Feds lower carbon capture project targets and offer new subsidies as costs double

Deal between Ottawa, province and oilsands heavyweights trades “expanded access” to global markets via West Coast pipeline for megaproject that will sequester a fraction of the carbon originally envisioned.

Alberta’s gargantuan Pathways carbon capture and storage (CCS) complex — the world’s biggest such project under development — could cost more than twice the $16 billion original estimate and sequester only a fraction of the oilsands’ carbon pollution initially promised — even as it appears the federal government is open to providing it with additional subsidies. Under a memorandum of understanding with Ottawa that leads on “expanded access” to international markets via the proposed West Coast pipeline and support for a production increase from Canada’s oil patch, the country’s five largest oilsands producers have agreed to target capturing 6 million tonnes annually (Mta) through the megaproject, starting in 2035.

The shared transportation and storage infrastructure is expected to be operating by January 1, 2032. The oilsands companies behind the project estimate the cost of its first phase at $20 billion, according to a briefing submitted to the federal government, or up to $30 billion according to Cenovus chief executive Jon McKenzie’s estimate reported by energy news site Argus Media in June. This stands in stark contrast with the original plan for the megaproject, which envisioned some 22Mt being captured and injected deep underground yearly by 2030.

The agreement, signed July 2 and made public on July 13, also includes new commitments to support the project with public dollars. ‘A pretty big package’ with shrinking commitments The federal government agreed “to advance financing to support operating costs for CCS projects,” including changes to “enhance the durability” of the Clean Fuel Regulations. The MoU backgrounder does not specify what those changes would include.

The Oil Sands Alliance (formerly Pathways Alliance) has been publicly advocating for financial support to help cover CCS operating costs for years — in addition to the existing investment tax credit that returns 50 per cent of the construction cost to the companies. “That's a pretty big package for emissions reductions, particularly given that this project has shrunk so much,” Janetta McKenzie, director of the oil and gas program at the Pembina Institute, said in a phone interview with Canada’s National Observer. Pembina Institute — an Alberta-based think tank — has been crunching the numbers on federal and provincial climate policy and the Pathways Project.

“We're looking at almost 200 extra megatonnes of emissions by 2040,” McKenzie said, when comparing the new deal to what was originally planned, even including some expansions to the oilsands. This is “pretty significant” when you consider the oil and gas sector is already Canada’s largest