At present, CCUS is the only existing technology that has the capacity to capture CO2 emissions at industrial sites and prevent the gas from being released into the atmosphere, for example at oil sands operations in Alberta where large volumes of natural gas are burned to generate the heat and steam required at bitumen extraction sites and at other emissions-intensive stage of the production process.
CCUS is being presented to Canadians as a new technological solution that will facilitate the continued expansion of oil sands production in Alberta while simultaneously allowing us to reduce or even eliminate the associated high levels of CO2 emissions that are released by the extraction process. But CCUS is not a new technology. It has been around for several decades. It has had very limited deployment anywhere in the world because it is very expensive.
An earlier attempt to adopt CCUS in Canada failed between 2008 and 2014. Under a plan called Alberta’s 2008 Climate Change Strategy, the province launched a program that would have deployed CCUS technology on a very large scale. The premise of that plan was that bitumen production would be able to continue to expand indefinitely without further increasing emissions. The Alberta plan promised that by 2050, 139 million tonnes (Mt) of CO2 emissions would be captured annually by CCUS. The plan promised that, as early as 2020, CCUS would be capturing 30 Mt of CO2 annually at oil sands sites in Alberta.
In 2014, the government of Alberta abandoned its entire CCUS strategy. By then, seven years had passed since the Alberta plan was unveiled. Four carbon capture projects in Alberta were originally announced. Two were later cancelled. No further government funding was committed to support additional projects. The industry showed no further interest in the CCUS plan.
Today in the oil sands there are only two existing CCS projects that originated under that plan. One is the “Quest Project”, located at Shell Canada’s Scotford Upgrader near Edmonton. Designed to capture and inject underground 1.2 Mt of CO2 every year, it became operational in November 2015. That amount represents 35% of the total CO2 emitted annually from the upgrader’s steam methane units, which produce hydrogen for upgrading bitumen. The capital cost was about $1.35 billion, two-thirds of which was paid for by taxpayer funded subsidies from Canada and Alberta.
The Alberta scheme failed because of the technology proved to be uneconomical. The cost per tonne of capturing CO2 at oil sands facilities was prohibitive.
Long before the failed Alberta effort, basic CCUS technology had been used for many years in the U.S. and elsewhere for enhanced oil recovery (EOR) in semi-depleted oil fields. In that application, CO2 is injected underground into declining oil fields, where the pressure of the injected CO2 drives the remaining crude oil through existing wells to the surface. There have been many years of successful commercial experience in separating CO2 at industrial plants, and long experience in the transfer of the gas by pipeline and its injection into semi-depleted oil fields. The technology used for EOR is virtually identical to what is required for CCUS, although it was widely acknowledged 10 years ago that a successful application of CCUS to sequestering CO2 at large fixed-site emitters like coal-fired electricity plants would require a huge scaling up of the technology.
The unresolved issue therefore is cost and the unproven economic viability of CCUS.
In Canada today, the oil sands industry is asking for government subsidies for CCUS because, without public funding, there is still no economic incentive for the producers to undertake these massively expensive projects. Ironically, if the Federal Government imposed a sufficiently stringent carbon price on bitumen producers under the Greenhouse Gas Pollution Pricing Act, that might provide some incentive for producers themselves to adopt and pay for CCUS at their operations. But under the very low carbon price imposed on the oil sands industry under the Federal Government’s existing Output-Based pricing system, at a typical production site in Alberta that meets the industry average for CO2 emissions per barrel, 80% of the emissions at that site are released free of any obligation to pay any carbon price. As a result, about 80% of all the CO2 emissions released in the oil sands industry are released into the atmosphere without any cost to the producer. Carbon pollution is free. There is no strong economic incentive for producers to install expensive CCUS technology.