with the world's currently largest CO₂ capture plant. It is being designed and engineered, and will hopefully be built later this year. It is based on electric. We eyeballed this one in North Dakota many years ago. We got it a couple of years ago and then lost it for a bit. We got it back just before Christmas last year. This is a 3,000-tonne-a-day unit. We are designing and engineering it right now with our partners, Doosan Heavy Industries. As I said, this will be the world's largest CO₂ capture plant. The CO₂ will be used for EOR.

I mentioned the tar sands.We have developed a modular unit that is essentially transportable. It's pre-designed and pre-engineered. There are a couple of interesting things about this unit that will capture CO₂ from pretty well any flue gas. First of all, it's built in a shop, so you're able to bring all the pieces together in a shop in modules and test them prior to shipment to the site. Then you can erect them very quickly on site at a much-reduced capital cost. Of course, if somebody comes along and says they'd like to buy two or three of them, that will not only drop our costs but will drop the price of the units.

We feel this is a very good unit that could be used on the SAGD oilers. We would very much like to see such a unit installed in a test situation and then ramped up by adding additional units later on, as and when needed. We feel this is definitely a very good solution to some of the issues on tar sands.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Osborne.

We'll go finally to Mr. Kaufman from Integrated CO₂ Network.

Go ahead with your presentation please, Mr. Kaufman.

[Stephen Kaufman, Chairman, Integrated CO2 Network]

Thank you, Mr. Chairman and honourable members, for the opportunity to speak to your committee on behalf of the ICO₂N group.

I would like to specify that my comments and answers to your questions will be in English. The subject is complex, and I am not bilingual.

I'm sorry about that.

I'd like to start with a short introduction on the Integrated CO₂ Network, also known as ICO₂N. I'm the chairman of ICO₂N, and I also happen to work for Suncor Energy during my “day job”.

ICO₂N is an initiative of 17 of Canada's largest industrial companies, including the coal-fired power sector, oil sands, and others. Companies in ICO₂N represent over 100 million tonnes of annual CO₂ emissions, about 15% of Canada's total. They also represent about 95% of the current oil sands production and over 60% of Alberta's electricity production.

The group's mandate is to advance carbon capture and storage in Canada. We've been working on this goal since 2005. Over the last five years, ICO₂N has completed significant technical, economic, and policy work on all aspects of CCS, including detailed economic analysis of large-scale CCS in Canada.

Our work was instrumental in the conclusions of the Canada-Alberta task force on CCS in 2007 and the Alberta CCS Development Council work in 2008. We've openly shared all of our analysis and work with Natural Resources Canada, Environment Canada, and other federal and provincial departments. I believe it's fair to say that ICO₂N has been and continues to be the leader in CCS analysis and advice to industry, government, and the public in Canada.

I had the pleasure of speaking to this committee in 2006. Many of our early conclusions about CCS have since been verified. Today I'd like to look forward a little on how and why Canada can promote the deployment of this technology.

As to the importance of CCS, as was mentioned by earlier speakers, we have large industrial plants in Canada with the potential to capture CO₂, which are located in close proximity to world-class geological storage locations. Canada has a unique opportunity to be a world leader in implementing CCS. The potential to use CO₂ for enhanced oil recovery is a key feature in Canada, which also improves the viability and economics of CCS.

Carbon capture and storage is a critical part of an integrated energy and environmental strategy for Canada. The large volume of CO₂ reductions that are achievable through CCS makes it one of Canada's most significant ways to reduce emissions and meet greenhouse gas reduction objectives. CCS is a solution that can complement other CO₂ reduction approaches, including important ones such as energy conservation, renewable fuels, and lower carbon energy sources.

The environmental importance of CCS has clearly been identified by our colleagues at the Pembina Institute who spoke earlier. It's also been demonstrated in recent reports by the National Round Table on the Environment and the Economy and by the Delphi Group.

We've actually provided you with a couple of packages of material, along with my presentation comments. One is a report by the Delphi Group. I've included a two-page summary of that inside what we've distributed. We've also provided a copy of our ICO₂N report, which details the economic analysis and technical analysis that we've done on CCS. This is for you to review when you have time.

