Federated Co-op announces carbon capture MOU with Whitecap Resources for refinery, ethanol plant

SASKATOON, CALGARY, REGINA – Federated Co-operatives Limited (FCL) and Whitecap Resources announced a memorandum of understanding on Oct. 21 to capture carbon dioxide at two major FCL facilities and inject it into the Whitecap-operated Weyburn Unit for enhanced oil recovery and storage. It was the biggest announcement on the carbon capture, utilization and storage front since SaskPower announced Boundary Dam Unit 3 in 2011.

The FCL announcement was for 500,000 tonnes of carbon dioxide per year, but Whitecap is working with three other companies to potentially join in, and FCL itself could be adding more in the future. If those additional projects join in, it could result in a total of two million additional tonnes of CO₂ per year, effectively doubling how much carbon dioxide is going into the Weyburn Unit right now.

FCL president and CEO Scott Banda and FCL vice president of refinery operations, Gil Le Dressay, spoke from Saskatoon via Webex, while Whitecap president and CEO Scott Fagerheim spoke from Calgary. Minister of Energy and Resources Bronwyn Eyre joined in from Regina.

Largest shift

“This is arguably the largest shift we will make, in our long history,” Banda said. “We need to thoughtfully consider the energy sources and products required to meet the needs of Co-op members, customers, and all western Canadians, today, and into future generations. We believe FCL has a key role to play in the larger western Canadian transition to a low-carbon economy. That’s why we’re making a commitment to reduce our greenhouse gas emissions by 40 per cent below 2015 levels, by 2030. We are also aspiring to net zero emissions by 2050.

“This is an enterprise-wide target. That means it includes all the emissions for FCL operations, including our distribution centres, feed plants, business offices, crude oil facilities, transportation fleets, refinery and ethanol plant.”

FCL is looking at multiple paths, including energy efficiency and biofuels.

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Carbon capture for FCL

Banda continued, “One path that we are exploring to help achieve these emission targets is using carbon capture. Today, we are entering into a memorandum of understanding with Whitecap Resources, to transport and store carbon dioxide from the Co-op Refinery Complex in Regina, and the Co-op Ethanol Complex near Moose Jaw, for long term sequestration and storage in Whitecap’s existing facility.

“FCL will fund, construct and operate the carbon capture facilities to be installed at the Co op Refinery Complex and at the Co op Ethanol Complex,” Banda said. “When fully implemented, we expect to be able to sequester nearly 500,000 tonnes of carbon dioxide equivalent (per year) in Whitecap’s Weyburn Unit. We currently expect carbon capture at the Co-op Ethanol Complex to be completed in 2024, and, by the commissioning of carbon capture at the Co op Refinery Complex, starting in 2026.”

Banda said, “Our final decision to move forward will be based on the project’s economic competitiveness, which will require government support and approvals, as well as favorable market conditions. While our targets are ambitious, we believe they are necessary, and demonstrate our commitment to realizing our vision. We believe we can be successful by maintaining our vision and working together for the long-term benefits of our communities.”

While the numbers at this point are preliminary, Banda said those two projects together are expected to cost FCL around $510 million for carbon capture facilities.

Past the gate

That just gets the carbon dioxide to the gate of each respective facility, however. It will be up to Whitecap to build the compression and pipeline to bring that CO₂ to the Weyburn Unit, where it will be utilized in enhanced oil recovery, something that’s been done at Weyburn since 2000.

Fagerheim said, “Whitecap is excited to announce the partnership with Federated Co-op to assist with their plans for reducing emissions and advancing their decarbonization strategy. Whitecap brings significant carbon capture expertise to the partnership, as an owner and operator of the largest anthropogenic carbon sequestration project in the world that we run Saskatchewan.

“We are currently sequestering two million tonnes a year of CO₂ that would otherwise be released to the atmosphere, which is over 40 per cent of the carbon sequestered in Canada at this time. Whitecap, through this partnership, will continue to play a major role in Canada’s transition to lower carbon economy.”

He continued, “We’re both proud and excited to be moving forward with a strong partner, with Federated Co-op and the province of Saskatchewan. It is important for me to acknowledge the support, leadership and vision specifically for Premier Moe and Minister Bronwyn Eyre, and the rest of the government of the Saskatchewan that are provided, along with PTRC and the CCS Knowledge Centre, and the Saskatchewan Ministry of Energy and Resources; all of whom have contributed significantly to the momentum of CCUS in the province of Saskatchewan, demonstrating our commitment to moving to a lower carbon economy, in a practical and organized manner.”

