Ottawa missing out on benefits of enhanced oil recovery, Saskatchewan says

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The federal government is being “willfully blind” by ignoring the economic and environmental opportunities of including enhanced oil recovery in its planned carbon-capture tax credit, according to Saskatchewan Energy Minister Bronwyn Eyre, who was speaking ahead of the release of the province’s own carbon-capture strategy.

Enhanced oil recovery, or EOR, is a process in which carbon-dioxide gas is injected underground in order to draw oil to the surface. An advantage of EOR is it can be used to extract oil from petroleum reservoirs that have already been pumped so thoroughly that they no longer yield easily to other methods.

April’s federal budget included plans for a carbon capture, utilization and storage (CCUS) tax credit, which would reward investment in technologies that sequester carbon-dioxide emissions before they can be released into the atmosphere. But unlike a similar mechanism in the United States, Canada’s proposed tax credit specifically excludes projects that would include an EOR component.

“Enhanced oil recovery is a major part of the mix for us. It’s an absolute win-win in terms of the economy,” Ms. Eyre said in an interview.

The U.S. program has worked well because it’s an all-encompassing tax credit, she said, “not one that ignores the oil part.”

On Tuesday, Ms. Eyre will unveil Saskatchewan’s new CCUS strategy, which will guide the province’s push to attract $2-billion in private-sector investment in the technology.

The minister would not share details on the new strategy before its release, but she said it would focus on altering regulations and extending current infrastructure investment incentives to attract carbon-capture projects to the province.

She said Saskatchewan will also look at ways CCUS infrastructure can bolster opportunities for hydrogen production.

Ms. Eyre said the province’s oil revenue is already seeing a recovery, in part because of EOR projects near Lloydminster, a city that straddles the Saskatchewan-Alberta border. Ignoring that kind of economic and emissions-reduction potential in a tax credit means Ottawa is sticking its head in the sand, she said.

“You can’t be so willfully blind to something that actually works and is an actual solution,” she added.

Forcing carbon-dioxide emissions deep into the ground as part of an EOR process prevents them from entering the atmosphere, where they could contribute to climate change.

EOR is only one use of captured carbon. The captured greenhouse gas can also be used in other major industrial sectors, such as power generation and manufacturing.

Groups such as the International Energy Agency say CCUS is an important part of reducing global greenhouse gas emissions. But many environmental groups argue that using captured carbon in EOR increases oil production, which in turn increases the total output of carbon emissions.

Several projects already capture carbon in Western Canada. For example, Shell’s Quest facility, near Edmonton, has captured and stored more than five million tonnes of carbon dioxide since it began operations in 2015.

But Alberta Premier Jason Kenney said earlier this year that Canada risks falling behind as a leader in carbon capture if Ottawa doesn’t make significant strides to increase investment in the emissions-lowering technology. The province asked the federal government to commit to $30-billion in spending or tax incentives over the next decade, in order to spur investment in large-scale industrial carbon-capture projects.

Ms. Eyre will announce details of Saskatchewan’s new CCUS strategy near the southern city of Weyburn, at an EOR facility operated by Whitecap Resources Inc. The site uses carbon dioxide purchased from the coal-fired Boundary Dam Power Station in nearby Estevan, and also from a coal gasification project in North Dakota.

Saskatchewan’s new CCUS strategy will be released ahead of the 2021 Energy and Mines Ministers’ Conference in Saskatoon, which will take place later this week.

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