Carbon capture and storage (CCS) is a process that first captures and then sequesters industrial carbon dioxide (CO2) emissions before release into the atmosphere. The CCS process involves the following stages:

  1. CO2 capture and compression;
  2. CO2 transport from the capture site to an injection/storage site;
  3. injection and permanent storage of CO2 in geological formations; and
  4. upon injection completion, post-closure long-term monitoring of the CO2 storage site.

A CCS system combining these features will reduce industrial CO2 emissions into the atmosphere.

The Alberta Government considers CCS a critical technology to reduce industrial greenhouse gas (GHG) emissions and has proposed CCS as the largest portion of its GHG reduction strategy. Alberta has taken significant steps in advancing its CCS initiative by establishing a legal and regulatory framework to implement large scale CCS projects. Although the CCS initiative provides a potential solution for sustainable hydro-carbon production in Alberta, large scale CCS raises numerous issues.

Background

In January 2008, the Government of Alberta released its Climate Change Strategy. The report reiterated the Province’s target to reduce annual GHG emissions from a 2010 baseline by 50 megatonnes (Mt) by 2020 and added a target of reducing annual GHG emissions by 200 Mt by 2050 (inclusive of the 50 Mt target).

The Climate Change Strategy anticipated that CCS implementation would account for up to 70% of Alberta's targeted GHG emissions reductions. The Strategy also included the establishment of the Alberta Carbon Capture and Storage Development Council to facilitate the implementation of CCS in Alberta by recommending those economic, regulatory, and technical requirements consistent with CCS implementation.

Formalized Regulatory Framework

  1. Carbon Capture and Storage Funding Act, S.A. 2009, c. C-25 (the “Funding Act”)

The purpose of the Funding Act is to encourage and expedite the design, construction and operation of CCS projects in Alberta. The Funding Act provides the Minister of Energy (the “Minister”) with the legal authority to make grants facilitating the Funding Act’s purpose. To date, the Minister has allocated $2 billion in provincial funding to four CCS projects:

  1. The Alberta Carbon Trunk Line Project by Enhance Energy for construction and operation of a 240 km pipeline that will collect and transport CO2 from industrial emitters (initially a fertilizer manufacturing facility and an oilsands bitumen refinery in Redwater, Alberta) to existing oil reservoirs. The injection of CO2 below the oil reservoir is intended to both enhance oil recovery and provide significant storage.
  2. The Shell Quest Project to capture more than one million tonnes of CO2 annually from Shell’s Scotford oilsands upgrader located near Fort Saskatchewan, Alberta and transport same by pipeline to injection wells located in Central Alberta.
  3. The Swan Hills Synfuels Project for piloting of in-situ coal gasification to convert a deposit of deep unmineable coal into synthetic gas (syngas) underground that will be processed at a conventional gas plant to remove CO2 as a byproduct of the gasification. The CO2 from this process will be captured and used for enhanced oil recovery and the produced syngas will be used as a fuel in a combined cycle power generation station to produce low emission electricity.
  4. TransAlta Corporation’s Project Pioneer for construction of a carbon capture facility at the Keephills 3 coal-fired power plant located west of Edmonton, Alberta anticipated to capture and store one million tonnes of CO2 annually. It must be noted that on April 26, 2012 Project Pioneer’s industry partners, TransAlta Corp, Enbridge Inc. and Capital Power Corp., announced they will not be proceeding with CCS project due to economical concerns. See discussion below under “Cost Considerations”.
  1. Carbon Capture and Storage Funding Regulation, Alta Reg 64/2010 (the “Funding Regulation”)

The Funding Regulation authorizes Ministerial spending for CCS education and research, and for development and refinement of the provincial regulatory regime for CCS. In March 2011, the Alberta Government launched a Regulatory Framework Assessment (RFA), funded pursuant to this regulation. The objectives of the RFA are to: (i) review the current regulatory requirements in Alberta that apply to CCS; (ii) examine CCS frameworks in other jurisdictions; and (iii) identify opportunities to improve Alberta’s regulatory framework. The review is expected to be completed in late 2012. As yet, there has been no public announcement arising as an outcome of the RFA.

