Pipeline Online: Revulsion for the energy sector

Saskatchewan’s Energy News

Brian Zinchuk is editor and owner of Pipeline Online. He can be reached at brian.zinchuk@pipelineonline.ca. Articles are used with permission.

Letter signed by 400+ academics shows “much deeper apparent revulsion for the energy sector,” says Saskatchewan energy minister.

By Brian Zinchuk
www.pipelineonlince.ca

SASKATOON – On Jan. 19, a letter signed by over 400 academics called on the federal government to not implement an investment tax credit for carbon capture, utilization and storage (CCUS). This measure is being considered at a time when several carbon capture projects have been announced for this province in recent months, seven years after SaskPower’s Boundary Dam Unit 3 Integrated Carbon Capture and Storage project began operations.

Such an investment tax credit would substantially improve the economics for such projects, which are being driven by the ever-increasing federal carbon tax.

There were eight signatories associated with Saskatchewan universities.

Pipeline Online spoke in depth with Saskatchewan Minister of Energy and Resources Bronwyn Eyre by phone from Saskatoon on Jan. 21 about the provincial government’s response to this letter. The entire letter in question can be read here, and in PDF format here Letter-from-Academics-re-CCUS-tax-investment-credit_January-2022-4.

Pipeline Online: Have you heard of any developments on a carbon investment tax front from the federal government yet?

Bronwyn Eyre: Well, the federal government was very clear in the budget last year that they were interested in CCUS and looking at tax credits around CCUS, but were very explicit about not extending that to enhanced oil recovery. And so we expressed disappointment at the time. In the budget, it was stated that Saskatchewan and Alberta are both poised to be “world leaders,” I believe was the wording, in carbon capture utilization and storage around distribution hubs and so on.

But the enhanced oil recovery (EOR) was explicitly excluded. So that’s where we’re at, in terms of the federal government, and I believe the plan, going forward, was to put out a CCUS strategy federally, originally by the end of last year. Obviously there was an election in between. So, the process now moves into this year. There’s a net-zero advisory board and some work is being done on how this tax credit might look, which clearly the academics in question are weighing in on as a result.

Pipeline Online: What does Saskatchewan want to see with this investment tax credit?

Bronwyn Eyre: We’ve always been very clear that the federal tax credit should be extended to enhanced oil recovery-CCUS, as it is in the United States under the 45Q tax credit, which has been very successful and a great driver for CCUS projects. 45Q does not exclude enhanced oil recovery. And so, we feel it’s very important that if you are going to look at a tax credit, it should include enhanced oil recovery.

Pipeline Online: This letter appears to be an attempt to strangle CCUS in its cradle, just as several projects in Saskatchewan have been recently announced. What are your thoughts on this?

Bronwyn Eyre: Just to expand on some of the background a little bit. It appears that, in this case, these academics have allowed their ideology to cloud their judgment, and really the facts, because they barely make a distinction between CCUS and CCUS-EOR. The federal government has made that distinction. As I’ve said, they have explicitly said that any CCUS tax credit won’t apply to enhanced oil recovery. We don’t agree with that, because we stand with the sector, and because the environmental footprint of enhanced oil recovery is so very good. Eight-two per cent fewer emissions than traditional wells. And the Whitecap EOR facility has sequestered half the four million tonnes of CO2 sequestered every year in Canada. How can you not acknowledge that record?

But I think what people aren’t realizing here is that industrial source CO2 is emitted from all sorts of large facilities, from potash facilities and refineries to cement factories.

The federal government has said that Saskatchewan can be a world leader in CCUS. And we’re already seeing that, with the recent FCL announcements with Whitecap Resources and the biofuel announcement this past week. The CCUS potential in Saskatchewan, which even the federal government has acknowledged, could take in potash facilities, the refineries, Evraz, etc. I think that the letter writers here are so focused on enhanced oil recovery, that I’m not sure they have completely taken into account the other potentials of CCUS. My question to them would be don’t they want these facilities, for example, in Saskatchewan to look at sequestering CO2?

Regrettably, their arguments also run counter to those of leading environmentalists who say global environmental targets can’t be met without carbon capture. Norway, the UK, many countries recognize that. But there are also leading environmentalists who say that the Paris Accord and other UN global targets can’t be met without enhanced oil recovery-CCUS.

