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Shell's Quest project would capture carbon dioxide from this hydrogen manufacturing at the Scotford upgrader. (Nathan VanderKlippe)
Shell's Quest project would capture carbon dioxide from this hydrogen manufacturing at the Scotford upgrader. (Nathan VanderKlippe)

The carbon capture conundrum Add to ...

On a late-spring day beneath a warm prairie sun, some 6,000 construction workers and 30 cranes are at work on a $12-billion expansion to Royal Dutch Shell PLC's upgrader to boost its capacity for processing oil sands bitumen.

A short drive across the massive industrial complex near Fort Saskatchewan, Alta., a gravel lot sits largely empty - an idle crane, some pickup trucks, and a row of portable offices. It is, however, home to a controversial idea: This undeveloped lot is the would-be home for a carbon capture storage (CCS) project.

The technology known as CCS has been touted as the next major advance for an oil sands industry that appears to be on a collision course with governments' determination to battle climate change. In their struggle to soften Canada's reputation as a source of "dirty oil," federal and provincial governments have placed a big bet on CCS, with plans to pump more than $3-billion into the technology.

Few other technologies hold the same promise, and indeed, few are being tested or funded to the same degree. And the spending is just ramping up. Later this month, the Alberta government is set to announce the winners of $2-billion in funding for carbon capture.

All this promise runs smack into the overarching uncertainty about carbon capture. The technology likely won't work where the oil is actually pulled out of the ground, but rather at the processing end. Even there, the economics simply don't add up. And the technology remains unproven at a commercial scale.

"We shouldn't see this as a silver bullet and be putting our eggs in this basket - particularly with public dollars - and ignore some of the cheaper and more effective options," said Simon Dyer, the oil sands program director at the Pembina Institute, an environmental think tank.

Even federal Environment Minister Jim Prentice conceded recently that the technology will have limited application in northeastern Alberta, where companies produce bitumen either in open-pit mines or by injecting steam into underground formations.

Critics such as Mr. Dyer, and some within the energy industry, argue that government money is better spent on technologies that reduce the very creation of greenhouse gases - including new oil sands extractions techniques currently under development - and on cleaner forms of electricity generation.

Most of CCS's proponents acknowledge it won't contribute to reducing emissions from the oil sands projects themselves, where diesel-powered trucks and natural-gas-powered steam generators produce greenhouse gases that are difficult to capture. But industry and government remain confident the technology can be widely used on the upgraders and refineries that process the bitumen, as well as for coal-fired power plants.

Upgraders are critical components of the oil sands industry, transforming heavy bitumen into synthetic crude oil for further refining. But it is an energy-intensive process that drives up both costs and the emissions of carbon dioxide for oil sands producers.

Capturing their emissions could dramatically reduce the "carbon footprint" of oil sand projects, though critics doubt it could ever remove the environmental stigma from the controversial projects.

Still, some industry executives have not given up on the idea that CCS can eventually be useful in the mines and in-situ projects around Fort McMurray.

One of those is Murray Edwards, one of Calgary's most successful entrepreneurs and vice-chairman of Canadian Natural Resources Ltd., which is looking into injecting CO{-2} into tailings from its Horizon oil sands mine. And Mr. Edwards supports CCS even though even though he believes it will come at a cost. "In today's world, the process that we're proposing is not economically viable," he said.

But the public purse needs to be wide open, he argues, to support what he believes will be a game-changing technology with wide application in the industry.

"If there's to be an important commitment on climate change and carbon emissions, there's going to have to be investment in technology, much like if the government hadn't mass-supported the railway it would never have been built," Mr. Edwards said.

Profiting from emissions

If CCS is going to contribute to the Harper government's goal of reducing greenhouse gas emissions by 20 per cent from 2006 levels by 2020, the oil and power industries need to begin building demonstration plants now, industry executives say.

Companies are vying for huge pots of public money that would help underwrite the first projects, though even taxpayers' support may not be sufficient to spur the development, given the large capital costs involved in the proposed projects.

Alberta is set to announce several winners of a competition for some $2-billion in provincial funding to build demonstration plants. Saskatchewan has offered its own support, and Ottawa has promised $1-billion for clean energy technology, much of which will go to CCS.

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