Carbon capture and utilization announcement laying groundwork for carbon trunk system: Whitecap CEO

CALGARY, WEYBURN – We know we’re going to be paying carbon tax. If a carbon tax credit is equal to the carbon tax paid, Whitecap Resources feels it can make it work, putting captured carbon dioxide into the ground, meeting carbon targets, and everyone’s happy.

“That’s exactly right,” said Grant Fagerheim, president and CEO of Whitecap Resources Inc., speaking to Pipeline Online by phone on Sept. 22.

Two weeks earlier, Fagerheim joined Saskatchewan Energy and Resources Minister Bronwyn Eyre on Sept. 7 in announcing what the province would like to see from the federal government with regards to carbon capture, utilization and storage (CCUS), when combined with enhanced oil recovery (EOR). She was joined by Minister of Environment Warren Kaeding and Minister of Social Services Lori Carr (who represents Estevan, home of current carbon capture facilities).

The Weyburn Unit has been sequestering carbon dioxide since 2000. It has been operated by Whitecap since 2017. The Weyburn Unit draws that CO₂ from two sources – the Great Plains Synfuels Plant at Beulah, N.D., and, since 2014, SaskPower’s Boundary Dam Unit 3 Integrated Carbon Capture and Storage Project. Combined, the Weyburn Unit sequesters two million tonnes of CO₂ per year, or close to half of the total volume of CO₂ sequestered in Canada per year. Fagerheim said the Weyburn EOR project is the largest single-reservoir anthropogenic carbon sequestration project in the world.

But while Canadian consumers and companies have been paying an ever-increasing carbon tax for the last three years, now at $40 per tonne of CO₂ equivalent, Whitecap does not get any carbon tax credits for the CO₂ it has been sequestering, and continues to sequester.

“It’s 21 years too early,” Fagerheim noted of the project.

In those 21 years, they’ve sequestered 36 million tonnes of CO₂, over 40 per cent of all CO₂ sequestered in Canada at this time, he noted.

Fagerheim talks about the ability to attract investment and creating jobs, “positioning Saskatchewan at the forefront of the technology curve, which it already is, all while generating royalty dollars for citizens and advancing the province and the rest of Canada towards a lower carbon economy.

“And I think that is a very key point to make. The energy sector is not shirking its responsibilities. It’s demonstrated that we continue to reinvent ourselves and drive to a lower carbon economy in all aspects of our business with emission controls, etc.

“We have to be respected and recognized for how clean the Canadian energy space is,” he said.

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Groundwork for carbon trunk line

Asked if the announcement seemed to be laying the groundwork for a Saskatchewan carbon trunk system, perhaps multiple systems, with a line leading to the Weyburn Unit, Fagerheim said, “Yes.”

He pointed out the federal carbon tax is set to be escalated by $15 per tonne of CO₂ equivalent per year from the current level of $40 per tonne. “And where that ends up along with the tax credit policy is very important to understand in order for long term investments to be undertaken.”

“We have emitters that we’re talking to, in conversation within the provinces of Saskatchewan and Alberta.”

He said In Saskatchewan, they’re getting into the compression side, the transportation and then storage and sequestration. “So along the value chain, what I call a value chain, it’s not just an economic value chain, but an environmental chain. There are technologies that have to be applied down that line.

“We think there are large emitters in the Regina region, and northwest of Regina. There’s the Shand project not far down the road from our Weyburn facility. These are larger emitters that are not going to be able to afford to pay taxes, and the amount of carbon taxation that’s being placed upon them at this time.”

Fagerheim said, “We believe there’s an economic and environmental solution to all of this.”

He said Premier Scott Moe and Minister Eyre have been leading the charge in our country on it.

“If we don’t get the proper support, in policy support from the federal government, and/or shared with the federal government and provincial government, we just take our technology elsewhere. There’s an established 45 credit south of the border,” he said, referring to the American carbon tax credit known as 45Q, enacted in 2018. That tax credit amounts to US$50 per tonne of CO₂ that’s stored permanently, or US$35 per tonne if it’s utilized, such as enhanced oil recovery.

“So why wouldn’t we just take our technology there and utilize it there?” he asked.

“What the Canadian energy companies are looking for is clarification on what is the policy that’s going to be established in our country? It’s critically important to have that well thought-out, finalized and communicated without continually moving the goalposts. Let’s put goalposts in place that we can actually work with to achieve the advancement to a lower carbon economy.”

“All pathways to a lower carbon economy will rely on some form of carbon capture,” Fagerheim said. “You’re going to have to put the CO₂ somewhere.”

He pointed out that hydrogen developers will have a certain amount of CO₂ captured at their facilities.

