Brian Zinchuk is editor and owner of Pipeline Online
The Weyburn Unit could take more than four times more CO2 than it is now.
If the federal government would simply play ball on allowing carbon tax input credits, the Government of Saskatchewan and Whitecap Resources CEO Grant Fagerheim think they can implement a carbon capture, utilization and storage (CCUS) scheme that could dramatically reduce Saskatchewan’s greenhouse gas emissions, result in billions of dollars in carbon capture projects, and a substantial increase in enhanced oil recovery.
While other media reported on the Sept. 7 CCUS strategy, I don’t think they really understood the implications. They are substantial. Vast, even.
Key to is the ability to put captured carbon dioxide somewhere. Fagerheim says that the Whitecap-operated Weyburn Unit is currently taking in two million tonnes of CO2 per year, but they have the capacity to expand that to nine million tonnes. Let’s put that into perspective: Boundary Dam Unit 3 captured 729,000 tonnes of CO2 in 2020, nearly all of that going to the Weyburn Unit. The additional capacity Whitecap says it can take would be the equivalent of nine to 10 projects the size of Boundary Dam Unit 3 (BD3).
Carbon trunk sytem
In other words, Whitecap has the capacity to take pretty much all the CO2 that could be captured from major projects, from Bethune to Estevan. Thus, the idea of a carbon trunk system, something the province is referring to as a hub and distribution system.
Let’s imagine how such a system would be built out. Not all capture projects would be the size of Boundary Dam Unit 3, but it gives us the closest example possible.
It cost $1.6 billion, of which roughly $1 billion was for the capture plant, and $600 million to retrofit the “power island” in a building that was built in the 1960s and had enormous asbestos abatement issues. To my understanding, most of the initial cost overruns were from the power island, although, over time, there have been some improvements made to the capture island. That was to be expected, as a first of its kind facility, certainly there’s going to be bugs and processes to work out.
And the lessons learned at Boundary Dam can be employed at all the other, new projects as part of this trunk system.
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When BD3 was built, the labour force maxed out at 1,400 people. Now, understandably, a large number of those were working on the power island, but similar work would have to be done at any other project. So let’s be conservative and say and average 1,000 people at peak would be employed at any of the capture projects this hub and trunk line would entail. Not all would be built at the same time, I would expect, so some of the workers could go from one project to the next. So let’s say, at minimum, there would be 3,000 highly paid, highly skilled jobs during the buildout, system-wide. Likely a lot more.
If you did capture projects at K+S, Moose Jaw Refinery, Belle Plaine fertilizer plant (and maybe potash mine?), Regina Refinery, Boundary Dam Unit 6 and Shand, that’s six projects, maybe seven. And there may be more I could be missing. Shand and Boundary Dam Unit 6, in particular, would be larger in scale than BD3 was, at least in capacity. The International CCS Knowledge Centre did a report saying that Shand could be done for roughly the cost of BD3, but with double the capacity.
BD6 would likely have similar asbestos abatement issues to BD3, so we would know that, going in. I don’t know if Shand has asbestos, but given it was completed in 1991, it’s less likely.
Saskatchewan Minister of Energy and Resources Bronwyn Eyre/Handout
Boundary Dam Unit 6 significance
Another curious thing in the story with Minister Bronwyn Eyre was her bringing up the possibility of carbon capture on BD6, and federal help in doing so. Over the past several years, to my recollection, this is the first significant mention, in a public manner, of the possibility of doing that. I’m certain there’s been ongoing discussions between SaskPower and the province and the feds on that topic, but this is the first I’ve heard of it being brought up at a ministerial level.
That’s significant for many reasons. If you live in Estevan, as I do, the imminent closure of Boundary Dam Unit 4 this year, and Unit 5 in two years, hangs like a pall over the community. Boundary Dam Units 3, 4 and 5 each produce roughly 150 megawatts, and Unit 6 and Shand are in the 300 megawatt range. (Unit 3, since it added carbon capture, produced a net 127 megawatts to the grid, due to parasitic loss for running the capture plant and pipeline compressor.)
When you shut down units, you produce less power. You also burn less coal, which means you mine less coal, and need fewer miners, fewer draglines, fewer everything. This is where economies of scale, and sheer practicality comes to play. If, as currently mandated by federal law, Unit 6 shuts down at the end of 2029, that means the massive Boundary Dam power plant, which used to produce over a gigawatt of power, will be producing only 127 net megawatts to the grid. And Shand would be producing around 300. The question then becomes – do you keep a large mine operating for that little power production? And if you do, what do you do when each plant goes into regular six week turnarounds? Do you shut the mine down? Stockpile coal?