  1. Carbon Capture and Storage Statutes Amendment Act, 2010 c. 14 (the “CCS Amendment Act”)

The CCS Amendment Act attempts to provide legal certainty regarding several aspects of the CCS process including:

  1. Ownership of Pore Space and Grant of Sequestration Rights:

To accommodate CCS, ownership of all pore space for the purpose of storing CO2 has been vested in the Crown in Right of Alberta (the Crown) under the Mines and Minerals Act1 (the MMA). Further, authority has been vested in the Minister of Energy to contract with counterparties for: (1) an evaluation permit2 granting the right to drill evaluation wells to determine the suitability of geological formations for CCS3, and (2) a carbon sequestration lease4 granting rights to inject captured carbon dioxide for sequestration5. The CCS Amending Act is retroactive and supersedes existing mineral or storage rights.

  1. Long-term Stewardship and Liability:

The lessee under a carbon sequestration lease must obtain a well licence and an approval from the Energy Resources Conservation Board under the Oil and Gas Conservation Act prior to drilling or using a CCS well.6 During injection operations, a lessee is required to monitor all wells and facilities and, upon ceasing injection operations, comply with all closure requirements of the approved closure plan.7 The lessee may then apply to the Minister for a closure certificate, which the Minister may issue if satisfied that: (i) the lessee has met all monitoring, closure, abandonment, decommissioning and reclamation obligations; (ii) the lessee has complied with all relevant environmental requirements, and (iii) the captured CO2 is behaving in a stable and predictable manner, with no significant risk of future leakage.8 Upon issue of a closure certificate by the Minister, the Crown permanently assumes all obligations of the lessee for the sequestered CO2 and conditionally indemnifies the lessee against liability in tort.9

  1. Post-Closure Stewardship Fund:

Lessees are required to pay a fee per tonne of “captured carbon dioxide injected”10 into a post-closure stewardship fund (the “Fund”) for the duration of the CO2 injection period.11 Monies paid into the Fund will be available to the Crown to be used for monitoring the injected CO2 plume, fulfilling the obligations the Crown has assumed from the lessee, and paying for the costs of reclamation and remediation activities.12

  1. Carbon Sequestration Tenure Regulation, A.R. 68/2011 (the “CST Regulation”)

The CST Regulation establishes requisite procedures for Ministerial agreement to make pore space available, to evaluate suitability for sequestration and to subsequently undertake sequestration of CO2.

The CST Regulation: (i) defines “pore space” and “deep subsurface reservoirs”13; (ii) establishes the application process and terms for permits and leases14; (iii) limits the size of parcels of land for permits and leases15; (iv) sets the annual rental fee for subsurface reservoirs16; (v) provides detailed provisions for monitoring, measurement and verification plans requiring Ministerial approval and periodic update17; and (vi) creates the obligation to provide a closure plan and details the specifications required for inclusion in a closure plan that requires Ministerial approval and periodic update18.

The CST Regulation expires on April 30, 2016 and will be reviewed under the RFA.

Sustainable Development

If fossil fuels continue to play a critical role as an energy source, CCS is increasingly recognized as a solution allowing for the continued production of coal and oil and gas coincident with improved energy efficiency and the development of a renewable energy portfolio.

Industry has recognized that CCS may be particularly efficient in respect of large emissions at industrial facilities, especially when integrated into designs for oil sands and other hydro-carbon production facilities. In Alberta, large CO2 emitters are typically located in clusters, there is often infrastructure available to transport the captured CO2, and there is a foundation of industry knowledge critical to developing the monitoring technology necessary to make CCS viable. Industry recognition and support is exemplified by the Integrated CO2 Network (ICO2N) which is a group of Canadian corporations from the coal-fired power, conventional oil and gas development, oil sands and other industry sectors working to accelerate the development and deployment of CCS technologies. As explained by Stephen Kaufman, director of climate change management and solutions with Suncor Energy Inc. and the industry chair of ICO2N, “CCS offers great potential for making significant reductions in our GHG emissions, and we recognize that one day it could play a key role in reducing the environmental footprint of the industry”.