Centralized hub and talk of hydrogen

Fagerheim said, “Our vision is to use the project with FCL as an anchor to create a centralized hub that will support the efficient capture and storage CO₂ from FCL’s operations, as Scott referenced earlier, and aggregate CO₂ from other industrial emitters in the greater Regina, Belle Plaine and Moose Jaw areas, with the potential for expansion into a larger hydrogen hub into the future.

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“We are already in early-stage discussions with various other parties, and have written support from three other emitters for a larger scale project that, together with FCL, pick up over 70 per cent of the emissions in the project area.”

Whitecap’s “New Energy Team” will be initiating a front-end engineering and design (FEED) study to provide centralized compression, transportation and sequestration from the Regina refinery and Belle Plaine ethanol facility.

Fagerheim hinted there could be for CO₂ development in the area, saying, “The project leverages the expertise Whitecap has gained as operator of the Weyburn Unit, and builds on the existing CO₂ infrastructure in southeast Saskatchewan. The new infrastructure being built aggregate CO₂ supply can support Weyburn Unit expansions and other greenfield CO₂-EOR projects in southeast Saskatchewan.”

Quickest path

Fagerheim said, “Overall, this project represents the quickest path to reductions in our individual greenhouse gas emissions, and can unlock billions of dollars of CO₂ investment in Saskatchewan.”

He noted this announcement represents 25 per cent of the carbon capture, utilization and storage potential outlined in Minister Eyre’s announcement in September that Whitecap took part in.

Minister calls FCL, Whitecap trailblazers

Eyre said Whitecap and FCL were being “ambitious, trailblazing leaders when it comes to getting ahead of the transformation, or as I call it, energy evolution narrative, and really highlighting what’s good for the economy, can also be so very good for the environment.”

She said Saskatchewan feels it’s important to “stand with the enhanced oil recovery aside of the carbon capture, utilization and storage narrative, and why we feel the federal government should as well.”

“If we’re really serious about the environment, leading environmentalists tell us that Canada can’t get to net-zero or Paris Accord targets without enhanced oil recovery or EOR.”

She pointed out EOR wells produce 82 per cent fewer emissions than traditional wells.

Eyre said the province anticipates $2 billion in private investment that flows into what’s called the carbon capture sequestration value chain.

Trunk line for Regina region

Asked about the pipeline to gather this CO₂, Fagerheim said, “We’ve made an early estimate, obviously, prior to the feasibility studies, of approximately $300 million for compression, transportation and sequestration. And that would include the two areas coming from the ethanol facility at Belle Plaine, as well as from the refinery, just northeast of Regina. So, those are our early estimates, but we’ll go through this feasibility study that we’ve actually initiated at this particular time.”

Asked if it would be built with the capacity to take CO₂ from additional facilities, Fagerheim said in their feasibility study, they wanted to make sure they were firstly committed to FCL. Regarding potash, chemical fertilizer or anything else in the greater Belle Plaine area, he said, “They would come in to potentially support. We’ll looking at sizing depending upon the CO₂, the emissions that they would like captured as well. But very much our first object is to work with FCL on sizing everything appropriately, but obviously, we’ll scale the size up for the pipeline, dependent upon the amount of CO₂ we can sequester from other emitters as well.”

For reference, the 330-kilometre Souris Valley Pipeline, which supplies the Weyburn Unit and Midale Unit from the Great Plains Synfuels Plant in Beulah, North Dakota, is a 12-inch carbon dioxide line from Tioga, North Dakota to Goodwater, Saskatchewan. The 65-kilometre carbon dioxide pipeline from Boundary Dam Unit 3 to Goodwater is a 10-inch line.

Long time in coming

FCL has been looking at carbon capture and storage for at least a decade, as the initial plans for the Aquistore project were to use carbon dioxide from the refinery and inject it into a deep saline aquifer a short distance from the refinery. Aquistore eventually ended up being part of the Boundary Dam Unit 3 Integrated Carbon Capture and Storage project, near Estevan.