It is important to recognize that the Delphi report shows that CCS is both a significant volume contributor, as well as very cost-effective when compared to other CO₂ reduction alternatives.

Carbon capture and storage has been identified as an international priority as well. The G8 countries, as you know, are going to be in Canada in June. They have set an objective of having 20 CCS projects under way by 2010. The IEA has identified CCS as one of the most important technological solutions to curb greenhouse gases. The IEA stated last week that CCS presents Canada with an opportunity to develop a technology that can reduce GHG emissions on a large scale.

CCS can be the next large-scale Canadian infrastructure development that will enable sustainable growth of our energy industry. It can help to maintain Canada's economic well-being, as it allows for the reduction of GHG emissions from some of our largest and fastest-growing sectors, such as coal-fired power generation and oil sands production and upgrading. Both of these key sectors have a very real role to play in a clean energy future for North America. In addition to the energy sector, CCS could help other sectors, such as chemicals, fertilizers, steel, and cement, address their GHG intensity in the same way.

CCS is also an important part of the clean energy dialogue that is under way between Canada and the United States. An effective advancement and implementation of CCS in Canada will strengthen our position in international climate change discussions and will position Canada for larger-scale CCS deployment ahead of policy developments that may happen in the U.S. and internationally.

The potential for CCS has advanced favourably in the past five years. However, the significant cost of constructing CCS facilities has resulted in only a few full-scale projects proceeding globally. These are in Algeria, the Norwegian offshore, and southeast Saskatchewan, notably with the CO₂ source coming in from the U.S.A.

More extensive adoption of CCS is challenged by issues of cost, design optimization, and a lack of clear international agreement on the pace of action on climate change. Ongoing research and development is necessary to enable new and more efficient capture technologies to emerge, and to refine storage and monitoring techniques. At the same time, piloting and field demonstrations are essential to solve the cost challenge.

Accelerating deployment of CCS can set the stage for more efficient, cost-effective rapid roll-out of this technology. It can help avoid carbon lock-in at new facilities by ensuring they can be built now to have the capability to reduce their emissions in the future. It will also allow industry to learn and develop the technology, ultimately resulting in greater CO₂ emission reductions at a lower overall cost per tonne.

CCS is in a transition period. The cost of technology is wide ranging, depending on sites, and is too high to be commercial today. You'll see on page 4 of our bound report a graph indicating the cost ranges for CCS. Actually, at the back page of my presentation comments there's a graph that illustrates where we're at in CCS and the fact that we're at this transition stage.

It's important to note that this situation is comparable to that of other emerging technologies, such as renewable energy, biofuels, and new nuclear power. As was determined in the Delphi study, none of these technologies is cost competitive with their historic fossil fuel alternatives, so governments have chosen to help deploy all of these technologies by providing public support.

Governments worldwide have a role to help accelerate CCS development. Industry will contribute its part, but a joint effort from industry and government is required during the transition period. Over the last several years, the federal government has promoted the initial deployment of CCS through investments in the ecoENERGY program, a very positive and necessary first step.

The current CCS development programs in Canada are working to address the challenges. These programs have resulted in the development of more than 10 world-leading projects that span the breadth of CCS technical requirements. That's not only demonstrations, but also some of the research studies and things to do with geology in Nova Scotia and other areas of investigation of CCS. It includes, of course, lab studies, industrial scale, what we call pilots, which are of a relatively small nature, and then the large-scale demonstrations.

There are six of these large-scale demonstration projects in western Canada that are expected to be operating by 2015, and that will solidify Canada's position as a world leader in CCS. In fact, the two largest capture projects are being executed by companies that are members of ICO₂N. They are the TransAlta project that you heard about earlier, which has as its partner Capital Power, and the Shell Canada project. It's interesting to note that the Shell project is going to use an amine solvent and TransAlta's project is going to use chilled ammonia, which are two competing technologies for how this will work. These are excellent examples of using demonstration projects to prove which technology will be best. In all of these cases, of course, it's important to note that provincial governments are participating. This is a necessary element that assures alignment of interest across the nation.