Liability

The willingness of the province to assume all obligations (and therefore liability) for stored CO2 is a considerable departure from current practice in respect of conventional oil and gas operations, which in most jurisdictions provides for operator liability. Under Alberta’s regulatory framework, liability is assumed by the Province at the point when the captured carbon dioxide is behaving in a stable and predictable manner, with no significant risk of future leakage19 and the lessee has complied with the closure requirements set out in regulations and related legislation.20 Interestingly, provincial indemnification is only made available to the lessee and it is unclear who will assume liability in respect of possible claims brought against the other participants in a CCS project, such as equipment suppliers or the original producer of the CO2. This suggests that Crown liability may be narrower than it first appears.

The MMA also provides that, subject to regulation, the Crown will assume ownership of the sequestered CO2 if the lessee ceases to exist prior to the issuance of a closure certificate.21 This provision provides some additional assurance that the Crown will assume the lessee’s obligations in the event of the insolvency of a lessee. However, until further regulations are promulgated, the extent of assumed liability is uncertain.

Technology

Evolving technology often develops in “fits and starts”. This has resulted in certain “technological gaps” that science must address as CCS develops:

  1. CO2 Site Assessment: A reliable means of predicting the suitability of a site and its potential storage capacity is essential. Seismic methodology will be required to accurately and reliably map deep sub-surface locations.
  2. Assessing Likelihood of CO2 Storage Leaks: A reliable means of assessing and predicting faults and fractures impacting containment at a storage site is essential. A better understanding of the effects of by-products captured coincidentally with CO2 on cap rock or other material that surrounds the storage site or provides the site seal is also necessary.
  3. Tracking CO2 Leaks: Tracking methods to accurately and reliably verify and observe CO2 plume movements and any leakage to the biosphere require improvement.
  4. Long Term Outcomes: Environmental studies are required to determine the effects of CO2 sequestration on groundwater, and on both terrestrial and aquatic plants and animals.

Cost Considerations

Because CCS is a nascent development in Alberta, it is difficult and premature to quantify the capital cost of and actual operational expenses associated with a CCS project. In these initial stages, expenditures will necessarily focus on infrastructure, retrofits to source plants requiring CCS technology, and the assessment of appropriate secure storage sites. As Alberta’s CCS initiative matures, cost assessment will be required to determine the “stand alone” viability of CCS projects. The cost of CCS implementation and operation must be competitive with the “cost of carbon” and not significantly increase the cost to industrial emitters of processing hydrocarbons. An example of this concern is the recent cancellation of the Project Pioneer CCS project by its industry partners who opted to pay emissions penalties in preference to incurring project development costs. A currently low price (tax) on carbon with no expectation or certainty regarding future prices was cited as the main reason that the project would not proceed. Commercial-scale viability of CCS technology will be dependent on a robust market for carbon sales and the price of emissions reductions being sufficient to encourage investment in the technology. Consideration of funding arrangements for CCS projects, including government funding and incentive schemes or other arrangements to first establish and then ensure the long term viability of CCS in Alberta will be required.

Importance of Government Support

Alberta’s development of a regulatory framework supporting CCS initiatives is due in no small measure to the policies of previous Alberta administrations, who made CCS a priority in their strategy to reduce GHGs. Although the government of Premier Alison Redford remains fully committed to CCS implementation, there have been indications of a possible shift in priority to diversify the funding committed to CCS into other clean energy technologies and emission reduction solutions that support GHG reduction strategies. This may, at least in the shorter term, suggest a shift in Alberta’s GHG reduction strategies to a more multi-faceted approach until the initially approved CCS projects have demonstrated that the piloted technologies are viable and effective tools into which further research and investment is desirable.

Conclusion

The Alberta Government considers CCS a critical technology for reducing industrial GHG emissions. Development of an appropriate legal and regulatory regime for a new technology is an organic process which will quite understandably require experiment, assessment, and revision. Patience is required as the CCS industry develops the tools necessary to ensure the safe, secure, and effective storage of CO2 in large quantity.