A rising Canadian carbon tax, scheduled to jump more than four-fold by 2030, has triggered a campaign by fossil fuel industry heavyweights to turn the greenhouse gas (GHG) emissions penalty into commercial opportunities.
The efforts so far include TC Energy Corp., Pembina Pipeline Corp., Shell Canada Ltd., Canadian Imperial Bank of Commerce (CIBC), Sproule Associates, and the top five oilsands producers: Canadian Natural Resources Ltd., Cenovus Energy Corp., Imperial Oil Ltd., MEG Energy Corp., and Suncor Energy Inc.
The commercial environmental cleanup lineup formed since a spring verdict by the Supreme Court of Canada upheld federal government authority to levy a national carbon price that translates into personal and corporate taxes.
The verdict let the Liberal government in Ottawa enforce annual increases on a schedule. The timeline, announced last winter, hikes the carbon price to C$170/ton ($136/ton) in 2030, or 4.25 times the current C$40 (US$32).
Industry has responded at a brisk pace. The producers kicked off the action in June by forming Oil Sands Pathways to Net Zero, which aims “to find realistic and workable solutions to the challenge of climate change” with an “actionable approach” of “economic investments.”
Work on new technology is promised, but the producer coalition is concentrating on carbon capture, utilization and storage (CCUS). The plan would grow the industry’s profitable sideline in field waste disposal that uses its geology, engineering and pipeline expertise.
The coalition envisions a new “carbon trunk line,” a pipe web to collect GHG emissions from bitumen production, currently 3 million b/d and growing, for permanent subterranean disposal at a new central Alberta storage hub near Edmonton.
Also last month, pipeline conglomerates TC Energy and Pembina formed a cleanup partnership called the Alberta Carbon Grid (ACG). The pair’s proposal maps out an open-access CCUS network for up to 20 million tons of GHG emissions per year.
By repurposing vacant pipe capacity in depleted oil and gas fields, TC Energy and Pembina say operations could start in 2025. A fee-based commercial framework would sell access to the new cleanup web for tolls promised to be less than the rising emissions penalty.
“The full build-out of ACG over time represents potential for a multibillion-dollar incremental investment,” the pair said. The plan includes a financial angle by offering a “marketing and trading pool to facilitate CO2 and carbon offset transactions.”
More recently, Shell has announced plans for a two-step carbon emissions disposal and hydrogen production project called Polaris, with a 2023 target for a final investment decision and a vision of a new commercial service for the entire industry.
First, Polaris would add 750,000 tons of carbon emissions to the current annual disposal of one million tons done by the six-year-old Quest system for Shell’s own Edmonton-area operations.
Second, Polaris would mature into a network to salt away GHG at an annual rate of more than 10 million tons for multiple large-scale emitters such as thermal power stations, fertilizer plants and petrochemical complexes, said Shell.
Opportunity for Finance
Meanwhile, CIBC, a prominent oil and gas lender, is plugging Canada into global emissions reduction finance as a partner of Britain’s NatWest Group plc, National Australia Bank Ltd. and Brazil-based Itaú Unibanco SA in an offset trading exchange called Project Carbon.
An inaugural pilot version of the exchange is set to open in August on a private digital platform trademarked Ethereum, with participants using financial services from trading facilities and price reporting to block-chain accounting of transactions.
Sproule, the 70-year-old dean of Canadian petroleum engineering and geology consulting firms, is also looking to capture value in the drive for lower emissions. It has created a carbon management practice led by industry veterans.
The specialists will provide “dedicated support for clients embracing lower carbon solutions, such as CCUS projects, and strategic assessments of opportunities within the carbon economy,” said Sproule.
Alberta Energy Minister Sonya Savage and federal Natural Resources Minister Seamus O’Regan have declared moral support for the industry cleanup enterprises, and regulatory accommodations are in the works. Government financial aid has not been ruled out.
Precedents have already been set. Shell’s Quest project and the second functioning Canadian CCUS pioneer, the Alberta Carbon Trunk Line, started by obtaining C$1.2 billion ($960 million) in provincial and federal grants.
Canadian GHG emitters are also no beginners at offset accounting and trading. Alberta has required emission records since 2002. A provincial cap-and-trade market, born in 2007, records 80 million credits for one ton each on its books. Active trading volumes are measured in hundreds of thousands.
Alberta has 16 varieties of commercial emissions offsets such as aerobic composting, wind power and waste heat use. All are accepted by the federal government, which is also crafting its own formal protocols for national credits that qualify for exchange trading.
The oilsands alone generate raw material for carbon disposal and offset commerce on a large scale, as Canada’s top source of GHG with emissions of about 700 million tons per year.
As the drive to turn GHG reduction into a business has emerged, Alberta Energy Minister Sonya Savage has said the Alberta provincial government “is committed to the development of the emerging CCUS industry.”
The same goes for the federal government: “This is how we get to net-zero,” Canadian Natural Resources Minister Seamus O’Regan said recently.
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