The major issue with this letter and these hardline positions is that they don’t take into account consequences. Such hardliners don’t take into account, for example, the effect that their positions have on jobs–450,000 jobs in the Canadian energy sector if we carry out a green transition that’s too abrupt, too political and too rapid.

Pipeline Online: They’re using Boundary Dam 3 as an example of a failure. Does the province see it like that? How does the province view BD3?

Bronwyn Eyre: We certainly were first out of the gate on the commercial CCUS technology side of BD3. We’ve been world leaders when it comes to that, and we’ve learned a lot from it. Of course BD3 itself also helps power the province and keep everyone warm and safe, so that’s a pretty amazing record and certainly not a failure.

When you think about it, the writers of this letter don’t appear to be in favour of any ‘transition’ at all, just shock and awe destruction of entire sectors. It’s been a similar story with the federal phase-out of coal. Communities in the southeast, around BD3, are struggling. They aren’t received the practical, promised federal transition support that really takes into account the unique realities of rural communities.

Do the academics understand that? The realities of what hardline phase-outs mean? The destructive approach they take to the energy sector is astonishing, when you consider the 30,000 jobs and millions of dollars in royalties that it generates in this province.

When the federal government says that we could be world leaders CCUS, I’m assuming that they’re taking into account our record on BD3, as they should. Can we learn from it and build on what has been achieved there? Absolutely.

In the CCUS announcement that we made back in September, we talk about the great potential for regional hubs, distribution hubs and sequestering areas that could, for example, encompass some of the potash facilities, the refineries and so on. And also in the northwest, we have great potential for hubs which can seriously sequester CO2. CCUS isn’t always related to enhanced oil recovery, and I’m not sure that’s being adequately recognized in this letter.

Pipeline Online: The letter implies that the carbon dioxide sequestered does not actually stay in the ground. Are you buying that?

Bronwyn Eyre: Well, I would have them ask Whitecap Resources, for example, about how much CO2 has been sequestered at its facility. I think that’s beyond question, in terms of what has been achieved at facilities, not only in Saskatchewan, but in terms of enhanced oil recovery around the world, which is well-established technology.

We’ve been doing EOR-CCUS in Saskatchewan for many years. It is not new to Saskatchewan.

Countries such as Norway, the UK are also well aware of the possibilities of CCUS and CCUS-EOR, and it’s something they continue to seriously look at.

Pipeline Online: You talked about this a little bit here, but if CCUS is stymied, how are we realistically supposed to reduce emissions not just for coal, but for refining and for ethanol production and heavy oil?

Bronwyn Eyre: Again, I go back to the leading environmentalists who say that not only can global targets not be reached without CCUS, but many say without CCUS-EOR. So, again, if we’re about building on what we have, and building on expertise that we have, not only here in Saskatchewan, but around the world, and not just taking a damn-the-consequences approach driven by blind ideology, we have to look at real possibilities. And CCUS is one.

Pipeline Online: If the signatories are successful, what does that mean for the idea of carbon trunk lines and Regina and Lloydminster areas?

Bronwyn Eyre: The target of their letter is the tax credit. I guess it means probably if they’re successful, no tax credit.

But the federal government has already said there’s no tax credit being envisaged in terms of EOR-CCUS. So, I guess if they’re successful it means no tax credit, period. However, we’ve been involved in CCUS and CCUS-EOR for some time without federal tax credits.

Obviously, we will be disappointed, but we know already that the federal government isn’t interested in EOR-CCUS, and has said as much, and explicitly excluded it from consideration for a tax credit. So that’s why when I stood up in September, outside the Weyburn facility at Whitecap, I said, “We stand by EOR.”

It has an amazing environmental footprint, which speaks for itself. And we feel it’s an important component of CCUS, a proven component, and one which we know leading environmentalists believe we can’t get to net zero without, as a country, if we’re serious about the targets. It’s a major part of that.

In terms of whether the federal government will extend the tax credit to enhanced oil recovery, or to any CCUS, the jury’s out. We’ll see what they do, I suppose. But that doesn’t mean that we will not proceed, as we’ve already announced we will, on CCUS infrastructure, for example. We made the announcement around the infrastructure incentive a few months ago, about how we would include CO2 pipelines in that incentive. We stand by EOR.

