Federal, Alberta governments commit funding to Alberta carbon capture project

CALGARY — A large-scale carbon capture and storage project planned for Alberta’s industrial heartland could be a “bright light” for a region hit hard by woes in the petroleum refining sector, the head of a local economic development group said Tuesday.

CALGARY — A large-scale carbon capture and storage project planned for Alberta’s industrial heartland could be a “bright light” for a region hit hard by woes in the petroleum refining sector, the head of a local economic development group said Tuesday.

“It could become a huge strategic factor in where companies locate their operations,” said Neil Shelly, executive director of Alberta’s Industrial Heartland Association, which represents four municipalities surrounding Edmonton.

The federal and provincial governments announced plans Tuesday to invest millions in the Alberta Carbon Trunk Line project, led by Enhance Energy Inc. in partnership with Northwest Upgrading.

The project is designed to gather carbon dioxide from the area northeast of Edmonton, home to several refineries and petrochemical plants, and then transport the gas via pipeline to mature oilfields north of Red Deer, Alta.

The gas will then be pumped into the depleted reservoirs as a means to boost oil production in a process called enhanced oil recovery.

In addition to Northwest Upgrading’s planned bitumen upgrading and refining complex, a fertilizer plant run by Agrium Inc. (TSX:AGU) in the area will also be among the first to contribute carbon dioxide to the pipeline.

At full capacity, the project will have the potential to permanently store up to two billion tonnes of carbon dioxide, the equivalent of taking 2.6 million cars off the road every year.

Construction of the 240-kilometre pipeline is set to begin in 2011, with operations to start up in late 2012.

“As industry looks for a way to effectively deal with their CO2 emissions by keeping them out of the atmosphere, we are offering a much needed solution — a safe and secure storage destination for CO2,” said Susan Cole, president and CEO of Enhance Energy.

Ottawa has committed $63 million to the project partly through its $1-billion Clean Energy Fund, Natural Resources Minister Lisa Raitt said in a statement.

The funds are expected to be spend over three or four years.

The Alberta government has signed a letter of intent to invest $495 million in the project over 15 years as part of its $2-billion commitment to carbon capture and storage.

“The Alberta Carbon Trunk Line will be the backbone of CO2 transportation for Alberta. It will be built with long-term capacity in mind so as more companies capture CO2, they will be able to connect to the line,” said Alberta Premier Ed Stelmach.

Carbon capture projects planned by Anglo-Dutch energy giant Royal Dutch Shell PLC (NYSE:RDS) and Calgary-based power generator TransAlta Corp. (TSX:TA) have also received government backing.

It is estimated about 2,000 people will gain direct employment throughout some portion of the Alberta Carbon Trunk Line’s development, Parras said.

Shelly said the number of permanent jobs created from this one project will be small, but that the long-term economic benefits to the area could be substantial.

“It’s another factor in favour of Alberta,” he said. “Definitely we think this can be a game changer.”

In the depths of the economic downturn, oilsands companies cancelled or delayed several projects that would process the raw bitumen they produce into higher-value products.

Now that investment in the oilsands is ramping back up again, many big players are opting to send their bitumen to be processed at plants south of the border, where they say the economics are more attractive.

That has prompted fears that jobs lost during the recession may never return once the economy recovers, unless the province takes steps to make Alberta more competitive with other regions.

Investing in carbon capture and storage systems like the Alberta Carbon Trunk Line could be a means to accomplish that, given that environmental regulations in the United States and Canada are sure to become more stringent in the years ahead, Shelly said.

“We’re probably going to be living in a carbon restrained future, whether it comes this year, next year or five years down the road,” he said.

“We’ll become one of the few regions, if not the only region in the world, that has basically a plug and play carbon capture and storage system in place.”

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