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Do you keep Unit 6 (and Units 4 and 5, for that matter), in standby in case of a crisis, like what’s happening in Europe, right now? If you do, do you mine a massive stockpile of coal and just leave it sitting there, for years, just in case? Because the mines can’t keep that production capacity open for just a standby. And would you be raiding the golf courses and retirement homes to find operators to run those plants that were in standby, if a crisis, as is happening today in Europe, occurs?
So if you don’t put carbon capture on Unit 6, and start making those decisions in the next year or two, or keep it in standby, the logical conclusion is to shut down and demolish the entire plant, and close the mine. With a carbon tax of $170/tonne in 2030, no one is going to burn coal without carbon capture, period. Even when it hits $110 in 2026, it’s likely getting pretty untenable. At that point, Shand becomes a stranded asset, and BD3’s and its capture island become a dead, white elephant, shot before its time.
All of this would have profound impacts on Estevan. They already are.
From left, Whitecap Resources president and CEO Grant Fagerheim was joined by Energy and Resources Minister Bronwyn Eyre, Minister of Social Services Lori Carr and Minister of Environment Warren Kaeding in announcing Saskatchewan’s movement towards substantially more carbon capture, utilization and storage. A key component would be the federal government allowing for carbon tax input credits. Photo courtesy Darcy Cretin/Whitecap Resources
Input tax credit argument
So all of this comes back to the Province’s, and Whitecap’s, argument. Currently, the federal government’s position is that it will not recognize enhanced oil recovery for carbon tax input credits. Saskatchewan is saying it should.
The argument is this: If we truly must pay a carbon tax, if a input carbon tax credit is equal to the carbon tax paid, then companies like Whitecap Resources can make it work, putting captured carbon dioxide into the ground, meeting carbon targets, and everyone’s happy.
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Think about it: If we’re all paying $170 per tonne for emitting CO2, shouldn’t you be able to deduct $170 per tonne for every tonne of CO2 that’s captured, and injected permanently into the ground? Isn’t the entire point of a carbon tax to reduce emissions, and wouldn’t this do exactly that, in a massive way?
Along the way, we still get to produce potash. We still get to refine oil. We still get to burn coal. We all but eliminate CO2 emissions in the process for those facilities. But we still get to have jobs, and an economy, and taxes to pay for health care.
And wouldn’t the construction of this carbon capture, and utilization and storage program be the very definition of the supposed “green, new jobs,” everyone on the left has been talking about since at least the time Lorne Calvert has been in power? (I still remember those press releases.)
What doe the feds have to lose?
What does the federal government have to lose by allowing this one, simple thing – carbon tax input credits?
I’ll tell you what – carbon tax. Billions in carbon tax. If we use that additional storage capacity of 7 million tonnes per year Whitecap says it can take, and multiply it by $170 per tonne in 2030 (not counting it going even higher after that), you end up with $1.19 billion per year, PER YEAR, to the federal coffers (which, assuredly, will be paid back to individual citizens in a revenue-neutral manner, right?). And that’s Saskatchewan alone, never mind what could be accomplished in Alberta.
Thus, the only argument the federal government could have that would argue against allow an input carbon tax credit is if they don’t want to give up that carbon tax money. It ceases being about reducing emissions, or the environment, or climate change. It’s all about money.
If the federal government is serious about reducing CO2 emissions, they must allow an input carbon tax credit for enhanced oil recovery. And they need to do it this year. If that happens, we can make this work, and still have jobs and an economy in the end, even while dramatically reducing emissions.
Brian Zinchuk is editor and owner of Pipeline Online.ca, Saskatchewan’s Energy News. He can be reached at brian.zinchuk@sasktel.net.
Editor’s note: I was invited, but unable to make it to the announcement because I had a pretty bad cold at the time. (Not COVID, I was tested.) Showing up with a cough these days is likely to get you punted pretty quick. The other media were able to attend, and did indeed report on it.
But I really don’t think they got it. Most did the usual short story, although the LeaderPost did get into a bit more detail. For comparison, here’s the same story as covered by CTV Regina, Leader-Post, and SaskToday.ca. And here’s the original press release. The reality is, if fully implemented, the announced CCUS strategy could be transformational for this province. This is the type of coverage and analysis you can expect regularly on PipelineOnline.ca.
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