Brian Zinchuk is editor and owner of Pipeline Online
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
CALGARY – Last fall Whitecap Resources announced an ambitious project in conjunction with Federated Co-operatives Limited (FCL) to take carbon dioxide from FCL’s Regina refinery and Belle Plaine ethanol plants, transport them by pipeline to the Weyburn Unit, and use that CO2 for enhanced oil recovery. But a key factor in that plan was the federal government announcing an “investment tax credit” for CO2 that is captured and sequestered.
The recent federal budget did indeed include such an investment tax credit, or ITC. However, use of CO2 for enhanced oil recovery (EOR) was specifically excluded for carbon capture, utilization and storage (CCUS) ITCs.
As of late February, there were a total of four projects signed onto Whitecap’s carbon dioxide hub. During a Feb. 24 earnings call, Whitecap revealed that two more projects had signed onto their carbon dioxide hub project. One was potash miner K+S, which had signed a memorandum of understanding with Whitecap. At the time, another company had also signed on, but was not being disclosed at that time.
Whitecap president and CEO Grant Fagerheim addressed this in his comment during the company’s April 28 earnings conference call, and in response to questions from Pipeline Online.
In his opening comments, Fagerheim said, “Moving over to the new energy part of our business, we have been asked frequently what the federal CCUS investment tax credit means for Whitecap overall. We feel this is the right direction and the level of refundable tax credits was positive, as a good start towards incentivizing larger scale CCUS in both Alberta and Saskatchewan.
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“As the operator of the world’s largest anthropogenic carbon sequestration project, we believe that by excluding EOR as an eligible use for ITC, there will be a lost opportunity to accelerate decarbonization into the future. Including EOR increases the number of projects that are economic, as the ITC alone will not be enough for all emitters to invest in carbon capture and it also reduces the burden on taxpayers.
“That said, we are excited to move forward with our Alberta and Saskatchewan hubs, now that we have clarity on one of the federal incentive programs.”
Asked by Pipeline Online if they will see any benefit from this new program, either for Whitecap, FCL, or other partners, Fagerheim said, “Certainly there’s an added benefit with the ITC market, now that it’s clarified. So, the economics now, at least we know from what was brought forward on the ITC market federally, part of our proposed Saskatchewan carbon hub project will now be able to dig in and there’s going to be an advantage to an advantage to Saskatchewanians, as well as Albertans, with this.
“It isn’t going to be the same extent that we believed it could have been, but we’ll work within the guidelines that have been provided to us at this time. So projects will proceed. And there’ll be fewer projects to proceed, I think, as a result, because the economics are marginal. But this is where, now, it’s over to us to work closely with the province of Saskatchewan as well as the province of Alberta on what suite of incentives can be put in place by the provincial governments on top of what the federal government has up to this point in time.
“So there’s clarity, now, on this and that’s the positive component of it.”
“We’ve obviously been hoping for the ability for a quicker decarbonization. That wasn’t the case when they excluded enhanced oil recovery projects in the ITC market, but we now we know we can work with the facts that are up there today,” Fagerheim said.
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