Le Dressay said, “We’re looking at capturing off the refinery or on our hydrogen plant producing units. We have two of them on site. And we’re looking at capturing the process gases initially, is what we’re looking at. There are future phases, as you talked about on the pipeline question, as well, that we’re also looking at, on the post-combustion, but the initial phases on the refinery is targeted at the process gases, industrial gases from the two hydrogen plants. The ethanol complex is on the fermentation process is what we’re looking at … for capturing CO₂.”

“What we’re looking at doing will be different than at Boundary Dam, in that we’re capturing that inside the processes, at a higher pressure. Eventually, we will look at post-combustion options on our journey to net-zero. So, we will look at other phases, and that’s part of our memorandum of understanding with Whitecap.”

Carbon tax influence

Asked by Pipeline Online about the influence of the federal carbon tax in this, with the potential to go up to $170 per tonne of CO₂ by 2030, Banda said, “We’re clearly motivated to ensure that we are in compliance with regulations that we know, now, and that we anticipate to be in place. And that’s been part of the challenge, is regulatory certainty, or a sense of the certainty, because these are, as you can tell, a major investments for us, as a cooperative, when we’re talking over $500 million.

“We raise our own internal revenue as we can’t float shares out on the market as a cooperative. So we’ve been planning for this, for some time, first of all; but second, once we see, and have seen now, some regulatory direction and certainty, for sure, that’s part of the motivation to ensure that we are in compliance and to the future.”

In recent months, Fagerheim had talked about the importance of a federal investment tax credit for carbon dioxide going into the ground for enhanced oil recovery. Asked how much that is a factor, he said, “As far as the investment tax credit, (it) has not been determined by the federal government, as of yet. And part of these announcements are (such) that we’re wanting to have the federal government be more educated, before they make the final decision on the Clean Fuel Standard that we anticipate prior to the end of the year.

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He continued, “We will look at the economics of this project, to ensure that there’s appropriate returns for the three parties. And we talked about this, in terms of Federated Co op, ensuring that there is an investable return. They’re not going to be investing their money if they don’t get some type of return for their unit holders, and nor would we. And the Saskatchewan government is the same way.

“I would expect that they’re looking to ensure the long-term sustainability into the future, while we’re looking to decarbonize and move to this lower carbon economy. So, putting specific economic parameters or commercial parameters around this at this particular time, just is not feasible. This is why we’re undertaking the feasibility study on all aspects, whether it’s on capture, as well as the compression, transportation, and sequestration.”

Will this fly without that federal change?

“Yes, they will fly without the federal change, to whatever they’re doing. Yes, it will,” Fagerheim replied.

Eyre noted the federal government has, to this point, explicitly left enhanced oil recovery out of that federal tax credit. She said this builds on what was announced in Weyburn in September, and where Saskatchewan wants to position itself, as leaders in carbon capture, utilization and storage.

Who pays who?

Currently, Whitecap is paying Great Plains Synfuels and SaskPower for the carbon dioxide it uses at Weyburn. Its recently announced 2022 capital budget pegged those expenditures at $28 million. But with ever-increasing federal carbon taxes at play, Pipeline Online asked who is paying who to deal with CO₂?

Fagerheim replied, “That all of our commercial terms will be worked out, that will be included, when we work together with the governments, both at the federal and provincial levels, to see if there’s any incentives for decarbonizing that that we can apply for and have applied against our capital structure. So when we talk about this memorandum, we are walking down a path together, to put together not only an environmental improvement to emissions, what we’ll call greenhouse gas emissions, but also to ensure that we can do that do this in an economic manner. And that’s when we talk about the practicality and walking down the path in an organized fashion. So, to come forward with what the economics look like today, on behalf of anyone, just as not feasible.

Banda concurred, deferring to Fagerheim’s statement.

Banda said, “We have to continue with our due diligence, our engineering, our feasibility or modeling. And I love the phrase, Grant, that we’re walking down this path together with the province. We’re in constant conversations, trying to find the best way to position our business; all businesses, frankly, for the betterment of this province.

“And so the thought process, you know, we back this up several years, and we’re looking at how do we sustain our operations in a low carbon economy? We have to make adjustments. We have to make investments. We have to find partners. And today, I think is a major first step, on one component of that journey with the with Whitecap, and really pleased that the minister Eyre was able to join us today as we continue to have conversations on how we do this. It’s not simple. There’s a lot of variables, but we’re committed to digging in and trying to find a path forward.”

 

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