Fagerheim said, “The Saskatchewan government gets it, and are taking the necessary steps to advance down this path, of energy transition or energy revolution, sooner than later. And that’s what exciting for us to see. Oftentimes, governments are sometimes your biggest obstacle. Now you’ve got a governing body that is willing to advance forward, and look to this lower carbon economy. And it’ll preserve jobs, advance more jobs, and increase the amount of job opportunities.”

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Offset credits as incentives

Fagerheim said the carbon tax can be managed, but it has to be done with an offset credit on the other side.

“We cannot penalize people or companies into better behavior. We can, in my opinion however, obtain better behaviours through effective incentive programs and policies. There should be effective incentivize programs developed for corporations to attain better behaviours. So how you do that, is to have an offset credit established, the investment tax credit market being discussed to the greenfield standards in Canada, but you need an offset credit to offset the carbon taxes on the other side. If you’re only going to increase taxes, then behaviours don’t change, and they may actually kill businesses. And we can talk about the amount of businesses that could be killed, if there isn’t an offset credit established on the other side of the current carbon tax.”

So what, specifically, would Fagerheim like to see from the federal government to make a carbon hub that leads to the Weyburn Unit?

He replied, “Let’s just use today, $40 a tonne. That’s the carbon tax that is being paid. So at $40 a tonne, the emitter is going to want some of that, they should want some of that, to partially offset what the carbon tax that they’re paying. But they can’t just do it alone. So, they’re going to need someone to sequester their CO₂ and store it for them. So, there’s got to be a sharing relationship on the investment tax credits on the other side.”

He gave an example where the companies that do the sequestration receive 50 to 70 per cent of the input tax credit, and the emitter gets the remainder.

Fagerheim points out who pays for it all in the end, however. “This is all going to be passed through to the consumer.”

This is being decided upon by the end of the year, Fagerheim said. And right now, the Weyburn Unit, which has been sequestering carbon dioxide for 21 years, is on the outside, looking in.

“They’ve excluded EOR projects from the participation in that investment tax credit. It wouldn’t be included,” he said.

“That would be ludicrous, if we didn’t have investment tax credits as part of carbon, capture, utilization and storage.”

“This is a proven technology. The quickest, the most effective way to remove emissions is to store them where they came from.”

Saline aquifer storage is also a possibility. But Whitecap has its own plans.

“Listen, we want to take on everyone’s CO₂. Anyone, any emitter, we’ll look to take on your CO₂,” Fagerheim said. “If that’s the aspirational goal to move quickly, that’s the way we should be going.”

Whitecap is taking 2 million tonnes per year currently. “We think we can manage, on our assets today, up to nine million tonnes per year, about a four-fold increase.”

That could all be sequestered in the lands Whitecap already owns.

Put in perspective, Boundary Dam Unit 3 captured 729,000 tonnes of CO2 in 2020. The additional capacity Whitecap says it can take would be the equivalent of nine to 10 projects the size of Boundary Dam Unit 3.

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Billion dollar projects

Fagerheim said, “The challenge everyone is going to have with regards to advancing carbon capture is that they are expensive and require long-term planning, and therefore, to put them in place, you need consistent policy framework that’s going to be in place for 20-30 years. I must emphasize that you cannot be altering policies and get better behaviour, as investors will only make investments for an extended period of time when they have confidence in the return characteristics of their investments.

“As an example, a capture unit is somewhere between $600 and $700 million. You put compression on there, maybe another $150 to $200 million. You’ve got a pipeline, and it depends on length, but let’s use $150 to $200 million. And you have sequestration, you have another $200 million. So you’re talking, in general terms, about a billion dollars of capital per project.

“These are very important projects to understand that you have to set up a policy and framework where there’s a return on invested capital. And that’s where it comes back into the investment tax credit market; you’re going need this in order to decarbonize Canada.”

For companies like Whitecap, and the emitters who would be capturing carbon, to make these massive investments, they can’t have the rug pulled out from under them with policy changes every time there’s another climate change conference.

“That’s exactly right. This is exactly what we’re talking about. Put the goalposts in place, leave them there, so people can make long term investments and create long term job opportunities in the constituency that we work.”

Asked what the investment tax credit should be, Fagerheim replied that it should be matching. If the carbon tax is $170 per tonne, the investment tax credit should be matching, and have a matching escalation of rates.

 

Editor’s note: Pipeline Online will strive to provide the depth in energy coverage that other media in Saskatchewan simply do not do. In addition to this story, we have one with Energy and Resources Minister Bronwyn Eyre as well as a column explaining its implications. For comparison, here’s the same story as covered by CTV Regina, Leader-Post, and SaskToday.ca. And here’s the original press release.

Launched Oct. 4, Pipeline Online is Saskatchewan’s Energy News. You can find it at PipelineOnline.ca, on LinkedIn., Facebook and Twitter.

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