And so, we will carry on, as we have. If there isn’t a federal tax credit going forward, we will continue on, realistically, with common sense policies that work with the sector, that work with the jobs in the sector, skills in the sector, and don’t turn on the sector. And certainly don’t make a hard stop on anything that will help the sector.

Pipeline Online: At 10:45pm Mountain Standard Time on January 5, Alberta’s combined wind and solar generation was producing just three megawatts out of installed capacity of 3,005 megawatts. That’s 1/10 of 1 per cent. This past Tuesday, at the same time, they were producing 10 megawatts, or three-tenths of 1 per cent. The letter concludes with a call for increased electrification, wide scale use of renewable energy and intensifying energy efficiency. How can we do that, when wind and solar, widely deployed and Alberta already, are proving at times to produce almost no power at all?

Bronwyn Eyre: Of course, we need the current power mix we have right now, in the province, to actually stay warm, to keep the lights on. Winter weather in Saskatchewan is a life and death matter, and we have to be very careful about moving too radically or quickly into any one area that might jeopardize people’s safety and way of life. We will never do that. Just look at what misguided policies led to in Texas last winter. And there, it only got down to -11 Celsius. Look at what’s happening with the gas shortages overseas.

The letter writers we’re talking about today simply don’t take into adequate account any consequences of what they are proposing. Basically, it’s apparent they want a hard stop on anything related to the oil and gas sector, which is simply irresponsible. If you’re just going to generate power based on wind and solar, you aren’t going to get there. You aren’t going to produce enough power for people, in this at-times extraordinarily cold province, without in turn producing intense hardship.

Pipeline Online: As I’m able to determine there’s only one geologist on the entire list. Now, there could be a few more, but not many. But there are academics specializing in history, sociology, “gender, sexuality and Women’s Studies,” law, French, “English and film studies,” politics, humanities, philosophy, geography, architecture, anthropology, medicine and drama, among others. What are your thoughts on this?

Bronwyn Eyre: I think in all of this, there’s a singular fixation, of course, on the energy sector. And it’s regrettable when there seems to be so little interest in the jobs, the people, the families that make up that sector. And as I said, the effect of a green transition, such as the one many of the signatories regularly call for, that is too abrupt, too political, too radical, would be a massive impact on hundreds of thousands of jobs and families in this country.

Pipeline Online: Is there anything you’d like to add?

Bronwyn Eyre: I think there has to be an acknowledgement, by these writers and others, who are so keen to get to net zero emissions, that Saskatchewan, for example, has brought about a 50 per cent reduction over five years in methane emissions. This surpasses even targets set by the federal government. And the federal government approved our methane plan.

I would ask them what would they say about that? What would they say to the fact that last month, the federal Environment Minister, Steven Guilbeault, publicly congratulated Saskatchewan on our achievement? And that’s the result of implementing common sense methane reduction policies prior to COVID. Not during COVID, (but) prior to COVID.

It’s CCUS today. It’s something else tomorrow. Basically, what is so regrettable is that there isn’t an acknowledgement of what is done well, and there isn’t any plan on how to bring about anything they want without a hard stop, which would be devastating, not only to the sector, but to ordinary citizens’ lives.

You’ve heard me before on the University of Calgary’s report by Dr. Joule Bergerson. If we’re talking academic reports, that report found that global energy-produced emissions could fall by almost 25 per cent if oil producing nations adopted regulations such as Saskatchewan’s, including around methane. I would like to ask the signatories, again, what their response would be to that. Or to the fact that, according to Natural Resources Canada, the Canadian energy sector has produced basically flat emissions since 2000, due to factors that include venting less methane.

So, if they’re always calling for a hard stop and hard reductions, what about the reductions that are already being made and have been made over two decades, if we trust Natural Resources Canada, which I believe they would. It’s regrettable that we can’t discuss and debate these issues, without the go-to of a devastating hard stop. They don’t want the tax credit for EOR-CCUS. Neither does the federal government. But it’s about a much deeper apparent revulsion for the energy sector and everything that it has achieved for this province, this country, and our lives here. And that’s what is very unfortunate to read.