Oil sands coalition to start exploratory drilling for carbon-capture project

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A coalition of oil sands companies eyeing a massive new emissions-reduction project in northern Alberta will this winter begin exploratory drilling of underground reservoirs in which it hopes to store captured carbon, as part of its goal to produce net-zero oil by 2050.

But Kendall Dilling, president of the Pathways Alliance, said there’s still another year or two of project development and applications for regulatory approvals before the planned carbon capture project hopefully gets the green light. The multibillion-dollar proposal includes a pipeline to gather captured carbon from more than 20 oil sands facilities and move it to an underground storage hub near Cold Lake, Alta.

“We want to turn dirt and get steel in the ground more than anybody, but these are massive projects. There’s just a certain development timeline that you have to follow,” Mr. Dilling told The Globe and Mail on Monday.

Pathways is a group of six companies responsible for about 95 per cent of oil sands production: Canadian Natural Resources Ltd. CNQ-T, Cenovus Energy Inc. CVE-T, Imperial Oil Ltd. IMO-T, MEG Energy Corp. MEG-T, Suncor Energy Inc. SU-T and ConocoPhillips Canada COP-N.

The companies formed the group in 2021, but Mr. Dilling said 2022 was the year Pathways “got some flesh on the bones and became a real organization with capacity to lead this net-zero plan.” Two key existing oil sands groups – Canada’s Oil Sands Innovation Alliance (COSIA), created in 2012, and the Oil Sands Community Alliance (OSCA), created in 2013 – joined the broader Pathways group this year.

Pathways also moved into new digs on the 20th floor of a downtown Calgary high-rise, and began absorbing oil sands files and the people who worked on them from the Canadian Association of Petroleum Producers, an oil lobby group.

But 2023 will be pivotal for the group and its members, Mr. Dilling said.

The federal and Alberta governments, the industry and Indigenous communities in the oil sands region will need to continue discussions and collaboration to ensure the fiscal and regulatory framework for the carbon capture project are both finalized in the first half of next year. Progress will be key to determining whether the project can go ahead and, thus, whether 2030 emissions-reduction targets are achievable.

“This opportunity in front of us, it’s on the scale of the Industrial Revolution, globally,” he said.

“This is the year, to me, Canada decides, ‘Are we going to be a leader? Or are we going to sit on the sidelines and watch this opportunity pass us by, and watch the Americans and Europeans and others take advantage of it?’”

Oil sands producers are betting big on carbon capture for the industry’s survival. The technology captures greenhouse gas emissions and pushes them deep underground to keep them out of the atmosphere. It’s already in use around the world, including in Alberta via Shell Canada’s Quest project at the Scotford Upgrader outside Edmonton and in southern Saskatchewan at the Boundary Dam power plant.

But carbon capture has its doubters. Critics worry about future CO2 leaks and the fact it doesn’t encourage the reduced reliance on fossil fuels that is critical to meeting climate goals.

The technology also remains extremely expensive, which is a tough sell for fossil fuel companies that have to justify to their shareholders immense capital and operating costs on something that doesn’t generate revenue. To help defray those costs, the federal government recently released details of a carbon capture investment tax credit covering 50 per cent of capital expenses.

The alliance was hoping for a boost to the tax credit so it more closely reflects a higher one recently introduced in the United States. Still, Mr. Dilling said Canada’s program presents an excellent opportunity to future-proof the oil sands “so that we can continue to provide literally trillions of dollars in GDP over the coming decades, as long as the world needs oil, providing a decarbonized barrel of oil to that market.”

Canada has worked hard “to be a leader on environmental issues,” he added.

“I think [2023] is the year where we really decide, ‘Yep, this is what the future looks like for this country and we’re going to get after it.’”