In conclusion, carbon capture and storage has tremendous potential to reduce Canada's CO₂ emissions and contribute to a more sustainable energy future. Canada is on the right path with its investment in CCS and is aligned with what other countries are doing, perhaps even ahead. However, industry and government cannot rest on the current programs and projects and need to continue to invest in this work. Collectively, we require full-scale demonstration of the existing technologies to confirm costs, reliability, technology choice, and ensure public confidence.

The full range of policy options to advance major CCS capital investments must continue to be explored, both in Canada and abroad. This includes aligning the expected GHG regulations with complementary tax, policy, and specific regulations related to CCS.

There is a central role for government in reducing investment and regulatory uncertainty to help close the economic gap and encourage CCS. It's also incumbent on government and industry to liaise with other countries and encourage knowledge sharing to accelerate collaborative work and avoid duplication. By working together, industry and government can continue to set a positive climate for CCS and accelerate its deployment towards full-scale adoption. Given the right environment, industry will do its part by mobilizing capital and technological expertise. CCS will be a major part of Canada's energy and environmental strategy in the years ahead. Now is the time to get the policy, regulatory, and investment frameworks right and to fund ongoing work to ensure CCS reaches its full potential.

Thank you for your attention. I look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Kaufman.

We have limited time, not enough for the normal seven minutes of questioning, so we'll go to four minutes.

On a point of order, Mr. Cullen.

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

I have two quick things for the committee. First is just a request through you to the clerk's office. If we could have a list of the witnesses who are on the list of requests for the next couple of weeks, that would be helpful. There remain some confusion and consternation as to which witnesses we're getting and who is being asked.

Second, I was unable to confirm at the last committee meeting that next Thursday we're going to be talking about retrofits. I just want to confirm that through you. Has it been discussed or confirmed? Who do we have for next Thursday?

[The Chair, Conservative, Leon Benoit]

My understanding is that next Thursday we're going to the report, unless the committee wants to continue with this. There has been some interest.

On Tuesday we have the renewable energy groups that have been asked: Canadian Wind Energy Association; Plasco Energy, which of course has the garbage project here in Ottawa as one of its things; Maritime Tidal Energy; the Canadian solar industry; and Nova Scotia Power, among others who have been invited. From Quebec one witness declined to attend, but we have another, on geothermal, which is what had been requested. That's for Tuesday.

But on Thursday my understanding is we're going to the committee report. It will be ready by then, although it's kind of putting a rush on the translators.

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

Maybe I'll have some discussions in the interim and can come back before we end.

Thank you, Chair.

[The Chair, Conservative, Leon Benoit]

Sure, absolutely.

Let's go to questioning. Four minutes for each party is as much as we can manage here. I'm getting some complaints from the chairs that we're not getting out of the room quickly enough, so let's try to get out a couple of minutes before 11.

Go ahead, please, Mr. Tonks.

[Alan Tonks, Liberal, York South—Weston, ON]

There has been so much content, it's hard to know where to start, Mr. Chairman.

First of all, thank you.

Your last point, Mr. Kaufman.... I think Mr. Vaasjo referred to the Genesee initiative and the research surrounding that project. And we have the capture plant design feasibility projects that HTC has provided from around the world.

The point was made that the IEA, I believe, has established a target of 20 projects. Are they commercialized projects or are they research projects?

You have said there is in process an analysis of the various CCS technologies. But how are they going to be evaluated so that we're not just duplicating or replicating but are rather maximizing or optimizing the research and concentrating on the commercialization that is going to be feasible and competitive and marketable? That's my question. How is that evaluation going to take place?

[Stephen Kaufman]

First of all, thank you very much for the question.

With respect to the IEA, I believe the actual request went from the G8 to the Carbon Sequestration Leadership Forum to come up with some recommendations on CCS. That forum came back and said, “We believe the G8 countries should have 20 projects up and running by a point in the future, but defined and moving ahead by 2010.” So there is going to be a report back, I believe, this June on that, and there has been some calibration of which projects around the world qualify.

