Carbon Capture efforts underway in Canada could open doors to investment in oil and gas, critical minerals and hydrogen sectors

By Bruce Lantz

Canada has some tough decisions to make regarding Carbon Capture, Utilization and Storage (CCUS), and much is at stake for both the industry and the nation.

Already a world leader in the fight to reduce carbon emissions and stall global warming, Canada must act now to ensure it doesn’t get left behind as other nations scramble to initiate their own projects to capture the carbon dioxide produced by power generation or industrial activity, transporting it, storing it deep underground, a kilometre or more in depleted oil and gas reservoirs or saline aquifers, and then re-using it in industrial processes by converting it into, for example, plastics, concrete or biofuel. Along with increasing efforts to lower emissions, it’s considered vital to meeting the targets set out in the 2016 Paris Agreement in the fight against global warming.

Storing carbon is a proven technology that has been in safe operation for more than 45 years, and there are currently 194 large CCS facilities globally, compared to just 51 in 2019 — 80 in the U.S., 73 in Europe, 21 in the Asia-Pacific and six in the Middle East. The capture capacity of all facilities grew to 244 million tonnes per year in 2022, up 44% from the previous year.

Getting it right will not only create opportunities for Canada’s oil and gas sector, but it will also open the door to investment into critical minerals, hydrogen, small modular nuclear reactors, and other industries that will drive the nation toward a future, lower-carbon economy. Fifty-three CCUS projects, hubs and expansions have been proposed or are in various stages of development across Canada — 39 in Alberta, which has the highest emissions in the nation — representing billions of investment dollars. These plans include Enbridge Inc.’s (ENB:TO) Wabamun carbon hub — it’s partnering with Capital Power Corp. (CPX:TO) and cement manufacturer Heidelberg Materials AG (HEI:MI) — and a $16.5-billion CCUS development proposed by the Pathways Alliance of six oil and gas companies, connecting oil sands operations to a storage hub near Cold Lake, Alberta.

“CCUS is also going to help us increase the supply of oil and gas, hydrogen, critical minerals and, of course, low-carbon cement,” Alberta Liberal MP and associate finance minister Randy Boissonnault said recently at an announcement with Heidelberg about its carbon capture project in Edmonton. Heidelberg and the federal government have signed a memorandum of understanding supporting building the world’s first carbon-neutral cement plant at the company’s Edmonton facility. The $1.4-billion project would capture more than one million tonnes of CO2 a year, which would then be shipped to the Wabamun hub for storage.

Heidelberg officials have not yet made a final investment decision, but the company expects the project could be operating by late 2026.

Many emissions-curbing efforts are underway in Canada. The Pathways Alliance is advancing a bold and yet realistic plan to reduce absolute emissions from production by 22 million tonnes annually by 2030 and achieve net zero operational emissions by 2050.

With anticipated co-funding support from Canadian governments, the Alliance has announced plans to invest about $24 billion before 2030 in the first phase of its plan.

Of the $24 billion, approximately $16.5 billion, will support a proposed carbon capture and storage network in northeastern Alberta that, when constructed, will be among the largest facilities in the world. The remaining $7.6 billion investment is planned on major emissions reduction projects and technologies.

“We know of no other oil-producing jurisdiction where competitors have come together and done the work required to advance such an ambitious plan,” said Dilling.

Between 2012 and 2021, the Alliance’s six member companies invested more than $10 billion on research and development on various technologies in Canada’s oil sands. Some helped the industry reduce average per barrel CO2 emissions by about 22% between 2011 and 2019.

While Canada is making progress, the United States is making serious advancements in the CCUS arena. Their government has committed $3.7 billion to finance CCUS projects and meet its goal of net-zero emissions by 2050, and their Inflation Reduction Act (IRA) now offers air-capture projects a per-tonne credit of $180, up from $50. About 80 projects could be operational before 2030 and the U.S. could see CO2 capture capacity increase five-fold to more than 100 metric tonnes of CO2 annually. Canada, meanwhile, has around 15 projects in various stages of development.

Recently, the Canadian government’s budget outlined several minor changes made to investment tax credits, and also promised to take steps to accelerate the regulatory timelines facing major projects. Canada now is offering an investment tax credit for capital expenditures while the U.S. is providing a tax credit of $85 for each tonne of storage.

Canada’s plan at least represents “progress”, said Enbridge CEO Greg Ebel in a statement. “The one thing that obviously would be helpful is just some certainty on the permitting/approval time.”

“Canada’s oil and natural gas industry is currently a global leader in the development of carbon capture technology,” Jay Averill, spokesman for the Canadian Association of Petroleum Producers, told Resource World Magazine. “To remain a leader, Canada’s industrial policy related to CCUS must become more competitive.

“The U.S. has taken a dramatic step forward in terms of their tax framework for CCUS and is now on par with Norway. With global energy demand growing along with an imperative for effective GHG (greenhouse gas) emission reductions, there is an opportunity for the government to work collaboratively with the oil and gas sector on developing an approach that can accelerate the development of CCUS projects in Canada.”

Averill said the U.S.’s IRA is a “landmark piece of legislation” that has the very real potential of accelerating their leadership in carbon capture and GHG reductions technology. Canada’s oil and gas industry may be currently a global leader in this area but remaining among the leaders will require a co-ordinated and incentive-based approach similar to the IRA.

“There is still time for the federal and provincial governments, and the oil and natural gas industry, to work together on an enhanced made-in-Canada approach that can effectively compete to attract global investment capital at a time of a softening economic outlook,” Averill said.