They are all considered to be relatively large-scale. They are not commercial. All projects around the world are being funded now by governments and industry together, because there is not a commercial profitability, but they're at so-called commercial scale. That's kind of the distinction from what may have been done previously, which is more laboratory-scale or pilot-scale.

In terms of the appraisal and assessment--and I'll defer to my panel colleagues--I think it's going to depend on individual companies right now looking at what they see from results and working through an assessment over the next five years perhaps to determine which of these technologies works best. So it's not as though there's a given international panel that's going to look at everything and decide which is the winning technology.

Brian, you may want to comment on that.

[Brian Vaasjo]

I would concur with those observations. What you hear around the world is that there is a significant amount of effort being put in by industry, governments, and equipment providers to look at various technologies for carbon capture and storage.

What is needed, and what they're looking for, is to have these technologies taken from the workbench and applied in meaningful ways so that you can actually achieve some carbon capture and storage and actually advance technologies.

[Alan Tonks, Liberal, York South—Weston, ON]

I have a final question. What would you be looking for from government with respect to a regulatory framework that would work towards the objectives you would be looking for?

[The Chair, Conservative, Leon Benoit]

Who is the question directed to, Mr. Tonks?

[Alan Tonks, Liberal, York South—Weston, ON]

It is to whoever would be appropriate to answer or has an answer.

[Brian Vaasjo]

I'll be first to respond.

What industry is looking for is an environment in which government and industry are working together in a cooperative way to look at both environmental policies and environmental restrictions. Certainly costing of carbon is beneficial for the advancement of technology and for filling the gap in circumstances when that isn't sufficient. I would look for some direct funding and support from both the federal and provincial governments.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Kaufman, we're actually out of time for Mr. Tonks' questioning. Maybe someone else will ask the question.

We'll go to Mr. Guimond for four minutes.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr.Chair.

Good morning, gentlemen.

Mr. Osborne, you talked about research, and Mr. Kaufman, you talked about transition, through a green lens. I find that interesting, but at the same time, surprising. Mr. Osborne, you said that CO₂ could be transformed or converted into useful products. Could you elaborate on that? I would like to know the results of your research on useful products that could be made from CO₂.

[John Osborne]

I don't want to make a big thing out of this, but there are small uses for CO₂ right now, such as in greenhouses and to make dry ice. There are some mineralization projects beginning to take place; the CO₂ could be turned into useful minerals.

I mentioned earlier that we're involved with Shell Gas, where CO₂ could be used for enhanced gas recovery. This is new. No one has ever, in a Shell Gas play, used CO₂ to enhance gas recovery. It's been done in conventional fields.

We're also involved in deep geothermal systems, which are called enhanced geothermal systems. This is very new. It is early days. We have a potential project sitting on a hot spot in Maine. The concept is to drill deep and inject supercritical CO₂. The moment the supercritical CO₂ hits the hot rock, you get a tremendous pressure and temperature effect, which you then bring to the surface and run through your turbines to create electricity. Then you recapture your CO₂, compress it, and put it down.

The long-term area in which I think very little work has been done, which has tremendous potential, is microbial conversion of CO₂.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have a feeling that your research is progressing. How long do you think it will take before you can market your findings or develop new products using CO₂?

[John Osborne]

It will take years. It is a step-by-step procedure. It is going to take years.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You talked about the University of Regina, about China and Norway. Where do we stand, globally, when it comes to research? In addition, do you think that the government is doing enough to support the industry or to support your research?

[John Osborne]

Globally, the Europeans are waiting on moving forward in trying to develop their projects.

China is already moving ahead. If you want to get anything done in this world, do it in China. You can do it quickly and efficiently.

I think everybody is now waiting for the United States. There are five projects in the United States--big ones--all in the $600 million range. Probably two or three of those will make it and move ahead. President Obama has a task force that I think has to come back by August of this year to recommend, I believe, between six and ten large-scale projects in the United States.

I think at the end of the day it's going to really be the United States leading, but China probably being ahead, in my opinion.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Guimond.

Mr. Cullen, for up to four minutes.

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

Thank you, Chair, and I thank the witnesses.

Mr. Kaufman, you have a broad overview of the industry from your membership and your work at Suncor. Is that fair to say?